Trump tariff threat to China, Mexico and Canada roils global markets

President-elect Donald Trump's renewed tariff threats have sent shockwaves through global markets. Announcing plans for a 10% tariff on Chinese imports and a 25% tariff on all Mexican and Canadian goods, Trump linked the measures to combating drug trafficking and migration. The move reignites trade tensions, impacting currencies like the yuan, peso, and Canadian dollar, and sparking fears of inflation and disrupted supply chains. Analysts caution against potential economic fallout..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here..By Nancy Cook and Brian Platt.President-elect Donald Trump vowed additional tariffs on China as well as US neighbors Canada and Mexico, roiling markets with his first specific threat to curb global trade flows since his election win..Trump said he would impose additional 10% tariffs on goods from China and 25% tariffs on all products from Mexico and Canada in posts to his Truth Social network on Monday. The Canadian dollar fell to a four-year low on the news, while the peso traded close to its weakest since 2022. China's yuan edged lower offshore..Trump cast the new levies as necessary to clamp down on migrants and illegal drugs flowing across borders. He accused China of failing to follow through on promises to institute the death penalty for traffickers of fentanyl, writing that "drugs are pouring into our Country, mostly through Mexico, at levels never seen before."."Until such time as they stop, we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America," Trump said..In another post, the incoming president also vowed to hit Mexico and Canada with a 25% tariff on "ALL products," saying he would sign an executive order to that effect on his first day in office.."As everyone is aware, thousands of people are pouring through Mexico and Canada, bringing Crime and Drugs at levels never seen before," he said. "This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!".Trump's tariff threats provide a sharp counter to expectations that he might temper his trade policies during a second term, despite concerns from some business leaders about the impact. It came just days after he tapped Scott Bessent to be the next US Treasury secretary, a move that was seen as a promising sign for those seeking a more measured tariff stance..Shortly after Trump's post, Canadian Prime Minister Justin Trudeau contacted the president-elect and the two leaders had a phone call to discuss border security and trade, according to a government official with knowledge of the matter..Trudeau pointed out to Trump that the number of migrants who cross the Canadian border into the US is minuscule compared to those who cross from Mexico, said the official, who spoke on condition of anonymity..Canada said it's working closely with US law enforcement agencies every day to disrupt the "scourge of the fentanyl coming from China and other countries," according to a statement by Deputy Prime Minister Chrystia Freeland and Public Safety Minister Dominic LeBlanc. .Read more: 🔒 FT's Jemima Kelly: The Trump vibe shift was there for all to see."Canada places the highest priority on border security and the integrity of our shared border," the ministers said..Liu Pengyu, spokesman for the Chinese embassy in the US, said economic and trade cooperation between both countries is mutually beneficial. "No one will win a trade war or a tariff war," he wrote in an X post, adding that Beijing has informed Washington of the progress made in counter-narcotics efforts. .When asked about the tariff threat at a regular briefing, Chinese Foreign Ministry spokeswoman Mao Ning said Beijing "will respond to that later," without elaborating. .Representatives for the Mexican Foreign Affairs Ministry and Economy Ministry, as well as China's Commerce Ministry, didn't immediately respond to requests to comment. Spokespeople for Trump didn't immediately answer a question about whether there would be exemptions from the duties. .Trump campaigned on pledges to implement sweeping tariffs on allies and adversaries alike, vowing to hike tariffs to 60% for all goods imported from China and to 20% for those brought in from the rest of the world — policies he says will help pressure companies to re-shore manufacturing jobs in the US and raise revenue for the federal government. .President Joe Biden has already hiked tariffs on a variety of Chinese imports this year, including semiconductors, solar cells and critical minerals, with rates ranging from 25% for batteries to 100% for electric vehicles. The move was the culmination of a review of Trump's tariff increases in his first term — none of which were rolled back..While it was unclear how Trump's 10% tariff threat on China fit in with his previous statements calling for even higher duties, analysts saw this as an opening gambit.."This tariff is specifically aimed at cracking down on the fentanyl trade, and does not necessarily mean that Trump's promised 60% tariffs on all Chinese imports are off the table," said Neil Thomas, a fellow for Chinese politics at the Asia Society Policy Institute's Center for China Analysis. ."China will register its opposition and consider limited retaliation but is likely to respond cautiously at first to Trump's threats, until it gets a better sense of the balance between confrontation and dealmaking in his second term," he added..Read more: 🔒 The Economist: The opportunities—and dangers—for Elon, Trump's disrupter-in-chief.Fentanyl Overdoses.While public health experts say fentanyl overdoses remain a major issue, provisional data released earlier this month by the Centers for Disease Control and Prevention showed a 14% drop in drug overdose deaths from June 2023 to June 2024. President Biden hailed US-China cooperation on counternarcotics this month during a meeting with counterpart Xi Jinping in Peru, noting to the Chinese leader that "overdose deaths are coming down for the first time in five years.".The Republican has long said he favors tariffs as a negotiating tool, even with US partners, and during the presidential campaign in 2024, he mused about replacing the federal income tax with revenue from trade levies. Most mainstream economists though have warned that Trump's levies would raise prices for consumers, fueling already high inflation and redirecting or reducing trade flows..Higher North American tariffs would upend the auto industry and other consumer sectors, including food, in which the three countries are highly integrated..Read more: Trump 2.0: The implications for the US and South Africa.'Stir the Debate'.The tariff would also do great damage to Mexico's auto sector and to factories in central and northern states that export electronics, plastics and other manufactured goods to US consumers. Trade between the two countries has grown in recent years, with Mexico turning into the US's largest trading partner. The Mexican government estimates there's now $800 billion annually in total trade between the nations. .The Canadian and US auto industries are so intertwined, and work on such thin profit margins, that a 25% tariff is "not a real conversation," said Flavio Volpe, president of the Automotive Parts Manufacturers' Association, a Canadian industry group.."The president-elect has done what he's famous for, which is try to stir the debate. The only surprise is how early he's done it," Volpe said. "What we learned in the first term was he uses strong rhetoric, public rhetoric. But the negotiations are always tough, but reasonable — and I'm just telling everybody to be patient.".A 25% tariff applied to all imports from Canada would put pressure on energy costs. Oil, gas and other energy products are Canada's largest export to its southern neighbor; it's by far the largest external supplier of crude to the US. Wilbur Ross, Trump's former Commerce secretary, said earlier this month it would make no sense to place tariffs on Canadian energy, because "all it would do would be to raise our costs and not help anything with more American jobs."."Tariff talk raises global inflation fears, creates concerns around global growth and increases geopolitical uncertainty," said Andrew Ticehurst, a senior rates strategist at Nomura Holdings Inc. in Sydney. "The knee-jerk reaction in markets is a stronger dollar, higher yields and weaker equities.".Read More: Yuan, Mexican Peso, Loonie Drop On Trump's Higher Tariff Threats.The move on Mexico and Canada would reignite a trade feud that simmered across the continental bloc during Trump's first term, where he forced a renegotiation of the North American Free Trade Agreement and imposed tariffs on certain sectors, including steel..Currently, the re-branded trade pact, known as the United States-Mexico-Canada Agreement, allows for duty-free trade across a wide range of sectors. It's not clear what recourse American importers, who would pay the duties, would have under the pact to head off any levy..Economic Team.Beyond Bessent, Trump still has a number of top economic roles to fill in his administration. One of the chief architects of Trump's tariff agenda, former United States Trade Representative Robert Lighthizer has yet to land a role in the second term..Trump has also vowed to move quickly to secure the US border — one of the top issues for voters in November's presidential election — following a surge in migrants that taxed communities across the country and became a major political liability for President Joe Biden and Vice President Kamala Harris, the Democratic nominee..The president-elect says he will carry out the largest mass deportation of undocumented migrants and finish building the wall on the US-Mexico border that he started during his first administration. He has also confirmed his intention to use the US military to carry out the deportations..Trump's team has been taking shape with him selecting South Dakota Governor Kristi Noem to lead the Department of Homeland Security and Tom Homan, the former acting head of the US Immigration and Customs Enforcement agency, to serve as his border czar. .Read also:.Trump and Musk look on as SpaceX launches sixth major starship test🔒 FT: Gideon Rachman – Trump's attack on the enemy within will delight America's real foesTrump will not let Musk steamroll him – Col Chris Wyatt.© 2024 Bloomberg L.P.

Trump tariff threat to China, Mexico and Canada roils global markets

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