By Beiyi Seow and Daniel Avis with Marion Thibaut in Montreal and Matthew Walsh in Beijing, AFP
Photo: AFP
Donald Trump's trade war against the US's largest trading partners escalated on Tuesday as huge US tariffs on Canada, Mexico and China kicked in, sparking angry retaliation from all three.
Canadian Prime Minister Justin Trudeau slammed the tariffs as "a very dumb thing to do," and said Trump was seeking to collapse Canada's economy to make it easier for the United States to annex his country.
Mexican President Claudia Sheinbaum said she would be laying out her country's response to the measures on Sunday.
Global markets fell sharply in response to the escalating trade war, with the S&P 500, a major Wall Street index, extending recent losses to erase all of its gains since Trump's US election victory in November.
Trump had announced - and then paused - blanket 25 percent tariffs on imports from major trading partners Canada and Mexico in February, accusing them of failing to stop illegal immigration and drug trafficking.
He pushed ahead with them on on Tuesday, citing a lack of progress on both fronts.
Canada's Prime Minister Justin Trudeau speaks during a news conference about the US tariffs against Canada on March 4, 2025 on Parliament Hill in Ottawa. Photo: AFP / Dave Chan
The sweeping duties will hit over US$918 billion (NZ$1633b) in US imports from both countries, affecting everything from avocados to the lumber crucial for building US homes, and hampering supply chains for key sectors like automobiles.
Trump also inked an order on Monday to increase a previously imposed 10 percent tariff on China to 20 percent, piling atop existing levies on various Chinese goods.
Beijing condemned the "unilateral imposition of tariffs by the US," filing a complaint with the World Trade Organisation and threatening to impose 10 and 15 percent levies on a range of agricultural imports from the United States.
Pushing up prices
Analysts have warned that the higher import costs could push up prices for consumers, complicating efforts to bring down inflation.
That includes at grocery stores - Mexico supplied 63 percent of US vegetable imports and nearly half of US fruit and nut imports in 2023, according to the US Department of Agriculture.
Housing costs could also be hit. More than 70 percent of imports of two key materials homebuilders need - softwood lumber and gypsum - come from Canada and Mexico, the National Association of Home Builders said.
Truck drivers at the Otay Mesa border crossing in Mexico told AFP they were already feeling the impact as they waited to cross into the United States early on Tuesday.
Work was drying up because many companies in the Mexican border city of Tijuana export Chinese goods, driver Angel Cervantes said.
Fight to 'the bitter end'
Ottawa's retaliatory 25 percent tariffs on $30 billion of goods went into effect early on Tuesday, and Trudeau said that they would expand to "the remaining $125 billion of American products in 21 days time."
He accused Trump - who has spoken often of making Canada the 51st American state - of wanting to "see a collapse of the Canadian economy because that would make it easier to annex us".
"Canadians are reasonable. We are polite. We will not back down from a fight," he said, adding that Washington had launched a "trade war."
US President Donald Trump signs an Executive Order on reciprocal tariffs in the Oval Office of the White House in Washington, DC, on February 13, 2025. Photo: AFP / Andrew Caballero-Reynolds
China said its tariffs against the United States will come into effect next week and will impact tens of billions of dollars in imports, from soybeans to chickens.
Beijing announced that all imports of US lumber have been suspended, and that soybean shipments from three American exporters have been halted, as the country's foreign ministry vowed to fight the US trade war to the "bitter end."
European Union trade spokesman Olof Gill warned the tariffs on Canada and Mexico threatened transatlantic "economic stability" and risked disrupting global trade, urging Washington to reverse course.
The Tax Foundation estimates that before accounting for foreign retaliation, tariffs on Canada, Mexico and China this time would each cut US economic output by 0.1 percent.
"We could easily reach the highest effective tariff rate since 1936 by the beginning of 2026," KPMG chief economist Diane Swonk warned ahead of the tariffs going into effect.
Both consumers and manufacturers stand to bear the costs of additional tariffs, which could diminish demand and trigger layoffs as businesses try to keep costs under control, she told AFP.
-AFP
