Trump launches trade war with sweeping tariffs on Mexico, Canada and China

WASHINGTON – US President Donald Trump on Feb 1 ordered sweeping tariffs on goods from Mexico, Canada and China, demanding that these countries stanch the flow of fentanyl – and illegal immigrants, in the case of Canada and Mexico – into the US, kicking off a trade war that could dent global growth and reignite inflation.

Mexico and Canada, the US’ top two trading partners, immediately

vowed retaliatory tariffs

, while China said it would challenge Mr Trump’s move at the World Trade Organisation and take other “countermeasures”.

Mr Trump signed three separate executive orders on the tariffs after a long golf outing in Florida, vowing to keep the duties in place until what he described as the national emergency over the fentanyl drug and illegal immigration to the US ends.

Responding to concerns raised by oil refiners and Midwestern states, he imposed only a 10 per cent duty on energy products from Canada, with Mexican energy imports facing the full 25 per cent tariff.

The US’ actions quickly sparked vows of retaliation from Canada, Mexico and China.

Canadian Prime Minister Justin Trudeau said Canada would respond with tariffs of 25 per cent against C$155 billion (S$145 billion) worth of American goods, including beer, wine, lumber and appliances, beginning with tariffs on C$30 billion taking effect on Feb 4, and C$125 billion 21 days later.

Mr Trudeau warned Americans that Mr Trump’s tariffs would raise their grocery and petrol costs, potentially shutting down auto assembly plants and limiting supplies of goods such as nickel, potash, uranium, steel and aluminium.

He urged his own citizens to forgo travel to the US and to boycott American products.

Mexican President Claudia Sheinbaum, in a post on social media platform X, said she was instructing her economy minister to implement retaliatory tariffs but gave no details.

Canada and Mexico said they were working together to face Mr Trump’s tariffs.

China’s Commerce Ministry did not specify its planned countermeasures. Its statement left open the door for talks between Washington and Beijing.

“China hopes that the US will view and handle its own fentanyl and other issues in an objective and rational manner,” it said, adding that Beijing wanted to “engage in frank dialogue, strengthen cooperation and manage differences”.

A White House fact sheet said the tariffs would stay in place “until the crisis alleviated”, but gave no details on what the three countries would need to do to win a reprieve.

At nearly US$100 billion (S$136 billion) in 2023, imports of crude oil accounted for roughly a quarter of all US imports from Canada, according to US Census Bureau data.

Automakers would be particularly hard hit, with new steep tariffs on vehicles built in Canada and Mexico burdening a vast regional supply chain where parts can cross borders several times before final assembly.

The tariff announcement makes good on Mr Trump’s repeated threat during the 2024 presidential campaign and since taking office, defying warnings from top economists that a new trade war with the US’ top trade partners would erode US and global growth, while raising prices for consumers and companies.

“Will there be some pain? Yes, maybe (and maybe not!),” Mr Trump wrote on the morning of Feb 2 in all-caps on his Truth Social media platform. “But we will Make America Great Again, and it will all be worth the price that must be paid,” he added.

Republicans welcomed the news, while industry groups and Democrats issued stark warnings about the impact on prices.

National Foreign Trade Council president Jake Colvin said Mr Trump’s move threatened to raise the costs of “everything from avocados to automobiles” and urged the US, Canada and Mexico to find a quick solution to avoid escalation.

“Our focus should be on working together with Canada and Mexico to gain a competitive advantage and facilitate American companies’ ability to export to global markets,” he said in a statement.

Provincial officials and business executives in Canada reacted with outrage, calling for forceful tariffs on imports from the US.

Roughly 90 minutes after Mr Trump’s announcement, the US national anthem was booed in the Canadian capital Ottawa ahead of the opening face-off at a National Hockey League game between the Ottawa Senators and Minnesota Wild. The Senators won 6-0.

Tariff collections are set to begin at 12:01am Eastern Time (1.01pm Singapore time) on Feb 4, according to Mr Trump’s written order. But imports that were loaded onto a vessel or onto their final mode of transit before entering the US prior to 12:01am on Feb 1 would be exempt from the duties.

Mr Trump declared the national emergency under the International Emergency Economic Powers Act and the National Emergencies Act to back the tariffs, which allow the President sweeping powers to impose sanctions to address crises.

Trade lawyers said Mr Trump was once again testing the limits of US law, and said the two statutes were untested for broad tariffs. Legal challenges were likely, some said.

White House officials said there would be no exclusions from the tariffs and that if Canada, Mexico or China retaliated against American exports, Mr Trump would likely increase the US duties.

Ontario Premier Doug Ford said in a post on X that Canada “now has no choice but to hit back and hit back hard”.

“As Premier of Ontario, the federal government has my full support for a strong and forceful response that matches US tariffs dollar for dollar,” he said.

Nova Scotia’s Premier Tim Houston said he has directed that all alcohol imported from the US be removed from the province’s store shelves.

White House officials said Canada, specifically, would no longer be allowed the “de minimis” US duty exemption for small shipments under US$800. The officials said Canada, along with Mexico, has become a conduit for shipments of fentanyl and its precursor chemicals into the US via small packages that are not often inspected by Customs agents.

Long-promised tariffs

Mr Trump spoke extensively about the tariffs on Jan 31, acknowledging they could lead to disruptions and hardships for Americans, but was not scheduled to speak to reporters about the tariffs.

The Republican President said he was using the tariffs to crack down on the flow of the opiate fentanyl and precursor chemicals into the US from China via Mexico and Canada, as well as to stop illegal immigrants crossing US borders.

The move was led by Deputy Chief of Staff Stephen Miller, a forceful hawk on illegal immigration, and Mr Howard Lutnick, Mr Trump’s nominee to head the Commerce Department, who flew to Florida with the US leader on Feb 1.

Less than two weeks into his second term, Mr Trump is upending the norms of how the US is governed and interacts with its neighbours and the wider world.

A model gauging the economic impact of his tariff plan from EY chief economist Gregory Daco suggests it would reduce US growth by 1.5 percentage points in 2025, throw Canada and Mexico into recession, and usher in “stagflation” at home.

“Steep tariff increases against US trading partners could create a stagflationary shock – a negative economic hit combined with an inflationary impulse – while also triggering financial market volatility,” Mr Daco wrote on Feb 1.

That volatility was evident on Jan 31, when the Mexican peso and Canadian dollar both slumped after Mr Trump vowed to fulfil his threats. US stock prices also fell and Treasury bond yields rose. REUTERS