Trump Promises 25% Tariff on Mexico, Canada, Extra 10% Tariff on China

Trump’s announcement on Monday rattled international markets and offered the clearest indication yet that he intends to implement a concentrated form of the unorthodox “America First” economic policies that fueled his return to the White House.

In a post on his social media platform Truth Social, Trump said he would impose tariffs on Mexican and Canadian imports on day one of his administration and that the measures would remain until the “invasion” of undocumented migrants and drugs came to an end.

“Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem,” Trump said.

“We hereby demand that they use this power, and until such time that they do, it is time for them to pay a very big price!”

Trump said in a subsequent post that he would also impose a 10 percent tariff on China, “above any additional tariffs”, until the country took action to stop fentanyl smuggling.

It was not immediately clear if Trump’s proposed tariffs would be in addition to, or instead of, the tariffs he proposed on the campaign trail.

During his election campaign, Trump said he would impose tariffs of 60 percent or more on imports of Chinese goods and suggested he could impose a tariff of 1,000 percent or higher on vehicles imported from Mexico.

“Representatives of China told me that they would institute their maximum penalty, that of death, for any drug dealers caught doing this but, unfortunately, they never followed through, and drugs are pouring into our country, mostly through Mexico, at levels never seen before,” Trump said.

Trump’s announcement drew swift responses from Ottawa and Beijing and reverberated throughout international markets.

Currencies including the Canadian dollar, Mexican peso, the euro, the British pound, the Korean won and the Australian dollar dropped against the US dollar.

Most of Asia’s main stock indexes fell, with Japan’s Nikkei 225 leading the losses with a 1.59 percent decline as of 2pm local time.

Canadian Deputy Prime Minister and Minister of Finance Chrystia Freeland said Canada and the US had one of the “strongest and closest relationships – particularly when it comes to trade and border security”.

“Canada places the highest priority on border security and the integrity of our shared border. Our relationship today is balanced and mutually beneficial, particularly for American workers,” Freeland said in a statement that did not directly refer to Trump’s tariff threat.

“Today, Canada buys more from the United States than China, Japan, France and the UK combined.”

Freeland added that US and Canadian authorities worked together “every single day to disrupt the scourge of fentanyl coming from China and other countries” and that Canadian oil was “essential” to the US’s domestic energy supply.

Ontario Premier Doug Ford said the proposed tariffs would be “devastating” to workers and jobs in both countries.

“The federal government needs to take the situation at our border seriously. We need a Team Canada approach and response – and we need it now,” Ford said in a post on X.

The Canadian Broadcasting Corporation, Canada’s national broadcaster, meanwhile, described Trump’s announcement as “his most severe threat against Canada in years”.

China’s embassy in Washington, DC said that “no one” would win a trade war between the sides.

“About the issue of US tariffs on China, China believes that China-US economic and trade cooperation is mutually beneficial in nature,” spokesperson Liu Pengyu said in a statement.

Trump’s proposals would have potentially enormous ramifications for international trade, though the Republican has made similar threats in the past without following through.

Trump’s pick for treasury secretary, Scott Bessent, has described tariffs as a “useful tool” for strengthening the president’s hand when negotiating with other countries.

“The tariffs can lead to higher inflation in the US, meaning the Fed will find it harder to cut rates,” Gary Ng, senior economist for Asia Pacific at Natixis in Hong Kong, told Al Jazeera, referring to the US central bank.

“Therefore, the direct implication is that the dollar will remain strong, and global central banks will find it hard to relax policies unless they accept currency depreciation… This is positive for US growth in the short run but bad for the rest of the world.”

If implemented, the president-elect’s proposed tariffs on Mexico and Canada, in particular, would raise questions about the future of the US-Mexico-Canada Agreement (USMCA), a free trade deal signed by Trump that largely maintained the provisions of the pre-existing North American Free Trade Agreement (NAFTA).

“It looks like the Trump tariff changes could end NAFTA by definition as it is a free trade agreement between the USA and Canada and Mexico, respectively,” Tim Harcourt, chief economist at the Institute for Public Policy and Governance at the University of Technology Sydney, told Al Jazeera.

“The president-elect says it’s based on banning the drug fentanyl by halting trade – or providing a disincentive – and immigration but non-fentanyl goods will get caught in the crossfire.”

Numerous economists have warned that Trump’s proposals for broad-based tariffs would raise the cost of everyday items in the US and dampen global growth.

Trump’s supporters have argued that tariffs would encourage the return of manufacturing jobs from overseas and give his administration greater leverage to extract more favorable trade deals from other countries.

China, Mexico and Canada are the US’s three biggest trading partners.

The countries accounted for $830bn of US exports and $1.43 trillion of US imports, respectively, in 2022, according to the Office of the US Trade Representative.