Trade war kicks off: Donald Trump imposes tariffs on Mexico, Canada and China

US President Donald Trump signed decrees this Saturday, February 1, 2025, imposing customs duties on Mexico, Canada and China, thus kicking off a trade war that could harm global growth and revive inflation.

Mexico and Canada, the United States' two largest trading partners, immediately promised to retaliate and impose tariffs of their own. China, for its part, said it would challenge Donald Trump's decision at the World Trade Organization (WTO) and take other “countermeasures”.

Donald Trump signed three executive orders, set to go into effect Tuesday, February 4, 2025, imposing 25% tariffs on Mexican and most Canadian imports, and 10% on goods from China. He pledged to maintain the tariffs until what he described as the national emergency over fentanyl and illegal immigration to the United States is over. The White House has not provided details on what would satisfy Donald Trump's demands.

In response to concerns from oil refiners and Midwestern states, the Republican president has decided to impose 10% tariffs on Canadian energy products. Mexican energy imports are also hit with 25% customs duties.

Canada responds

Canadian Prime Minister Justin Trudeau said Canada would respond to the measures by imposing 25% tariffs on C$155 billion worth of U.S. goods, including beer, wine, lumber and household appliances. A measure on C$30 billion worth of U.S. goods will go into effect Tuesday, and another on C$125 billion worth of U.S. goods will come into effect in 21 days.

Mexico takes action

Mexican President Claudia Sheinbaum, for her part, indicated in a message published on the social network X that she had asked her Minister of Economy to implement retaliatory measures, without providing further details. Canada and Mexico have said they are working together to address Donald Trump's tariffs.

China seeks 'frank dialogue'

China's commerce ministry has not specified what countermeasures it plans to take, leaving the door open for talks between Washington and Beijing. “China hopes the United States will view and handle its own fentanyl issue and other issues in an objective and rational manner,”, the ministry said, adding that Beijing hoped“engage in frank dialogue, strengthen cooperation and manage differences” with Washington. A White House fact sheet says the tariffs will remain in place “until the crisis subsides”, without specifying what the three countries will have to do to get a reprieve.

What repercussions ?

At nearly $100 billion in 2023, crude oil imports accounted for about a quarter of all U.S. imports from Canada, according to U.S. Census Bureau data. Automakers would be particularly hard hit, as new tariffs on vehicles built in Canada and Mexico would weigh on supply chains in particular. The move comes as Donald Trump has repeatedly threatened Mexico and Canada with tariffs since returning to the White House if the two countries, neighbors of the United States and among Washington's main trading partners, do not effectively combat the flow of fentanyl and migrants.

Republicans welcomed the move, while industry groups and Democrats issued dire warnings about the impact it would have on prices.

Finding a quick fix

National Trade Council Chairman Jake Colvin said Trump's move threatened to raise the costs of “everything from avocados to automobiles” and urged the United States, Canada and Mexico to find a quick solution to avoid escalation. The U.S. tariffs are set to go into effect at 12:01 a.m. Tuesday, according to the order.

White House officials said there would be no carve-out of the tariffs and that if Canada, Mexico or China retaliated against U.S. exports, Donald Trump would likely increase U.S. tariffs.