Canada, China announce retaliatory tariffs after Trump levies come into effect

Published 04/03/2025, 15:02
© Reuters

Investing.com - Canada and China have unveiled retaliations to U.S. President Donald Trump’s latest import tariffs, while Mexico was widely tipped to release its own response on Tuesday, exacerbating concerns over an escalating global trade conflict.

Trump’s levies on items from the three countries came into effect shortly after midnight Eastern time on Tuesday.

The tariffs include a 25% fee on all imports incoming from Mexico and non-energy goods from Canada. A 10% surcharge will be collected on Canadian energy. Duties on Chinese items, meanwhile, were doubled to 20%.

America’s southern and northern neighbors had earlier raced to appease Trump’s call for increased border security to help stem the flow of the illegal drug fentanyl and migrants into the U.S. Concessions previously offered in February led to a month-long postponement of the duties.

However, Trump said on Monday that Canada and Mexico had still not done enough to address his demands, adding that there was "no room left" for a deal to evade the tariffs. China had also not taken "adequate steps to alleviate the illicit drug crisis," Trump said.

Canada’s Prime Minister Justin Trudeau said Ottawa would respond to Trump’s tariffs by introducing its own 25% levy on roughly $20 billion in U.S. goods, after previously saying the measures would target specific items like American beer, bourbon, wine, orange juice and home appliances.

Should the U.S. levies remain in place for 21 days, another duty on about $86 billion in American goods would be implemented, Trudeau said.

"Tariffs will disrupt an incredibly successful trading relationship,” Trudeau said, adding that Americans will end up paying more for items like groceries and gas because of them.

Mexican leader Claudia Sheinbaum has said the country has a "plan B, C, D" to respond to the tariffs, although no moves were immediately announced.

Elsewhere, China slapped retaliatory additional tariffs of 10%-15% from March 10 on a wide range of U.S. agricultural products and announced new export restrictions for some U.S. companies, calling Trump’s levies "unreasonable and groundless." Beijing filed a lawsuit with the World Trade Organization as well.

Economists and company executives have long argued that the tariffs on Canada and Mexico -- which make up $900 billion in annual U.S. imports -- threaten to upend a deeply-integrated North American economy. Along with China, Canada and Mexico account for more than 40% of total U.S. imports.

The tariffs on Canada and Mexico could lift core consumer prices in the U.S. by 0.6%, while the extra levies on China could push up prices by 0.1%, according to Goldman Sachs analysts. The prospect of Trump’s trade stance reigniting inflationary pressures has been a key concern for the Federal Reserve, with the central bank signaling that it will adopt a careful approach to future potential interest rate cuts as policymakers assess the impact of the tariffs.

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