MUMBAI: The world woke up Tuesday staring at a murky trade war after US president Donald Trump surprised on the downside with slapping 25% each additional import duties on Mexican and Canadian goods landing on American soil, and an additional 10% on Chinese goods, on top of the 10% announced early last month.
The punitive tariffs swiftly met with retaliatory tariffs in equal measure by all the three nations which are the largest trading partners of the world’s biggest consumer market.
Describing the 25% tariffs on Canada and Mexico, as a “measure for safeguarding the nation” under the International Emergency Economic Powers Act, Trump said the tariffs are “to combat the extraordinary threat to US national security, including to public health posed by unchecked trafficking of lethal drugs like fentanyl and nitazene synthesis which could kill 9.5 million Americans.”
According to the official CDC data, as much as 68% of all drug poisoning deaths in 2022 and 2023—2,16,294 in total in the US—were caused by synthetic opioids, primarily fentanyl, the White House said.
Some basic facts: In 2024, Mexico's total exports to the US were $506 billion in 2024, up 6% from 2023 and total bilateral trade was $839.9 billion. The US exported $334 billion to Mexico, making Mexico the US’ top trading partner for the second consecutive year in 2024. The US had a trade deficit of $171.8 billion. Mexico is the biggest supplier of passenger cars to the US, with 23% of all US car imports.
China’s total trade with the US was $582.4 billion in 2024, while the US exports to China was only $143.5 billion and imports were $438.9 billion, resulting in a trade deficit of $295.4 billion.
In 2024 Canada exported as much as 75.9% of all its exports to the US, worth $410 billion led by over $107 billion in crude oil alone, and leaving it with a merchandise trade surplus of $102.3 billion.
In retaliation, China, the second largest trading partner of the US and Canada, which is its third largest source market, announced equal measure in retaliatory tariffs, Mexico, which is the largest source market for the US and the largest auto supplier, said it would announce counter tariffs shortly.
Canadian Prime Minister Justin Trudeau announced a 25% tariff on 155 billion Canadian dollars ($107 billion) worth of US goods immediately, while China slapped an additional 15% tariff on US farm goods like corn and soybeans apart from also restricting exports to 15 US companies from March 15.
With the new 10% duties on Chinese goods the total amount of new tariffs imposed in just about a month to 20% and the average effective US tariff rate on Chinese goods is thus set to hit 33%, up from around 13% before Trump began his latest term in January, according to an by Nomura.
China had already raised duties on certain US energy imports and putting two US companies on an unreliable entities list that could restrict their ability to do business in the Asian country. This came after the first round of new US tariffs early February.
US exports of farm products to China account for the largest share of US goods shipped into China at 1.2%, or $22.3 billion, as of 2023, followed by oil and gas with 1% share or $19.3 billion, according to Allianz Research analysis, pharmaceuticals rank third at 0.8% or $15.6 billion.
Meanwhile, veteran investor Warren Buffett of Berkshire Hathaway warned aggressive tariff policies could trigger inflation and burden consumers. “Tariffs are actually, we’ve had a lot of experience with them. They’re an act of war, to some degree,” Buffett told CBS News.
Trump’s tariffs are expected to significantly raise consumer prices on various goods not just in the US but across the affected countries.
On the effects of tariffs on prices of common household items could with a 10% higher tariff could vary from 0.8% to 25%, said Moody’s.
Harvard professor Robert Lawrence said the tariff war will deal a devastating blow to Canada and Mexico, as much as 80% of their exports are to the US. And Americans, especially the poor or average citizens will find their consumption bills shooting up.
“It turns out that many of the goods that are imported into the US tend to be purchased by poorer Americans. So this isn’t just a tax measure--it’s actually a regressive tax measure and the estimates are that a typical American household could find its consumption bills going up by on the order or $1500-4000 a year – so it would be a significant impact on the cost of living," Lawrence told American channel CNBC.
Moreover, in the first round of tariff hikes under Trump’s past presidency, “it was Americans who paid the higher tariffs" he said.