File picture of U.S. President Donald Trump and Prime Minister Narendra Modi at the White House in Washington, D.C., U.S., on February 13, 2025
| Photo Credit: Reuters

Donald Trump is expected to sign an order imposing hefty new tariffs of 25% on goods from Mexico and Canada and 10% on imports from China. File
| Photo Credit: AP

U.S. President Donald Trump is expected to sign an order on Saturday (February 1, 2025) imposing hefty new tariffs of 25% on goods from Mexico and Canada and 10% on imports from China, potentially disrupting more than $2.1 trillion worth of annual trade.

Mr. Trump, who is working from his Mar-a-Lago estate in Florida this weekend, said on Friday (January 31, 2025) that there was little that the top three U.S. trading partners could do to forestall the tariffs.

He set the February 1 deadline to push them to take strong action to halt the flow of fentanyl and precursor chemicals into the U.S. from China via Mexico and Canada, as well as to stop illegal immigrants from crossing southern and northern U.S. borders.

But during a lengthy White House exchange with reporters, Mr. Trump brushed aside the notion that his tariff threats were merely bargaining tools.

“No, it’s not … we have big (trade) deficits with, as you know, with all three of them.”

He also said that revenue was a factor and the tariffs may be increased, adding: “But it’s a lot of money coming to the United States.”

Mr. Trump did, however, reference a potential carve out for oil from Canada, saying that tariff rate would be 10% versus the 25% planned for other Canadian imports. But he indicated wider tariffs on oil and natural gas would be coming in mid-February, remarks that sent oil prices higher.

Crude oil is the top U.S. import from Canada, reaching nearly $100 billion in 2023, according to U.S. Census Bureau data.

Higher costs

Mr. Trump acknowledged that the steep duties could result in higher costs being passed on to consumers and that his actions may cause disruptions in the short term, but said he was not concerned about their impact on financial markets.

Jake Colvin, president of the National Foreign Trade Council, which represents major U.S. companies on trade matters, said imposing tariffs on key U.S. trading partners “could impact the cost and availability of everything from avocados to air conditioners to cars and risks shifting the focus of our relationships away from constructive dialogue.”

Although Mr. Trump speaks of “charging” other nations for tariffs, they are paid by importing companies and sometimes passed on to consumers.

Automakers would be particularly hit hard by higher costs, through tariffs on vehicles assembled in Canada and Mexico. Their vast regional supply chain, where components can cross borders several times before final assembly, would further exacerbate these costs.

And Mr. Trump said that more tariffs are coming, saying import taxes were being considered on European goods, as well as on steel, aluminum and copper, and on drugs and semiconductors.

White House spokesperson Karoline Leavitt said the tariffs would be implemented immediately, and details would be published on Saturday (February 1, 2025).

Retaliation expected

Mr. Trump’s move is expected to draw retaliatory tariffs, potentially disrupting more than $2.1 trillion in annual two-way U.S. trade with its top three trading partners.

Canada has drawn up detailed targets for immediate tariff retaliation, including duties on Florida orange juice, a source familiar with the plan said.

Canada has a broader list of targets that could reach C$150 billion ($103 billion) worth of U.S. imports, but would hold public consultations before acting, the source said.

Mexican President Claudia Sheinbaum has also threatened retaliation, but said she would “wait with a cool head” for Mr. Trump’s tariff decision and was prepared to continue a border dialogue with him.

China has been more circumspect about its retaliation plans, but has vowed to respond to defend its trade interests.

China “firmly opposes” Mr. Trump’s new duties, a spokesperson for Beijing’s embassy in Washington said, adding: “There is no winner in a trade war or tariff war, which serves the interests of neither side nor the world.”

Donald Trump’s tariff threats have rattled foreign businesses and governments, with many fearing it could signal the opening salvo of an all-out trade war when he returns to the White House next year.

The president-elect on Monday placed both allies and rivals on notice, vowing to quickly slap an across-the-board tariff of 25 percent on Canada and Mexico, and add a 10 percent tariff on China.

Following through on that threat — or his campaign promise of a 10 percent levy on all US imports — will spark retaliation and have ripple effects across the global economy, analysts say.

“Our assumption is that all these other countries, all these other advanced economies, especially in Asia, they will retaliate in kind,” economist Bernard Yaros of Oxford Economics told AFP.

US tariffs and retaliation including from Europe and Asia would “depress growth” and trade flows, he said, estimating a cut to global growth of 0.1 to 0.9 percentage points in 2026.

Even before tariffs take effect, threats weigh on sentiment and could delay investments and hiring, ING economists Ruben Dewitte and Inga Fechner warned in a note.

Trump has long viewed tariffs as a negotiating tool — or an “all-purpose bludgeon” as a recent Wall Street Journal editorial put it.

On Monday, Trump said that the tariffs on Mexico and Canada would only be removed when illegal immigration and drug trafficking to the United States are stopped.

While seeking to build US leverage, he also risks longer term impacts, with some suggesting he would push countries toward China, Columbia Law School professor Petros Mavroidis said.

“What he definitely does is alienate all his allies,” he told AFP.

Erin Murphy, senior fellow at the Center for Strategic and International Studies, said in Trump’s threats “there is no differentiation” regarding countries’ economic development status or affinity with Washington.

Europe pushback

Europe could be particularly impacted, Dewitte and Fechner said, warning that “a looming new trade war could push the eurozone economy from sluggish growth into recession.”

EU tariffs on car imports were a particular target of Trump during his campaign.

But US reliance on the bloc for strategically important products, mainly in the chemical and pharmaceutical sectors, could give the EU some leverage in talks, ING said.

“European countries will be less likely to strike any kind of bargain with Trump than Canada or Mexico,” said Peterson Institute for International Economics nonresident senior fellow Gary Hufbauer.

He expects the EU could offer to reduce auto tariffs and buy more US agricultural products like soybeans, but it may not be enough for an administration seeking greater market access or rules exemptions.

Should the US impose tariffs, the EU will probably retaliate on iconic US goods like iPhones or whiskey, he said.

European countries could turn to the World Trade Organization (WTO), though even favorable rulings from the international body may not significantly change US practices.

EU chief Ursula von der Leyen has said she will work towards “constructive cooperation” with US authorities.

Jovita Neliupsiene, the EU ambassador to the United States, meanwhile said the bloc is ready to respond to new trade frictions.

Avoiding escalation

In Asia, economies like Japan and South Korea could be targeted over metals and auto exports, while Vietnam may also draw US scrutiny over solar panels, Yaros said.

The US trade deficit with Vietnam has widened in recent years on a surge in goods imports.

Yaros said that countries targeted by Trump’s tariffs, in seeking to avoid escalation, will “retaliate in a way that’s commensurate to the action done by the US, but no greater.”

China, based on precedent, might eschew equal retaliation for tools like export controls, he added.

Daniel Russel of the Asia Society Policy Institute said both Tokyo and Seoul are very focused on preparing for potential tariffs.

He expects partners like South Korea could seek exemptions from blanket US tariffs, for example, by citing its high-tech investments in America.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)