President-elect Donald Trump announced on Monday his intention to impose significant tariffs on the United States’ three largest trading partners: Canada, Mexico, and China. This move is part of his strategy to fulfill campaign promises that may lead to trade conflicts.

Taking office on January 20, 2025, Trump stated that he would implement a 25% tariff on imports from Canada and Mexico until those countries take action against drug trafficking, particularly fentanyl, and curb illegal immigration. This approach could be seen as a breach of existing free-trade agreements.

Additionally, Trump proposed an extra 10% tariff on imports from China, marking one of his most detailed statements regarding his economic plans since his election victory on November 5, where he emphasized a “put America first” agenda.

“In my first Executive Orders on January 20th, I will sign the necessary documents to impose a 25% tariff on all products entering the United States from Mexico and Canada, addressing the issue of our open borders,” he stated in a post on Truth Social.

Despite record migrant arrests during President Joe Biden’s administration, which have put pressure on U.S. border enforcement, illegal crossings have significantly decreased this year due to new border policies and increased enforcement from Mexico.

In 2023, over 83% of Mexico’s exports were directed to the U.S., while 75% of Canadian exports were also sent to the United States.

These tariffs could pose challenges for foreign companies, particularly Asian auto and electronics manufacturers that rely on Mexico as a cost-effective production hub for the U.S. market.

Trump’s proposed new tariff seems to breach the provisions of the U.S.-Mexico-Canada Agreement (USMCA) on trade. This agreement, which Trump enacted in 2020, maintained the largely duty-free trade among the three nations.

During the contentious negotiations that led to the USMCA, Canada and the United States had previously imposed sanctions on each other’s goods. Trump will have the chance to renegotiate the agreement in 2026, when a “sunset” clause will necessitate either a withdrawal or discussions regarding modifications to the agreement.

Following his tariff announcement, Trump spoke with Canadian Prime Minister Justin Trudeau about trade and border security, according to a Canadian source familiar with the matter. The source indicated, “It was a productive discussion, and they will maintain communication.”

William Reinsch, a former president of the National Foreign Trade Council, suggested that Trump might be leveraging the tariff threat to initiate an early renegotiation of the USMCA. “This appears to be more of a threat than a genuine policy move,” Reinsch commented. “The strategy seems to be that if you keep pressuring them, they will eventually concede.”

Ricardo Monreal, leader of Mexico’s lower house and a member of the ruling Morena party, advocated for “the use of bilateral, institutional mechanisms to address human, drug, and arms trafficking.” He cautioned that “increasing trade retaliation would only harm consumers and does not address the root issues,” as he stated on the social media platform X.

Trump’s announcement led to a surge in the dollar’s value, which increased by 1% against the Canadian dollar and 2% against the Mexican peso. Meanwhile, Asian stock markets declined, as did European equity futures, with S&P 500 futures dropping by 0.3%.

CHINA: NO ONE WINS TRADE WARS

The president-elect criticized Beijing for not taking sufficient measures to halt the influx of illegal drugs entering the U.S. from Mexico. “Until they take action, we will impose an additional 10% tariff on all their products imported into the United States, on top of any existing tariffs,” Trump stated.

In response, a spokesperson from the Chinese embassy in Washington emphasized, “China believes that economic and trade cooperation between China and the U.S. is mutually beneficial. A trade war or tariff war will not yield any winners,” said Liu Pengyu.

The embassy also highlighted the measures China has implemented since a 2023 meeting with U.S. officials, during which Beijing committed to curbing the export of materials used in the production of fentanyl, a significant contributor to drug overdoses in the U.S. “These actions demonstrate that the notion of China intentionally allowing fentanyl precursors to enter the United States is entirely unfounded,” the spokesperson added.

Trump has previously vowed to revoke China’s most-favored-nation trading status and impose tariffs on Chinese imports exceeding 60%, significantly higher than those during his first term. The Chinese economy is currently facing increased vulnerabilities due to a prolonged property slump, debt concerns, and weak domestic consumption.

As the November 5 election approaches, Trump has proposed implementing blanket tariffs ranging from 10% to 20% on nearly all imports and suggested tariffs as high as 200% on vehicles crossing the U.S.-Mexico border. He also expressed his intention to activate the USMCA’s six-year review clause upon taking office, which is currently scheduled for July 2026.

Mexico’s finance ministry commented on Trump’s tariff commitment, stating, “As the leading trade partner of the United States, Mexico benefits from the USMCA, which offers a stable framework for both domestic and international investors.”

Economists argue that Trump’s proposed tariffs, which may represent his most significant economic initiative, could elevate U.S. import duty rates to levels not seen since the 1930s. This could lead to increased inflation, a decline in U.S.-China trade relations, provoke retaliatory measures, and significantly disrupt supply chains.

They explain that the burden of tariffs falls on the companies importing the affected goods, which must either transfer the costs to consumers or accept reduced profit margins.

Trump often emphasizes that countries will bear the financial consequences of his tariff strategy, asserting on Monday that Mexico and Canada will “pay a very big price.”