Will your business be impacted?
In a move that could have knock-on effects for business across the US, President-elect Donald Trump announced on Monday that, on his first day in office, he will implement substantial tariff hikes on goods coming from Mexico, Canada, and China. The tariffs are aimed at addressing what he describes as issues related to illegal immigration, crime, and drugs, particularly fentanyl, entering the United States, according to a CNN report.
In a post on Truth Social, Trump declared he would sign an executive order imposing a 25% tariff on all products from Mexico and Canada, effective immediately. “This tariff will remain in effect until such time as drugs, in particular Fentanyl, and all illegal aliens stop this invasion of our country!” he wrote. Trump has long linked trade issues to immigration and drug enforcement, and his new plan promises to escalate those tensions with the US’s closest trading partners.
The president-elect also outlined plans to increase tariffs on Chinese goods by 10%, above existing levels, until China takes stronger action against the illegal flow of drugs into the US. Trump cited previous unsuccessful negotiations with Chinese officials on this matter and accused them of failing to act on promises to stop fentanyl exports.
Market reactions to proposed tariffs
The announcement has sparked immediate reactions. A Chinese Embassy spokesperson responded, refuting Trump’s claims that China is complicit in the drug trade. “No-one will win a trade war or a tariff war,” said Liu Pengyu, emphasizing the mutually beneficial nature of US-China economic relations.
The proposed tariffs, if implemented, could significantly disrupt US supply chains, the report noted. Experts warn that the policy could lead to increased costs for American businesses and consumers, potentially raising prices on everyday goods. Karl Schamotta, chief market strategist at Corpay Cross-Border Solutions, estimated that the tariffs could add $272 billion annually to the tax burden, exacerbate inflation, and hinder economic growth.
The impact was immediately felt on global markets. The Canadian dollar dropped 1.2% against the US dollar, and the Mexican peso fell by 2%. Although these declines could bolster the value of the US dollar, American investors expressed concern. US stock futures, which had been higher earlier in the day, fell after the announcement, with the Dow Jones and Nasdaq futures both slipping.
The tariffs would also affect US imports from Canada, such as oil, cars, machinery, and wood products. Mexico, a major supplier of cars, electronics, and oil, could see its trade with the US heavily taxed, while Chinese exports of electronics, machinery, and plastics could face significant price hikes. These industries, particularly in Mexico, which surpassed China as the US’s top trading partner in 2023, are expected to be directly impacted by the new tariffs.
CNN highlighted that the move marks a shift from Trump’s first term, where he imposed tariffs on hundreds of billions of dollars of goods from China, and threatens to complicate trade relations with both Canada and Mexico under the US-Mexico-Canada Agreement (USMCA), which Trump negotiated during his previous presidency.
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