President Trump Imposes 25% Tariffs on Major Trade Partners
On Saturday, 1 February, US President Donald Trump announced imposing tariffs on imports from Canada, Mexico, the European Union, and China. The White House released a statement saying the tariffs on these nations were to address the threat of illegal aliens and drugs. It says it is an emergency that demands extraordinary measures and is a national emergency under the International Emergency Economic Power Act (IEEPA). Read more to know the response of Justin Trudeau.
The sudden decision made by the Trump Administration has triggered Canada, China, and Mexico to take countermeasures to retaliate against the imposed tariffs. This has led to a broadening of trade war situations between the nations. All the nations on which the tariff was imposed are not happy about it. The most affected one is Canada, which shares the most board with the United States of America.
Why was the Tariff Imposed? Concern for Justin Trudeau
The 25% import tariff imposed on several countries by the US are for various economic and political reasons. These tariffs are mainly on steel and aluminium. The government says that these tariffs are mainly due to security concerns and to protect the US economy.
Reasons for Imposing Retaliatory Tariffs
Economic Protection
The US market in recent years has been heavily saturated by goods and services from abroad. The US government wants to safeguard its domestic industries from outside competition, mainly in the steel and aluminum industries. Earlier as well, during his first term as President, Trump imposed tariffs on imported goods to protect America’s national security when the oversupply of steel and aluminium threatened their national security. By imposing tariffs and increasing the cost of imported goods, the US can boost their domestic productions, preserve jobs for its citizens, and reduce the dependency on suppliers from outside the nation.
However, it is also being said that these tariffs can increase the cost of raw materials that are a necessity for industries such as automobiles and constructions. It can lead to high prices of these raw materials in domestic markets. Hereby, some critics are arguing it can be inefficient and expensive.
To stop the flood of illegal aliens and drugs
In the past few years America has seen an increase in the number of illicit distribution networks majorly related to illegal aliens and drug supply. The White House stated in the fact sheet that more than 10 million illegal alien attempts to enter the United States under previous administration leadership. The United States government has illegal trafficking issues on the both border front, that is, from the southern border, Mexican drug trafficking organisations engaging in manufacturing and transporting dangerous narcotics that have caused deaths of thousands of Americans.
On the other hand, in the northern borders Canada has increased its domestic production of fentanyl which is a dangerous drug. It is also mentioned in the fact sheet that due to weak border rules and regulations, gang members, smugglers, human traffickers, and illegal drugs and narcotics of every kind have been transported within the border and across the nation.
This, especially the addition of illegal aliens, has led to consequences on the daily lives of American citizens as it overwhelms the schools, lowers wages, reduces housing supply and raising rents, overcrowding the places, draining the welfare system, etc. The tariff imposed on imported goods has also helped in tightening border security and safeguarding the interest of America.
Trade Deficit Reduction
The United States has always gone through trade imbalance with major economies like China, Canada, and the European Union. All these nations are major trade partners of the US and heavily impact the US’s economy for exports and imports. The US administration has imposed tariffs on these nations to reduce the dependency of the US on these nations and increasing the domestic consumption by local businesses owned by American citizens discouraging imports. The high cost of imported goods would make the market less competitive for the American business owners running local industries and will create employment as well.
Moreover, in November 2024, President Trump promised to the citizens “ to sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders. This Tariff will remain in effect until Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!”
America First Policy
The Trump Administration has been adopting and implementing the American First Trade Policy to ensure the national security of the nation and trade policy is a prominent component in national security. It ensures America’s domestic industry flourishes and has more employment opportunities for the citizens of the country. The current administration is rigorously focusing on the best interest of American citizens only and the “America First” economic agenda perfectly aligns with the tariff. Another scenario is by taking strong actions for unfair trade across the border, the Trump administration is all set to secure political support in the international forum.
Why did Trump impose Retaliatory Tariffs?
The prominent trade partners of the United States of America have been targeted by these tariffs, including:
Canada
One of the biggest exporters of steel and aluminum raw materials to the US is Canada. According to the new changes, a 25% tariff was imposed on imported goods from Canada. Although, energy resources from Canada will have a lower 10% tariff. This decision of the US government has strained the long standing relations between the two nations. It has led the Canadian government to take retaliatory tariffs on American goods.
China
The US-China trade conflict broadened due to the imposed additional tariff of 10% on Chinese imported goods. The imposed tariffs were in response to China’s intellectual property theft, forced technology transfer, and other “unreasonable behaviours”.
Mexico
Another important trade partner of the US, Mexico has also been subjected to a tariff of 25%. The imposed tariffs are also to counter border issues and illegal drug supply across open borders, to safeguard American citizens from narcotics and to secure the border of America.
America knows what it is doing with imposing the tariffs of these nations. It is to impact these nation’s trade and economy. With trade accounting for over 67% of Canada’s GDP, trading goods, especially exporting goods to the US, becomes a major contributor to Canada’s economy. Moreover, 73% of Mexico’s GDP is dependent on trades and 37% of China’s GDP. Meanwhile, for the US, trade accounts for only 24% of the GDP. Hence, it can be seen that the US government is smartly leveraging its unique position in trade with these nations to incur its national security.
Response to Tariffs
Countermeasures from the other nations against the retaliatory tariffs.
Canada’s Response to Tariffs
Canada responded to the tariff imposed by the US by imposing a 25% retaliatory tariff on the US imported goods valuing billions of dollars, that is, approximately $30 billion. These goods include steel, aluminum, and consumer products like food and beverages. To reduce reliance on the US for trading after the US’s sudden tariff regulations, Canada is negotiating new trade agreements with Asian markets and the European Union through the Comprehensive Economic and Trade Agreement (CETA).
In addition to that, to support its domestic industries, the Canadian government has issued financial aid packages for affected industries.
The Canadian Prime Minister Trudeau has expressed his concern that this unsaid trade war between the two nations will weaken their diplomatic ties.
China Response
Chinese government responded aggressively by imposing tariffs on a wide range of American products, including agricultural goods, etc. it was done to impact American farmers who rely on Chinese markets. Furthermore, China went to pursue legal actions against the US by going to the World Trade Organization, demanding justification for tariffs.
Other countries response
Mexico, Japan, and India also took countermeasures against the US tariffs. Mexico responded with imposed tariffs on US imported goods such as American steel, dairy products, pork,etc. Japan has been negotiating with other countries to diversify its trade. Meanwhile, India imposed tariffs on US based agricultural and industrial products and has been negotiating with other countries as well.
The response from the other countries has been growing rapidly. The tariff that protects American Workers and industries have led to retaliation measures from affected countries. The stock markets have seen a massive decline whereas the business leaders have warned that the prices will be high for consumers in America.
However, President Trump says “ the pain” will be worth it in the long term.
Impact on the Globe
The US government’s increasing tariff gives rise to the problems that trade can never have a smooth sail across the sea. Every nation works on its own interest and cannot be blamed for doing so. However, this change will bring further changes in world trade. The impact on the world would be in two major ways:
New Trade Agreement
The recent turbulence caused by the United States of America, new trade agreements would be adopted by the other nations as well. Majority of those nations will do so to reduce the dependency on the US for their domestic needs. Other nations have learned their lessons to not depend on only one source for their needs and they have been negotiating deals with other economies as well.
Supply Chain Shifts
The changes in the trade policies by the US government, the supply chain has been affected as well leading to the changes in the trade routes between the country. The business has been searching for alternative options for suppliers and manufacturing locations.
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Shubhangi Gupta is a distinguished content writer and the visionary founder of The Unpleasant – Acha Nahi Sabse Sacha. With a Master’s degree in Commerce from University of Lucknow, Shubhangi has seamlessly blended her academic background with her passion for reading and writing, embarking on a successful career as a content writer since 2019.
