By Alexis Simendinger & Kristina Karisch
President-elect Trump on Monday announced what he sees as the fix for the state of the economy and inflation: Huge new tariffs on foreign goods entering the United States.
With his announcement, Trump sent shock waves across the nation’s northern and southern borders, vowing sweeping 25 percent tariffs on goods from Mexico and Canada, as well as a 10 percent tariff increase on goods from China. The hikes would take effect as soon as Trump takes office, and function as part of his effort to crack down on illegal immigration and drugs.
The three countries are the U.S.’s largest trading partners. Thanks to decades of trade agreements between the North American neighbors, Mexico and Canada are particularly intertwined in U.S. auto production and energy output.
During the campaign, Trump also promoted the idea of a “reciprocal” tariff, in which the U.S. would match the tariff rates that other countries put on American goods, and suggested using tariff revenue to replace income taxes. The Biden administration also raised tariffs on goods from China, but Trump’s plans are much larger.
His tariffs would affect trillions of dollars of products, rather than tens of billions.
CNN: Trump announced Jamieson Greer as his pick to serve as the next U.S. trade representative. No stranger to the role, Greer served as chief of staff to Robert Lighthizer, the trade representative during Trump’s first term, when the administration implemented tariffs.
Officials from Mexico, Canada and China — as well as major industry groups — warned the threat of hefty tariffs on goods would harm the economies of all involved, cause inflation to spike and damage job markets. Trump’s Monday pledge roiled currency, bond and equity markets on Tuesday.
“The folly here is that such tariffs will, in the end, boomerang back to the U.S. in the form of higher inflation and rising interest rates,” Bernard Baumohl, chief global economist for the Economic Outlook Group, told Reuters. Trump, he added, “will undo the singular pledge he gave to Americans during the campaign, which is to bring the cost of living down.”
The plan isn’t particularly popular: Two-thirds of Americans think Trump’s tariff plans will only add to rising costs if implemented, and many are planning purchases ahead of his inauguration anticipating higher prices, according to a Harris poll conducted for The Guardian.
- The Associated Press: Trump vows tariffs over immigration. Here’s what the numbers say about border crossings, drugs and crime.
- The Hill: Trump says he’s going to impose new tariffs: When could it impact your wallet?
- The Wall Street Journal: If the president-elect follows through with his tariff plans, consumers and businesses are likely to see prices rise on everything from fresh fruit to electronics.
Keith Rockwell, a former director at the World Trade Organization, told The Guardian there’s a chance Trump’s move could spark a trade war.
“The United States exports hundreds of billions of dollars’ worth of goods to these countries,” he said. “Anyone who expects that they will stand pat and not retaliate has not been paying attention.”
Others believe the president-elect’s latest threats may just be a negotiating tactic. Either way, the Monday announcement served as a reminder of how Trump’s first term was defined by social media posts that set off alarm bells across diplomatic channels and international markets.
In his first term, “Donald Trump was willing to tweet out tariff threats, usually in the evening, after watching Fox news, and those tweets typically didn’t come to much of anything,” Scott Lincicome, a trade expert at the libertarian Cato Institute, told NPR.
The countries Trump is targeting reacted swiftly to the proposed tariffs.
Mexican President Claudia Sheinbaum on Tuesday warned that Trump’s proposed penalties would only wind up causing inflation and unemployment in the U.S. — and made clear her country could respond with tariffs of its own.
“One tariff would be followed by another in response, and so on until we put at risk common businesses,” Sheinbaum said.
Meanwhile, Canadian Prime Minister Justin Trudeau said on Tuesday he had a “good” conversation with Trump shortly after Trump’s social media post, working to tamp down fears of an immense economic hit to Canada. Roughly 77 percent of Canadian exports go to the U.S., according to the Toronto Region board of trade. Trade experts warned of sweeping economic consequences for all those involved.
He did not say if Canada would impose retaliatory tariffs, as Ottawa did during a previous round of trade hostilities during Trump’s first term.
The New York Times: A vulnerable Trudeau, facing a general election in 2025, hopes to muster unity against Trump’s tariff plans.
Neither the U.S. nor China would win a trade war, the Chinese Embassy in Washington said Monday, after Trump threatened to slap an additional 10 percent tariff on all Chinese imports. “China believes that China-U.S. economic and trade cooperation is mutually beneficial in nature,” embassy spokesperson Liu Pengyu said in a statement.
On Capitol Hill, the reception among Democrats was frosty.
Sen. Richard Blumenthal (D-Conn.) criticized Trump’s tariff threats on “CNN News Central.”
“I think that the president-elect has failed to really face the practical consequences,” Blumenthal said. “I think he’s heading toward a real horror show where the consequences can’t be squared with the promises he made.”
