WASHINGTON (AFP) – Steep United States (US) tariffs on Canadian and Mexican goods came into effect yesterday as a deadline to avert US President Donald Trump’s levies passed without the nations striking a deal, in a move set to snarl supply chains.
Trump had unveiled – and then paused – blanket tariffs on imports from major trading partners Canada and Mexico in February, accusing them of failing to stop illegal immigration and drug trafficking.
In pushing ahead with the duties, Trump cited a lack of progress in tackling the flow of drugs like fentanyl into the US.
US stock markets tumbled on Monday after Trump told reporters there was “no room left” for the North American neighbours to avoid the levies.
The duties stand to impact over USD918 billion worth of US imports from both countries.
Trump also inked an order on Monday to increase a previously imposed 10 per cent tariff on China to 20 per cent – piling atop existing levies on various Chinese goods.
Economists caution that tariffs could raise consumer prices while weighing on growth and employment.
The Tax Foundation estimates that before accounting for foreign retaliation, tariffs on Canada, Mexico and China this time would each cut US economic output by 0.1 per cent.
And sweeping duties, particularly on Canada and Mexico, are set to upset supply chains for key sectors like automobiles and construction materials, risking cost increases to households.
This could complicate Trump’s efforts to fulfill his campaign promises of lowering prices for Americans.
On Monday, Trump told reporters that Canada and Mexico should “build their car plants, frankly, and other things in the United States” in order to face no tariffs.
Former US officials see Trump’s tariffs over drugs like fentanyl as a means to tackle socio-economic problems – while providing legal justifications to move quickly.
Washington is also seeking leverage and to rebalance trade ties, analysts said. But using emergency economic powers to impose tariffs on Canada, Mexico and China is a novel move, and could trigger lawsuits.
Canadian Prime Minister Justin Trudeau on Monday pledged to impose retaliatory 25 per cent tariffs on Washington, saying in a statement: “Canada will not let this unjustified decision go unanswered”.
Mexican President Claudia Sheinbaum said her country has contingency plans. If Trump continues with his tariff plans, KPMG chief economist Diane Swonk warned ahead of them going into effect: “We could easily reach the highest effective tariff rate since 1936 by the beginning of 2026.”
Both consumers and manufacturers stand to bear the costs of additional tariffs, which could diminish demand and trigger layoffs as businesses try to keep costs under control, she told AFP.
Chief economist at the National Association of Home Builders Robert Dietz told AFP the group expects a possible “combined duty tariff rate of above 50 per cent on Canadian lumber” as proposed duties add up.
Even as the US also plans to expand forestry, Dietz said, prices will likely rise in the short-run. Anecdotally, some builders expect they could face higher costs of USD7,500 to USD10,000 per newly built single family home, he said.
