US trading partners warn that Trump’s tariffs will hurt everyone involved

(Reuters) – Officials from Mexico, Canada and China have warned that U.S. President-elect Donald Trump’s threat to impose high tariffs on goods from the three largest U.S. trading partners would hurt the economies of all parties involved and could exacerbate inflation and damage labor markets.

In the first round of responses to Trump’s surprise announcement Monday of a 25% tariff on imports from Canada and Mexico and an additional 10% tariff on Chinese goods until illegal drugs and migrants crossing the border are eliminated, leaders and other senior officials called for dialogue and cooperation.

“One tariff will lead to another, and so on, until we endanger our common interests,” Mexican President Claudia Sheinbaum said at a regular news conference. Sheinbaum said she plans to send a letter to Trump and will request a phone call to discuss the issue.

Meanwhile, a Bank of Canada official said it was clear that any actions by Trump to follow through on the threat would reverberate on both sides of the U.S. northern border.

“What happens in the U.S. has a major impact on us, and something like this would certainly impact both economies,” Lieutenant Governor Rhys Mendes said during a question-and-answer session from the audience in Charlottetown, Prince Edward Island.

Earlier, a spokesman for the Chinese embassy in Washington said: “No one will win the trade war or the tariff war.”

As of September, U.S. Department of Commerce data showed that in the first nine months of the year, the three countries shipped more than $1 trillion in goods to the United States, with Mexico ranking first, followed by China and then Canada .

Focus on fentanyl

Trump, who takes office on Jan. 20, promised throughout his campaign to impose tariffs of varying amounts on U.S. trading partners as part of his promise to “put America first.”

The imposition of import tariffs was the main political assumption of his first four-year term and, just like today, he also threatened them for non-economic reasons. In 2019, he threatened Mexico with 5% tariffs in exchange for cooperation in tightening border controls.

In this case, the mix of complaints to the three countries was added to by the influx of illicit drugs, particularly fentanyl, into the United States. According to the Centers for Disease Control and Prevention, fentanyl overdose deaths actually decreased in the U.S. in 2023, although nearly 75,000 people still succumbed to the powerful opioid.

Referring specifically to China, Trump wrote in a post on his social media site: “Until they stop acting, we will be charging China an additional 10% rate, on top of any additional tariffs, on all of their many products imported into the United States.” America.”

It was not entirely clear what this meant for China, as he had previously promised to end China’s Most Favored Nation trade status and impose tariffs of more than 60% on Chinese imports – much higher than those imposed during his first term.

Trump’s threats of new tariffs appear to violate the terms of the US-Mexico-Canada trade agreement (USMCA). The agreement Trump signed took effect in 2020 and continued largely tariff-free trade between the three countries, although the deal will expire in 2026.

Warren Maruyama, former general counsel to the U.S. Trade Representative under President George H. W. Bush, said Trump’s threat could be relatively easily responded to by declaring an emergency, which would unblock the International Emergency Economic Powers Act.

“If precedent is any indication, it is a serious, uphill battle” to challenge actions taken under that umbrella.

Trump’s broadside late Monday sent Mexican and Canadian currencies tumbling, although U.S. stock markets largely took the development in stride, with many investors viewing it as an opening bid for nominations rather than a certainty.

Shares of some companies considered particularly sensitive, such as automakers Ford and General Motors, fell sharply.

“Given that the post clearly refers to the flow of people and drugs across the southern and northern borders, it suggests that this particular tariff threat is more of a negotiating tool than a revenue-raising tool,” said Thomas Ryan, North America economist at Capital Economics.

“It leaves the door open for Canada and Mexico to come forward with a credible plan over the next two months to try to avoid these tariffs.”

(This story has been updated to correct the spelling of Maruyama in paragraph 14)

(Additional reporting by David Lawder, Andrea Shalal, David Ljunggren, Brendan O’Boyle, Joe Cash, Ethan Wang, Liz Lee, Thomas Hals and the Mexico office; writing by Dan Burns; editing by Bill Berkrot)