Proposed tariff would be ‘devastating’ to US and Canada, Ontario premier says
Ontario premier Doug Ford says a 25% tariff on all goods imported from Canada to the US would be “devastating to workers and jobs” in both countries.
“We need a Team Canada approach and response – and we need it now,” Ford said on X. He urged Justin Trudeau to call an urgent meeting with Canadian premiers.
Key events
Peter Stone
Donald Trump has quickly tapped big donors and political allies for top posts to roll back environmental and health regulations, cut taxes and government spending in ways that will benefit key backers, say government watchdogs.
Armed with blueprints to expand presidential power in aggressive ways and backed by a bevy of billionaire donors and ultra loyalists who helped him win, the president-elect’s transactional style of awarding powerful posts to backers such as X owner Elon Musk, or allies of others such as fracking mogul Harold Hamm, is seen as “unprecedented”, and will likely boost their bottom lines, say critics.
Among the super-rich donors helping shape the president-elect’s administration, no one seems to loom larger than Musk, who gave some $200m to a pro-Trump Super Pac.
Musk has become a ubiquitous adviser to Trump who tapped him to co-chair an outside federal advisory panel on “government efficiency”, an effort fraught with conflicts given the billions of dollars in government contracts that Musk’s companies now boast.
Mexican president to warn Trump tariffs will cause inflation and job losses
Mexico’s president Claudia Sheinbaum said she will send a letter to Donald Trump to warn him that his pledge to impose across-the-board tariffs of 25% on Mexico and Canada will cause inflation and job losses in both countries.
“To one tariff will come another and so on, until we put our common businesses at risk,” Sheinbaum said at a press conference on Tuesday, Reuters reported.
She said she would send the letter later in the day to the US president-elect urging dialogue and cooperation following his announcement on Monday.
Sheinbaum added that her administration had always shown Mexico’s willingness to help fight the fentanyl epidemic in the US and that apprehensions of migrants at the border were down and that migrant caravans were no longer arriving at the shared border.
Criminal gangs in Mexico were still receiving guns in the US, she said, adding that the region’s shared challenges required cooperation, dialogue and reciprocal understanding.
“We do not produce weapons, we do not consume the synthetic drugs. Unfortunately we have the people who are being killed by crime that is responding to the demand in your country,” she said.
Germany’s economy minister, Robert Habeck, has warned that Europe must prepare for Donald Trump to impose hefty tariffs on its exports and stick together to combat any such measures.
“We have to be prepared for the fact that something similar could also happen to Europe or Germany,” Habeck told a business conference in Berlin on Tuesday, AFP reported.
Trump’s tariffs announcement on Monday indicates that his previous campaign threats to hit goods from across the world with higher tariffs should be taken seriously, he said.
“The EU must react to this in a united manner (and) speak together as Europe,” he said, adding that EU leaders should seek dialogue before considering retaliatory measures.
“It must be made clear that in the end everyone loses” from tariffs, including the US, he said.
China tells US not to take ‘goodwill’ for granted on narcotics fight
Amy Hawkins
A spokesperson for China’s foreign ministry said that the US should not “take China’s goodwill for granted” in counternarcotics cooperation and that “fentanyl is an issue for the US”.
The spokesperson was responding to US president-elect Donald Trump’s statement that he would be imposing tariffs of 10% on Chinese imports as a punishment for “massive amounts of drugs, in particular Fentanyl, being sent into the United States” from China.
In 2019, at the behest of the US, China scheduled all forms of fentanyl, the only major country to do so on a permanent basis.
Donald Trump’s planned tariffs on all products coming into the US from Canada, Mexico and China would have serious implications for American industries, the New York Times writes.
Affected industries would include auto manufacturers, farmers and food packagers, which busily ship parts, materials and finished goods across US borders, the paper writes.
Mexico, China and Canada together account for more than a third of the goods and services imported and exported by the US, supporting tens of millions of American jobs.
The costs could be particularly high for the industries that depend on the tightly integrated North American market, which has been knit together by a free-trade agreement for over three decades … That, in turn, could cause spiking prices and shortages for consumers in the United States and elsewhere, in addition to bankruptcies and job losses.
Scott Bessent, Donald Trump’s pick for treasury secretary in his upcoming administration, would be one of several officials responsible for imposing tariffs on other countries.
Bessent has on several occasions said tariffs are a means of negotiation, according to Associated Press. In a Fox News op-ed last week, he wrote that tariffs are “a useful tool for achieving the president’s foreign policy objectives”.
“Whether it is getting allies to spend more on their own defense, opening foreign markets to US exports, securing cooperation on ending illegal immigration and interdicting fentanyl trafficking, or deterring military aggression, tariffs can play a central role.”
Analysis: what would US trade tariffs mean for Canada?
Chris Michael
The imposition of 25% tariffs on Canada, particularly if they come suddenly, would be shattering to the Canadian economy, writes Chris Michael.
More than three-quarters of all of Canada’s exports go to the US – almost $600bn worth – including energy, lumber and auto parts. Successive decades of free trade have knitted the two countries together more or less seamlessly.
Canada would also likely retaliate, imposing tariffs of its own on US goods, driving up the cost of imported American items. Making matters worse for Canadians would be if the Canadian dollar falls as a result – and it has already taken an immediate hit, dropping about 1 cent against the US dollar following Trump’s announcement.
A 25% tariff on all goods would set off by far the largest trade war between the two allies – dwarfing the last one he started. In 2018, the first time Trump was president, he imposed tariffs on steel and aluminium, before eventually relenting about a year later. Those tariffs pitted the US against all its major trading partners including the EU, China, Canada and Mexico.
Trump has often attacked Canada’s own protectionist policies, including calling Canadian quotas in the dairy industry a “disgrace” and blaming it for widespread hardship among US farmers – even though the American problem has been persistent overproduction that leads US farms to dump tens of millions of gallons of surplus milk.
In his first term, he pushed to renegotiate Nafta – the North American Free Trade Agreement – which many voters in the Rust belt states he won in 2016 blamed for gutting their manufacturing economies and sending factory jobs to Mexico and Canada. The three countries agreed on some substantial tweaks, and renamed the treaty the United States Mexico Canada Agreement (USMCA).
That deal itself now looks to be in tatters.
Quebec’s premier, François Legault, says Canada must do “everything possible” to avoid Donald Trump imposing a tariff of 25% on Canadian products.
In a post on X, he said the move by Trump “poses an enormous risk to the Quebec and Canadian economies”.
He calls for border integrity to be a federal government priority.
Earlier, Ontario’s premier, Doug Ford, said tariffs would be “devastating” to workers and jobs in the US and Canada.
Lauren Aratani
Two-thirds of Americans think Donald 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 exclusively for the Guardian.
Trump has called tariffs the most “beautiful word in the dictionary”, yet about 69% of Americans think tariffs on imports will lead to higher prices, according to the poll.
The majority of Democrats (79%), independents (68%) and Republicans (59%) all believe that tariffs will increase the prices of the goods they pay for in the US. Nearly the same percentage of respondents said that tariffs will have a significant effect on what they can afford.
The Harris poll raises questions about the popularity of one of Trump’s key economic policy platforms. During his presidential campaign, Donald Trump called for a broad 20% tariff on all foreign imports and a 60% tariff on Chinese imports.
Donald Trump has used the fentanyl crisis gripping the US to support his ambition to impose trade tariffs on China. It gives the incoming US president an opportunity to both appear to be addressing the narcotics emergency, while also reinforcing one of his key aims in terms of US trade.
China is the dominant source of chemical precursors used by Mexican cartels to produce fentanyl, while Chinese money launderers have also become key players in the international drug trade, US authorities say.
The Biden administration has attempted to crack down on both but diplomacy has yielded modest results. That has frustrated some US security officials and China hawks, Reuters says in a detailed report, who say the pressure must be increased on Beijing. They say the quickest way for Washington to get China’s attention is to sanction Chinese banks doing business with money launderers and corrupt chemical sellers.
Foreign banks hit with US sanctions can’t engage with American financial institutions or access the US dollar, severely curtailing their ability to transact business internationally. It’s a weapon that has been wielded against financial institutions in Iran and Russia, but never against banks in Mexico and China tied to drug trafficking.
A plan formulated by David Asher, a top former US anti-money laundering official and circulated in Trump transition circles, calls for criminal indictments of major Chinese and Mexican financial institutions allegedly laundering money for the cartels; mass sanctions on Chinese companies and people implicated in the fentanyl trade; beefed-up bounties on most-wanted traffickers; cyber warfare against Mexican cartels; and a US intelligence agency focus on fentanyl that’s commensurate with the war on terrorist organizations.
On the campaign trail, Trump vowed to designate Mexico’s drug cartels as terrorist groups and harness the US military to destroy them. But it’s not clear if Trump is willing to move beyond tariffs on Chinese goods.
There is growing consensus in Republican circles close to Trump that Beijing has exploited the synthetic opioid epidemic to harm Americans. They point to a bipartisan report issued in April by the House of Representatives’ select committee on China that calls that nation the “ultimate geographic source” of the fentanyl crisis. The report alleges that Beijing provides tax rebates to Chinese companies that export fentanyl chemicals.
Beijing has repeatedly dismissed the claims in that report. The Chinese Embassy said “the idea of China using fentanyl as a means to strategically weaken the US runs completely counter to facts and reality.”
What Trump has announced on tariffs
In a series of posts on his Truth Social platform, Donald Trump has announced he will apply new trade taxes on a number of the US’s closest trading partners from day one of his second term.
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Trump has said that, as soon as he gets into office, he will impose a 25% tariff on “ALL products coming into the United States” from Mexico and Canada.
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He says the tariffs will remain in place until both countries clamp down on migrants and drugs crossing the border into the US.
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Trump also says he will impose a further 10% tariff “above any additional tariffs” on all products coming into the US from China.
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It was not entirely clear what this would mean for China as Trump has previously pledged to end China’s most-favoured-nation trading status and slap tariffs on Chinese imports in excess of 60% – much higher than those imposed during his first term.
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The reasons for the China tariff, Trump said, was their failure to curb the supply of drugs into the US. China is a major producer of the chemicals used to manufacture fentanyl.
Joe Biden is to propose expanding coverage of anti-obesity drugs for millions on Medicare and Medicaid, which could cut out-of-pocket expenses for some by as much as 95%, a White House official said on Tuesday.
This would enable more Americans to afford new weight loss medications that can help prevent type 2 diabetes and lower the risk of death and heart attacks by up to 20%, but cost as much as $1,000 a month without insurance coverage, Reuters reported.
Current rules for the Medicare and Medicaid government health insurance programs cover the use of drugs such as Mounjaro, Ozempic and Wegovy for certain conditions like diabetes, but not for obesity as a condition on its own.
A new proposed regulation, to be published by the Department of Health and Human Services later on Tuesday, would require Medicare to cover these drugs as a treatment for obesity, expanding access for an estimated 3.4 million Americans with Medicare.
It would also ensure access to the medications for approximately four million adult Medicaid enrollees, the White House official said.
Reuters reported earlier this month that intense demand for anti-obesity drugs has triggered supply issues, with many patients turning to cheaper compounded versions sold online.
Trump considering naming AI czar but Musk not in frame, reports say
Away from the trade tariff news, Donald Trump is considering naming an “AI czar” in the White House to coordinate federal policy and governmental use of artificial intelligence, Axios reported on Tuesday, citing sources.
Tesla chief Elon Musk will not be the AI czar, but is expected to be involved in shaping the future of the debate and use cases, the report added.
Germany’s vice-chancellor Robert Habeck has urged the European Union to seek talks with the US to ward off a damaging trade war following Donald Trump’s vow to impose trade tariffs on Mexico, Canada and China.
Habeck says the EU must “respond united, and not tear itself apart into two or three blocs of countries but speak as a united Europe”.
“We must make clear that ultimately, everyone loses: the United States, the United States’ economic area and Europe,” he said.
Proposed tariff would be ‘devastating’ to US and Canada, Ontario premier says
Ontario premier Doug Ford says a 25% tariff on all goods imported from Canada to the US would be “devastating to workers and jobs” in both countries.
“We need a Team Canada approach and response – and we need it now,” Ford said on X. He urged Justin Trudeau to call an urgent meeting with Canadian premiers.
Mexican senator tells US to ‘stop consuming drugs’ in response to Trump tariff threat
The head of Mexico’s Senate, Fernández Noroña, has responded to Trump’s vow by asking what tariffs Mexico should impose on the US to force people there to stop consuming drugs and illegally exporting weapons to Mexico.
Mexico’s finance minister has previously warned that any taxes imposed on Mexican goods could trigger retaliatory tariffs. “If you put a 25% tariff on me, I’ll have to react with tariffs and I’m your main importer,” Rogelio Ramírez de la O previously said.
Trump’s threatened new tariffs could violate the terms of the US-Mexico-Canada Agreement (USMCA) on trade, Reuters report. The deal, which Trump signed into law, took effect in 2020 and continued the largely duty-free trade between the three countries.
During the rancorous talks leading to the USMCA, Canada and the United States at one point imposed sanctions on each others’ products. Trump will have the opportunity to renegotiate the agreement in 2026, when a “sunset” provision will force either a withdrawal or talks on changes to the pact.
After issuing his tariff threat, Trump held a conversation with Canada’s prime minister Justin Trudeau in which they discussed trade and border security, a Canadian source familiar with the situation told Reuters. “It was a good discussion and they will stay in touch,” the source said.
Trump could be counting on the threat of tariffs to prompt an early renegotiation of USMCA, said William Reinsch, a former president of the National Foreign Trade Council.
“This strikes me more as a threat than anything else,” Reinsch said. “I guess the idea is if you keep hitting them in the face, eventually they’ll surrender.”
Mexico’s lower house leader Ricardo Monreal, a member of the ruling Morena party, urged “the use of bilateral, institutional mechanisms to combat human, drug and arms trafficking.”
“Escalating trade retaliation would only hurt the people’s pocketbooks and is far from solving underlying problems,” he said in a post on social media platform X.
Trump’s announcement sparked a dollar rally. It rose 1% against the Canadian dollar and 1.6% against the Mexican peso, while share markets in Asia fell, as did European equity futures. S&P 500 futures eased 0.1%. The US dollar also rose to its highest level since 30 July 30 against China’s yuan
Donald Trump’s trade tariffs could cost US consumers $2,400 a year
Donald Trump’s vow to impose 25% import tariffs on products from Mexico and Canada, and 10% from China, when he takes power in January has sent global stockmarkets into a spin, Mark Sweney report in the Business live blog.
The US dollar rose but shares and European stock markets fell at the start of trading as investors worried about the ramifications of Trump’s threats. Copper prices fell, weighed down by a stronger US dollar and Trump’s pledge to levy more tariffs on Chinese products.
Research by ING has estimated that if the costs of the new tariffs are fully passed on to consumers, then Americans will face having to pay $2,400 more per capita annually for goods.
The report says that also taking into account potential labour shortages due to Trump’s plans to crackdown on immigration – with a vow to stage the “largest deportation operation in American history” – there could be a 1% increase in inflation in the US.
James Knightley, ING chief international economist for the US, said:
“President-elect Donald Trump has promised to implement sweeping new tariffs aimed at protecting American industries, promoting domestic manufacturing, and reducing reliance on foreign imports.
“However, tariffs imposed during the first Trump term – and continued and extended under Biden – did not achieve all of the promised outcomes. Furthermore, our research shows that if the new tariffs are fully passed on, they could increase inflation and cost American consumers up to $2,400 per capita annually.
The report points to policies implemented under the first Trump administration, such as a 20% tariff on all imported large residential washing machines introduced in 2018, which resulted in the retail cost climbing 12%.
Beijing warns US ‘nobody will win in a trade war’ after Trump vows to impose tariffs on China, Mexico and Canada
Beijing has told Donald Trump that “nobody will win in a trade war” after the president-elect vowed to sign an executive order imposing a 25% tariff on all products coming in to the United States from Mexico and Canada, with additional tariffs on China.
Trump accused China of failing to stop the number of drugs entering the US. China is a major producer of precursor chemicals that are acquired by drug cartels, including in Mexico, to manufacture fentanyl, a highly potent synthetic opioid.
In a post on his social media platform Truth Social, Trump said: “I have had many talks with China about the massive amounts of drugs, in particular Fentanyl, being sent into the United States – But to no avail … Until such time as they stop, we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America.”
Liu Pengyu, a Chinese embassy spokesperson, said China had taken steps to combat drug trafficking after an agreement was reached last year between Joe Biden and Xi Jinping.
“The Chinese side has notified the US side of the progress made in US-related law enforcement operations against narcotics,” he said in a statement. “All these prove that the idea of China knowingly allowing fentanyl precursors to flow into the United States runs completely counter to facts and reality.”
Trump also posted: “On January 20th, as one of my many first Executive Orders, I will 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.” He cited what he called the “long simmering problem” of “thousands of people pouring through Mexico and Canada, bringing Crime and Drugs at levels never seen before”.
Canada’s deputy prime minister, Chrystia Freeland, released a statement on Monday evening saying that the country places the highest priority on border security and the integrity of its shared border with the US. Trump and the Canadian prime minister, Justin Trudeau, spoke on Monday night about trade and border security, Reuters reported, citing a Canadian source directly familiar with the situation.
Arturo Sarukhan, a former Mexican diplomat, said the decision would violate the revised free trade pact between the United States, Canada and Mexico, known as the USMCA, and said the new tariffs would “put North American relations in a downward spiral”.
Mexico’s finance ministry said: “Mexico is the United States’ top trade partner, and the USMCA provides a framework of certainty for national and international investors.”
A tariff is a tax placed on goods when they cross national borders. Import tariffs such as those proposed by Trump can have the effect of protecting domestic industries from foreign competition while also generating tax revenue for the government. But economists widely consider them an inefficient tool that typically leave consumers and taxpayers bearing the brunt of higher costs.
Countries generally levy retaliatory tariffs of their own in response to tariffs such as those Trump is proposing, which can spark a trade war – as happened between the US and China during Trump’s first presidency.
