Global trade tensions have peaked as President Donald Trump imposed a controversial tariff strategy targeting the United States’ biggest 3 trading partners Canada, Mexico, and China. On February 1st, 2025 this move was announced. It has made shockwaves in international markets and stiffed tactful relations.
The administration implemented 25% of tariffs initially. The tariff was applied to imports from Canada and Mexico. He also added a 10% tariff on Chinese imports. This step will take effect on February 4, 2025.
The last-minute negotiation with Canada and Mexico delayed it for 30 days. The delay was in the implementation of this Tariff rule for the North American neighbors. However, the Tariff on Chinese goods remained on schedule.
The latest development is part of Trump’s broader “American First” economic policy campaign that was set for the 2024 presidential election.
This strategy was made to empower the economic conditions of America with global dynamics to address the issues. The issues include illegal immigration, and drug trafficking and Trump’s perceived it as unfair trade practices.
“He imposed the International Emergency Economic Powers Act (IEEPA) to justify these tariffs. He claimed that they are necessary for national security and economic stability.”
The start of this trade pressure was back from Trump’s first term (2017-2021). In this period he just started trade disputes with China and other regions of the North American Trade Agreement(NAFTA) to the United States-Mexico-Canada Agreement (USMCA). The current tariff implementation represents the escalation of previous policies.
Key points of current situation
- 25% tariff is imposed on Canadian and Mexican imports. There’s a 10% lower tariff on Canadian energy resources. There’s a 10% tariff on all the Chinese imports.
- With negotiations and discussions, trump agreed to delay tariffs on Canadian and Mexican goods with a delay of 30 days. This is the result of strengthening border security and fentanyl trafficking.
- The Chinese tariff will take effect at midnight on the 4th of February 2025.
- According to experts and analysts, this tariff could result in global economic growth with higher inflation, and disturbance in various sectors. The most destructive sector is the automotive industry.
The implication of these tariffs will have far-reaching effects in the economic world. Joshua P. Meltzer of the Brookings Institution said that these tariffs could reduce the GDP growth of the U.S. by 0.25 percent.
This could result in the loss of approximately $45 billion in economic output. If Canada and Mexico revive this, the figure could rise to $75 billion.
Global markets have also reacted to the news. Jim Reid, an analyst at Deutsche Bank said the market “significantly underestimated the risks” and this can cause severe shocks.
According to RBC Capital Markets analysis, the automotive sector is expected to be specifically hit. Volkswagen could see a 9% decline in earnings and Stellantis might face a reduction of 12%.
Trupm’s tariff approach has welcomed criticism from economists and traders. They argue this strategy can undermine the efforts to develop a secure supply chain to compete with China.
Edward Alden of the Council on Foreign Relations warns that “China will advantage the trade war across North America as it cuts the efforts to restore supply chains away from China”.
The international responses are sudden and Canada has already imposed retaliatory tariffs of 25% on $155 billion worth of U.S. goods. Mexico has also taken similar actions. China has declared its intentions towards tariffs at the World Trade Organization. It indicates every country has taken countermeasures.
With the evolution of the situation, businesses are crawling to adopt all the rules. Supply chain experts are taking a proactive approach to mitigate the strategies. The coming weeks will be crucial to leasing tariffs to a trade war.
More News:
Tariff Tango: Mexico, Canada, and China Prepare Retaliatory Strikes
FDA Adapts Regulatory Approach To Keep Balance With Gen AI Advancements In Medtech
