Trump’s tariffs could hit Canada, Mexico hard, while China appears to be prepared Today World News

U.S. President Donald Trump’s sweeping tariffs — 25% on imports from Canada and Mexico, and an additional 10% on goods from China — are set to roil supply chains for products ranging from automobiles to avocados — with industries girding for cost increases.

U.S. imports from Canada and Mexico covered nearly $900 billion in goods as of 2023, and supply lines between the three North American neighbours — who share a trade agreement — are deeply integrated. Fresh tariffs would pose complications for businesses with a footprint across one or more countries.

Analysts expect Mr. Trump’s 25% across-the-board tariffs on Canada and Mexico would hit the automobile and electronics sectors hard.

While Canadian energy exports have a lower 10% rate, this still marks an uptick as Washington previously did not impose tariffs on Canadian oil imports.

Mexico and Canada also account for significant U.S. agriculture imports, meaning the duties could add to prices of popular foods like avocados and tomatoes.

Nearly 80% of Canadian goods exports go to the United States, amounting to some $410 billion in value, according to Statistics Canada. The levies will hit Canadian vehicle and energy industries hard, given that they represent over 40% of Canada’s exports to the United States.

The energy exports involve mainly crude oil and bitumen, alongside natural gas.

The auto sector in Ontario — the nation’s most populous province — faces particular challenges.

This is because “various parts cross the border multiple times before ending up in a finished product,” said Robert Kavcic, at Bank of Montreal, in a research note.

The United States imports construction materials from Canada, too, meaning tariffs could drive up housing costs.

More than 70% of imports of two key materials homebuilders need — softwood lumber and gypsum — come from Canada and Mexico, said National Association of Home Builders chairman Carl Harris.

“Tariffs on lumber and other building materials increase the cost of construction and discourage new development,” he said.

Mexico’s exports to the United States represented 84% of the goods it sold to the world last year, according to its National Institute of Statistics.

This amounts to over $510 billion.

The auto industry spanning vehicles and parts, alongside the electronics and machines sector, will likely see the greatest impact. They send around half of all their production to the United States, analysts from Capital Economics said.

The latest 25% tariffs would also affect sectors like food. Mexico supplied 63% of U.S. vegetable imports and nearly half of U.S. fruit and nut imports in 2023, according to the U.S. Department of Agriculture. More than 80% of U.S. avocados come from Mexico — meaning higher import costs could push up prices of items like guacamole.

Mr. Trump invoked emergency economic powers in imposing tariffs on Canada, Mexico and China, arguing they had failed to stem the flow of illegal immigrants and drugs into the United States.

But analysts have said that U.S. tariffs on Canadian and Mexican imports could be incompatible with the United States-Mexico-Canada Agreement (USMCA), a trade deal Mr. Trump inked during his first presidential term.

Broader conflict

Some anticipated that Mr. Trump’s posturing could be a way for Washington to gain an upper hand ahead of a 2026 deadline to review the USMCA.

Economists warned that heavy U.S. tariffs — and retaliatory measures — could tip Canada and Mexico’s economies into recession, while the United States would face risks of a shallow downturn too.

“The tariffs send a clear message, reinforcing Trump’s America First stance while using trade as a geopolitical tool,” EY chief economist Gregory Daco said.

Markets will view this as heightened political uncertainty while investors brace for inflationary pressures and supply chain disruptions, he said.

Mexican President Claudia Sheinbaum has already announced that her country would impose retaliatory tariffs. “Mexico and Canada could challenge the move under USMCA, while China may counter with targeted restrictions,” Mr. Daco said.

A bigger concern, he said, is that the situation could escalate into a prolonged and broader conflict.

The premier of the Canadian province of British Columbia, David Eby, specifically called on residents to stop buying liquor from U.S. “red” States and said it was removing American alcohol brands from government store shelves as a response to the tariffs.

Mr. Trump’s new tariffs will probably not have a major impact on China’s economy but may herald the opening salvo of another bruising trade war with Beijing, analysts said on Sunday.

China’s Ministry of Foreign Affairs said the country’s government “firmly deplores and opposes this move and will take necessary countermeasures to defend its legitimate rights and interests.”

The Ministry of Commerce in China said it would file a lawsuit with the World Trade Organization for the “wrongful practices of the U.S.” and take measures to safeguard its rights and interests.

However, Mr. Trump’s action against Beijing was “not a big shock to China’s economy”, according to Zhiwei Zhang, president of Pinpoint Asset Management. Given Beijing had already factored in higher tariffs this year, the move was “unlikely to change the market expectation on China’s macro outlook”, Mr. Zhang said.