WASHINGTON (AP) 鈥� President Donald Trump launched a trade war Tuesday against America鈥檚 three biggest trading partners, drawing immediate retaliation from Mexico, Canada and China and sending financial markets into a tailspin as the U.S. faced the threat of rekindled inflation and paralyzing uncertainty for business.
Just after midnight, Trump imposed 25% taxes, or tariffs, on Mexican and Canadian imports, though he limited the levy to 10% on Canadian energy. Trump also doubled the tariff he slapped last month on Chinese products to 20%.
with tariffs of up to 15% on a wide array of U.S. farm exports. It also expanded the number of U.S. companies subject to export controls and other restrictions by about two dozen.
Canadian Prime Minister Justin Trudeau said his country would plaster tariffs on more than $100 billion of American goods over the course of 21 days.
鈥淭oday the United States launched a trade war against Canada, their closest partner and ally, their closest friend. At the same, they are talking about working positively with Russia, appeasing Vladimir Putin, a lying, murderous dictator. Make that make sense,鈥� Trudeau said.
Mexican President Claudia Sheinbaum said to with its own retaliatory tariffs. Sheinbaum said she will announce the products Mexico will target on Sunday in a public event in Mexico City鈥檚 central plaza, perhaps with the delay indicating Mexico still hopes to de-escalate the trade war set off by Trump.
As he promised voters, the U.S. president is abandoning the free trade policies the United States pursued for decades after World War II. Trump argues that open trade cost America millions of factory jobs and that tariffs are the path to national prosperity. He rejects mainstream economists who contend that such protectionism is costly and inefficient.
Import taxes are 鈥渁 very powerful weapon that politicians haven鈥檛 used because they were either dishonest, stupid or paid off in some other form,鈥� Trump said Monday at the White House. 鈥淎nd now we鈥檙e using them.鈥�
Dartmouth College economist Douglas Irwin, author of a 2017 history of U.S. tariff policy, has calculated that Tuesday鈥檚 hikes will lift America鈥檚 average tariff from 2.4% to 10.5%, the highest level since the 1940s. 鈥淲e鈥檙e in a new era for sure."
U.S. markets after Trump said there was 鈥渘o room left鈥� for negotiations that could lower the tariffs. Shares were mostly lower Tuesday after they took effect.
According to estimates by the Yale University Budget Lab, Trump鈥檚 tariffs amount to a tax hike of roughly $1.4 trillion to $1.5 trillion over 10 years, a massive increase that would disproportionately hit lower-income households.
The Canada and Mexico tariffs were supposed to begin in February, but Trump to negotiate further with the two largest U.S. trading partners. The stated reason for the tariffs is to and illegal immigration, and both countries say they have made progress on those issues. But Trump has also said the tariffs will only come down if the U.S. trade imbalance closes, a process unlikely to be settled on a political timeline.
The tariffs may be short-lived if the U.S. economy suffers. But Trump could also impose more tariffs on the European Union, India, computer chips, autos and pharmaceutical drugs. The American president has injected a disorienting volatility into the world economy, leaving it off balance as people wonder what he will do next.
鈥淚t鈥檚 chaotic, especially compared to the way we saw tariffs rolled out in the first (Trump) administration,鈥� said Michael House, co-chair of the international trade practice at the Perkins Coie law firm. 鈥淚t鈥檚 unpredictable. We don鈥檛 know, in fact, what the president will do.鈥欌��
Democratic lawmakers were quick to criticize the tariffs, and even some Republican senators raised alarms.
Sen. Susan Collins, R-Maine, said she鈥檚 鈥渧ery concerned鈥� about the tariffs going into effect because of her state鈥檚 proximity to Canada.
鈥淢aine and Canada鈥檚 economy are integrated,鈥� Collins said, explaining that much of the state鈥檚 lobsters and blueberries are processed in Canada and then sent back to the U.S.
The world economy is now caught in the fog of what appears to be a trade war.
Trudeau said Canada would impose 25% tariffs on $155 billion Canadian ($107 billion U.S.) worth of American goods, starting with tariffs on $30 billion Canadian ($21 billion U.S.) worth of goods immediately and on the remaining amount on American products in three weeks.
鈥淥ur tariffs will remain in place until the U.S. trade action is withdrawn, and should U.S. tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures,鈥� Trudeau said.
The White House would like to see a drop in seizures of fentanyl inside the United States, not just on the northern and southern borders. Administration officials say that seizures of fentanyl last month everywhere from Louisiana to New Jersey had ties to foreign cartels.
Damon Pike, technical practice leader for customs and trade services at the tax and consulting firm BDO, suggested the responses of other countries could escalate trade tensions and possibly increase the economic pressure points.
鈥淐anada has their list ready,鈥� Pike said. 鈥淭he EU has their list ready. It鈥檚 going to be tit for tat.鈥欌��
Tim Houston, the leader of Canada鈥檚 Atlantic coast province of Nova Scotia, said he would direct the Nova Scotia Liquor Corporation to remove all U.S. alcohol from store shelves. Houston also said his government will limit access to provincial procurement for American businesses and double the cost for commercial vehicles from the United States on a tolled highway.
The Trump administration has suggested inflation will not be as bad as economists claim, saying tariffs can motivate foreign companies to open factories in the United States. On Monday, Trump announced that Taiwan Semiconductor Manufacturing Company, the computer chipmaker, would be in domestic production.
Still, it can take time to relocate factories spread across the world and to train workers.
Greg Ahearn, president and CEO of the Toy Association, said the 20% tariffs on Chinese goods will be 鈥渃rippling鈥� for the toy industry, as nearly 80% of toys sold in the U.S. are made in China.
鈥淭here鈥檚 a sophistication of manufacturing, of the tooling,鈥� he said. 鈥淭here鈥檚 a lot of handcrafting that is part of these toys that a lot of people don鈥檛 understand 鈥� the face painting, the face masks, the hair weaving, the hair braiding, the cut and sew for plush to get it to look just so." All of that killed labor "has been passed through generations in the supply chain that exists with China.鈥�
For a president who has promised quick results, Ahearn added a note of caution about how quickly U.S. factories could match their Chinese rivals.
鈥淭hat can鈥檛 be replicated overnight,鈥� he said.
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Gillies reported from Toronto. Associated Press writers Anne D鈥橧nnocenzio in New York, Lisa Mascaro in Washington and and Maria Versa in Mexico City contributed to this report.
Josh Boak, Paul Wiseman And Rob Gillies, The Associated Press
