President Donald Trump issued executive orders to impose new tariffs on February 1st. The tariffs, placed on imports from Canada, Mexico and China, were to go in effect on February 3rd, however instillation was pushed back 30 days in attempt to stall a trade war.
The proposed tariffs include a 25% additional tariff on imports from Canada and Mexico, as well as a 10% tariff on goods imported from China. However, energy sources from Canada will only have a 10% import tariff, compared to the 25% on the rest of goods.
The tariffs are being enacted in an attempt to halt “The extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl, constitutes a national emergency under the International Emergency Economic Powers Act (IEEPA),” as stated on the White House website.
Before the installation of the tariffs, on February 3rd, President Trump, Canadian Prime Minister Justin Trudeau, and Mexico’s President, Claudia Sheinbaum, announced they agreed to forestall a potential trade war for 30 days. Both Canada and Mexico agreed to boost efforts regarding border security and combat drug trafficking.
After tariffs on Chinese goods took effect, China unveiled retaliatory measures against the US, which raised concerns of a trade war. China’s Finance Ministry said it will impose additional tariffs of 15% on coal and liquefied natural gas imports from the US starting on February 10th.
“[This] seriously violates the rules of the World Trade Organization ... destructs the normal bilateral economic and trade activities,” China stated on the imposition of the tariffs.
Economic analysts warn the tariffs could lead to widespread consequences, such as disrupting supply chains and global stock markets. Key sectors affected include that of Canadian oil and lumber, Chinese plastics, textiles and computer chips, as well as clothing, liquor and auto parts sourced from Mexico. The tariffs also raise concerns on inflation, with a predicted potential increase in the annual inflation rate from 2.9% to 4%.
"Come make your product in America, but if you don't make your product in America, which is your prerogative, then very simply you will have to pay a tariff," President Trump stated last week at the World Economic Forum in Davos, Switzerland.
Despite efforts to reduce tensions, they still remain high, with Canada’s Prime Minister calling on Canadians to boycott U.S. goods in favor of local alternatives. Mexico has retaliated in a similar way with their own threat of potential tariffs on American exports, while China has vowed to take "necessary countermeasures to defend its legitimate rights and interests,” China’s Ministry of Foreign Affairs said.
Historical patterns suggest tariffs could lead to an increase in unemployment rates and consumer prices. A recent economic report stated that tariffs are likely to "generate a rebound in consumer price inflation this year, taking it further above target and making it harder for the Federal reserve to resume loosening monetary policy."
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