Canada and China respond with counter-tariffs

US President Donald Trump has put his repeated threats of punitive tariffs against America's neighbours into action. As the 78-year-old confirmed on Monday, the USA will impose import tariffs of 25 percent on all Canadian and Mexican products. The new duties are set to come into force on Tuesday.

"The tariffs. They're all ready to go. They go into effect tomorrow," Trump said during an event at the White House.

At the beginning of February, the US President announced that he would significantly increase import tariffs on imports from the two neighboring countries. The only exception is Canadian energy imports, which will only be subject to a 10 percent tariff in order to protect American consumers from a price shock.

After talks with the respective heads of government last month and their promises to meet the US government's demands, Trump decided to postpone the imposition of the tariffs for the time being. But that is now over.

Trade conflict could start in North America

“There is no more room for Canada and Mexico,” Trump said.

The US President again cited the fact that both countries had not taken sufficient measures to combat the flow of illegal drugs and immigrants into the USA as the reason for the tax increase.

"Large quantities of fentanyl have entered our country from Mexico and, as you know, from China, from where it enters Mexico and Canada," the president said.

Trump also wants to reduce the trade deficits with both countries. Since both Canada and Mexico have announced retaliatory measures, this could be the beginning of a North American trade conflict .

Tariffs on Chinese imports also increased

"If Trump imposes tariffs, we are ready. We are ready with $155 billion in tariffs and we are ready with the first tranche of tariffs, which is $30 billion," Canadian Foreign Minister Mélanie Joly said following Trump's announcement.

Tones of resistance were also heard from Mexico. "Whatever his decision, we will make our decisions and there is a plan, there is unity in Mexico," said Mexican President Claudia Sheinbaum on Monday morning.

In addition to the punitive tariffs on goods from Canada and Mexico, the US government will also increase tariffs on Chinese imports by a further ten percent on Tuesday. Only in February, the US imposed import tariffs of ten percent on products from China, and these are now doubling to a total of 20 percent.

At that time, Beijing had already reacted with counter-tariffs of 15 percent on coal and liquefied natural gas from the USA. An additional tariff of 10 percent was imposed on oil and agricultural machinery from the United States.

The Chinese Ministry of Commerce said it would respond to new tariffs with countermeasures. The party-affiliated state newspaper Global Times suggested additional tariffs on US agricultural products as part of the possible retaliation.

The two largest economies now threaten to head for a new trade war like the one in 2018, when Trump also triggered a conflict by imposing tariffs during his first term in office.

US stock markets reacted with losses to the news from Washington. Since import duties are paid by importers and they often pass the additional costs on to the end customer, this could lead to higher prices for US consumers .

Semiconductor manufacturer wants to invest in USA

Trump and his government members, meanwhile, are convinced that due to the importance of the American market, foreign companies are forced to relocate parts of their production to the USA in order to avoid the tariffs .

The US President cited the world's leading semiconductor manufacturer TSMC as an example of the success of his economic policy. The Taiwanese company announced on Monday that it would invest another $100 billion in the US in the coming years. This is in addition to the $65 billion that TSMC had already announced during the Biden administration.

According to a report by the Reuters news agency, the Japanese car manufacturer Honda also wants to relocate production of its Civic model from Mexico to the US state of Indiana, primarily because of Trump's customs policy.

Trump has also suggested that Canadian and Mexican automotive companies move their production to the United States.

"You have to build your car factories and other things in the United States, then you won't have to pay tariffs," he said.

According to the Trump administration, several other companies are also considering increasing their investments in the USA. Things will get really serious for European and German companies next month, when the counter-tariffs announced by Trump are due to come into force. This means that the USA intends to impose tariffs on imported goods that have been imposed on US goods by other countries to the same extent.

One example would be import duties on car imports. The USA currently charges 2.5 percent on European vehicles. In contrast, the EU charges ten percent on US imports. The USA could therefore try to increase the duties on EU car imports to ten percent as well. The deadline for this is April 2nd.