Trump imposes new tariffs on Mexico, Canada and China

US President Donald Trump is making good on his threat and is imposing far-reaching tariffs on goods from Canada, Mexico and China. Trump signed the corresponding orders. According to these, tariffs of 10 percent will be levied on all imports from China and 25 percent on imports from neighboring countries Mexico and Canada. A rate of 10 percent will apply to energy imports from Canada. Mexico and Canada reacted promptly.

Mexico's President Claudia Sheinbaum announced countermeasures. She had instructed Economy Minister Marcelo Ebrard to implement a plan that considers counter-tariffs, Sheinbaum wrote on Platform X.

Canada also reacted with counter-tariffs. Starting Tuesday, tariffs of 25 percent will be introduced on US goods, Prime Minister Justin Trudeau announced at a press conference in the evening. The tariffs planned by Canada are intended for US goods with a total value of 155 billion dollars. The Canadian government is also considering measures in other areas, such as trade in critical minerals.

Trump's decrees also include a clause that states that tariffs could be increased or expanded if countries respond with retaliatory measures - such as counter-tariffs on goods from the USA. Tariffs are a type of surcharge on imported goods. They are due at the border. Trump's decision has serious consequences.

Mexico is the USA's most important trading partner. No other country exports more to the United States. According to economists, Trump's tariff policy is likely to harm both economies through higher inflation and job losses. More than 80 percent of Mexico's total exports go to the USA. Thousands of companies and millions of jobs depend on it.

Trump not only criticizes imbalances in trade, he also uses punitive tariffs to get Mexico to crack down on migration and drug cartels. He also claims that Chinese companies are circumventing tariffs by investing in Mexico and exporting from there to the USA.

Sheinbaum reacted angrily to the White House's claim that her administration had allied itself with the drug cartels. At the same time, she suggested to Trump that they set up a working group to work together to combat drug trafficking.

"Mexico does not want confrontation. We expect cooperation between neighboring countries," said the left-leaning president.

Tariffs against Mexico are also likely to hit German companies hard, especially the automotive industry. Almost all manufacturers and many suppliers use Mexico as a cheap production location - and serve the US market from there.

VW, Audi and BMW have their own factories in the country, Mercedes-Benz produces in a joint plant with Nissan. And at Audi alone, 98 percent of cars are exported, 40 percent of which go to the USA.

New customs barriers in the USA are becoming a serious problem here, says industry expert Stefan Hecht from the management consultancy Advyce & Company. Because with an additional surcharge, it is hardly worth sending cars from Mexico to the USA.

In response, he expects manufacturers to move at least part of their production from Mexico to the United States, where VW, BMW and Mercedes also have factories.

The USA is Canada's most important and largest trading partner - almost a trillion dollars in goods and services are traded between the two North American neighbours. In addition to close cooperation in the automotive industry, Canadian companies sell a range of agricultural products and, above all, oil, gas and minerals to the United States.

Trump also justifies the sanctions against Canada by saying that immigrants from Canada bring crime and drugs across the border into the USA and that the Canadian government is not doing enough to stop it.

Washington's tariffs on all imports from Canada are likely to make products on the US market more expensive and therefore less attractive, which could ultimately cause significant damage to producers in Canada. Canadian Prime Minister Justin Trudeau had previously threatened countermeasures.

The tariffs against Canada could also cause problems in Europe - at least for Volkswagen. The Wolfsburg-based company is planning a battery cell factory in Ontario near the US border that will supply the group's electric car plants in the USA. Trudeau's government had lured the billion-dollar project with high subsidies.

Stefan Bratzel from the Center of Automotive Management in Bergisch Gladbach warns that tariffs are now "poisonous" and speaks of a "worst case scenario for this investment". But that is still a long way off: production in St. Thomas near Toronto is not scheduled to start until 2027.

Trump criticizes, among other things, the large amount of fentanyl flowing from China into the USA. Until that stops, the tariffs will remain, he argues. The new US tariffs are likely to be a further burden on the already struggling Chinese economy.

Although Beijing has been trying to broaden its trade for years, the US remains the most important export market and thus an important pillar for many companies. In the US, tariffs on Chinese goods would likely lead to higher prices.

However, China is not defenseless. Beijing could consider responding with its own tariffs, especially on agricultural products from the United States.

China could also implement targeted retaliatory measures, such as restricting the export of rare earths or stepping up investigations into US companies to see whether they are using unfair means to enter Chinese markets. Overall, the already strained relations between the two superpowers are likely to deteriorate further.

European car manufacturers will probably also feel the effects of the tariffs against China - albeit indirectly. Almost all manufacturers and suppliers operate large factories in China. However, production is almost exclusively for the Chinese market, and there are no significant exports to the USA.

Industry expert Stefan Hecht from the management consultancy Advyce & Company nevertheless expects the impact to reach Germany. Given the new hurdles on the US market, Chinese manufacturers such as BYD will likely push even harder into Europe than before, he believes. "Europe will then increasingly come to the fore as a sales market."

The result could be increasing competition and price wars on the German car market. "The local manufacturers will feel this clearly," says Hecht. After all, manufacturers like VW are already struggling with high overcapacity in Germany. It remains to be seen how the EU Commission, which has already imposed punitive tariffs on electric cars from China, will react to Trump's new punitive measures.

The European Union itself must expect tariffs from Trump. "Absolutely," the president said recently when asked whether he would also impose tariffs on products from the EU. "The EU has treated us so badly," he said by way of justification. The USA has a "huge deficit" in trade with the European Union. "So we are going to do something very significant with the European Union," he announced - without giving any details.

It has long been a thorn in Trump's side that European companies sell significantly more goods in the USA than American companies in the EU. There was already a fierce trade dispute between the USA and the EU during Trump's first term in office. During his years in office from 2017 to 2021, Trump relied heavily on tariffs to resolve trade conflicts with other countries.