Washington, March 4: President Donald Trump announced on Monday that a 25% tariff on imports from Mexico and Canada would take effect starting Tuesday. The move has reignited fears of a trade war in North America, with potential implications for inflation and economic growth, which analysts have already warned about.
As per agency report, Trump stated that the tariffs aim to pressure Mexico and Canada to take stricter measures against fentanyl trafficking and illegal immigration. However, he also hinted at his broader goal of reducing America's trade imbalance and relocating more manufacturing plants to the United States.
The announcement sent shockwaves through the U.S. stock market, causing the S&P 500 index to drop by 2% during Monday’s trading session. Investors expressed concerns over the economic and political risks associated with the tariffs, fearing that they could drive up inflation and strain long-standing trade relations with Mexico and Canada.
Despite these concerns, the Trump administration remains confident that imposing tariffs is the best strategy to boost American manufacturing and attract foreign investment. This latest action follows a 10% tariff on Chinese imports in February, which Trump has now declared will double to 20% starting Tuesday.
Initially, Trump had given Mexico and Canada a one-month grace period in February, as both countries had promised certain trade concessions. However, on Monday, he stated that there was no longer room for exemptions, and the new tariffs would proceed as planned. While Canada’s energy products, including oil and electricity, will face a lower tariff rate of 10%, other imports will be subject to the full 25% levy.
Canadian Prime Minister Justin Trudeau strongly opposed the decision, stating that Trump’s tariffs lacked justification and would violate the trade agreements that the U.S. had negotiated during Trump’s previous term. Trudeau warned that Canada would retaliate within 21 days, imposing a 25% tariff on $155 billion worth of U.S. goods, beginning with an initial $30 billion in tariffs starting Tuesday.
Meanwhile, Mexican President Claudia Sheinbaum opted for a more cautious approach, stating that Mexico would wait to see how the situation unfolds before responding. Ahead of Trump’s announcement, Sheinbaum remarked that the decision ultimately rests with the U.S. government and its president.
The escalating trade tensions between the U.S. and its North American neighbors mark a significant shift in economic policies, with analysts predicting disruptions in supply chains and rising costs for businesses and consumers in all three countries.
