President-elect Donald Trump has ignited market turmoil by announcing plans to impose sweeping tariffs on imports from China, Mexico, and Canada. This latest move, outlined in posts on his Truth Social platform on Monday, marks one of his first major steps to reshape global trade since his election victory.
Trump’s proposed tariffs include an additional 10% on all Chinese imports and 25% on goods from Mexico and Canada. The announcement sent shockwaves through financial markets, with the Canadian dollar tumbling to a four-year low and the Mexican peso nearing its weakest levels since 2022. Meanwhile, China’s offshore yuan also edged lower.
The president-elect framed the tariffs as a strategy to curb illegal drug flows and undocumented immigration. He specifically criticised China for failing to enforce the death penalty for fentanyl traffickers, claiming drugs were “pouring into our country” via Mexico at unprecedented levels.
“Until such time as they stop, we will be charging China an additional 10 per cent tariff on all their many products coming into the United States of America,” Trump wrote.
Trump also vowed to enact a 25% tariff on “ALL products” from Mexico and Canada through an executive order on his first day in office, declaring, “This tariff will remain in effect until such time as drugs, in particular fentanyl, and all illegal aliens stop this invasion of our country.”
Market and trade impact
The tariff threats mark a significant escalation in Trump’s trade agenda, reigniting concerns over protectionist policies that defined his first term. Analysts warned of potential damage to key sectors like the North American auto industry, where supply chains are deeply intertwined.
Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, dismissed the 25% tariff as unrealistic. “The president-elect has done what he’s famous for, which is try to stir the debate. Negotiations are always tough but reasonable — I’d urge everyone to be patient,” he said.
Mexico’s economy, heavily reliant on trade with the U.S., could face severe strain. The two nations currently engage in trade worth $800 billion annually, with Mexico supplying a range of goods, including electronics and plastics.
Canadian energy exports to the U.S., including oil and gas, are also at risk. Trump’s former Commerce Secretary Wilbur Ross has previously warned that tariffs on Canadian energy would harm American consumers without creating new jobs.
Political ramifications
Trump’s tariff proposals come as he builds his cabinet for a second term. While his nomination of Scott Bessent as Treasury Secretary has been seen as a moderating influence, this latest move raises questions about the administration’s broader economic direction.
During his campaign, Trump pledged to increase tariffs to as high as 60% on Chinese imports and 20% on other goods. His supporters view these measures as essential for reshoring jobs and strengthening U.S. manufacturing, though critics warn they could stoke inflation and disrupt global supply chains.
Neil Thomas of the Asia Society Policy Institute suggested that Trump’s 10% tariff on China might be an initial negotiating tactic rather than a definitive policy shift. “China will likely respond cautiously at first, balancing confrontation with potential dealmaking in Trump’s second term,” Thomas said.
Fentanyl crisis
Trump’s trade rhetoric ties directly to the fentanyl crisis, which has claimed thousands of lives in the U.S. While public health experts noted a 14% drop in overdose deaths from June 2023 to June 2024, the synthetic opioid remains a significant public health issue.
During a recent meeting with Chinese President Xi Jinping, outgoing President Joe Biden praised U.S.-China collaboration on narcotics enforcement. China has since tightened controls on chemicals used to produce fentanyl. However, Trump’s accusations suggest he remains sceptical of Beijing’s commitment.
More Read
Border policies
The tariff threats align with Trump’s broader immigration agenda, which includes completing the U.S.-Mexico border wall and implementing mass deportations of undocumented migrants. He has also vowed to use military resources for border enforcement.
South Dakota Governor Kristi Noem is set to lead the Department of Homeland Security, while Tom Homan, former acting head of Immigration and Customs Enforcement, will serve as border czar.
Trump’s hard-line policies signal a sharp departure from the Biden administration’s approach to both trade and immigration, setting the stage for contentious domestic and international debates as his presidency begins.
The markets, meanwhile, brace for further volatility as businesses and policymakers assess the implications of Trump’s sweeping proposals.
