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TRADE WAR UNDERWAY AS CANADA, MEXICO ANNOUNCE RETALIATORY TARIFFS


by Ryan Hanrahan, University of Illinois' FarmDoc project

The Hill's Alex Gangitano and Brett Samuels reported Sunday evening that "President Trump said he would speak Monday morning with the leaders of Canada and Mexico after imposing a fresh round of tariffs on imports from those countries and made clear it would take significant action to lift the tariffs."

"'They have to balance out their trade, number one. They've got to stop people from pouring into our country, and we've stopped it. They haven't stopped it. We've stopped it,' Trump told reporters at Joint Base Andrews. 'They have to stop people pouring in, and we have to stop fentanyl. And that includes China,'" Gangitano and Samuels reported. "The president said he will speak with Canadian Prime Minister Justin Trudeau, as well as Mexico leadership, not specifying who, on Monday morning."

"Trump on Saturday signed off on 25 percent tariffs on Canada, 25 percent tariffs on Mexico and 10 percent tariffs on China, which appear likely to set off a significant trade war," Gangitano and Samuels reported. "The move led to swift responses from all three nations, including Canadian Prime Minister Justin Trudeau on Sunday night saying that Canada would impose 25 percent tariffs on more than $100 billion in U.S. goods."

Reuters' Jarrett Renshaw, Daphne Psaledakis and David Lawder reported that "President Donald Trump said on Sunday the sweeping tariffs that he has imposed on Mexico, Canada and China may cause "short term" pain for Americans as global markets reflected concerns the levies could undermine growth and reignite inflation. 'We may have short term some little pain, and people understand that. But long term, the United States has been ripped off by virtually every country in the world,' he said."

Impacts on Agriculture Trade

Progressive Farmer's Chris Clayton reported that "Canadian and Mexican officials suggested they will work together when it comes to retaliatory tariffs after President Donald Trump imposed universal tariffs on both countries and China -- the three biggest markets for U.S. agricultural commodities."

"For Canada and Mexico, the moves essentially scrap the U.S-Mexico-Canada Agreement (USMCA) that Trump signed in his first term. That agreement lowered tariffs on products, including zero tariffs on most agricultural products flowing between the three countries," Clayton reported. "Through November, U.S. agricultural sales to the three countries accounted for $75.9 billion for 2024."

"By Saturday evening, Canadian Prime Minister Justin Trudeau announced 25% retaliatory tariffs on more than $106 billion (150 billion Canadian dollars) in U.S. products. Initially, Canada will start with $20.6 billion (CA$30 billion) on Tuesday and bump it up to full tariffs by the end of the month," Clayton reported. "...Trudeau and Mexican President Claudia Scheinbaum had spoken about collaborating on their responses. The Wall Street Journal reported Mexico is considering 'carousel retaliation' that would shift to different products, but have political impact, including 'hitting sectors such as agriculture that are likely to lobby Congress.' Canada and Mexico also focused their tariffs on U.S. products coming from Republican states."

American Farm Bureau President Zippy Duvall on Sunday "expressed alarm about potential harm to farmers resulting from the order signed by President Trump imposing stiff tariffs on the United States' top three agricultural markets by value."

"'Farm and ranch families answer the call to feed America's families and the world, and these tariffs and the promised retaliation will put further stress on their livelihoods. More than 20% of U.S. farm income comes from exports, which are dominated by these three markets. Just last year the U.S. exported over $30 billion in agricultural products to Mexico, $29 billion to Canada and $26 billion to China - our top three markets and nearly half of all exports by value combined,'" Duval said.

Canada Retaliatory Tariffs Details

Agri-Pulse's Oliver Ward reported that "the Canadian actions will eventually subject $155 billion of U.S. exports to 25% duties, Prime Minister Justin Trudeau told reporters at a press conference on Saturday night. Some $30 billion will face the new duties from Tuesday, the same day U.S. tariffs on Canadian products are slated to go into effect.

A further $125 billion of U.S. products will go into effect in three weeks 'to allow Canadian companies and supply chains to seek to find alternatives,' Trudeau said," according to Ward's reporting. "Among the U.S. products to face new duties, Trudeau said, would be American 'beer, wine and bourbon, fruits and fruit juices, including orange juice, along with vegetables.' He did not say whether these ag products would be part of the first or second wave of tariffs, however."

"The U.S. is (also) a major buyer of Canadian oil and potash, and the Canadian government had been weighing export taxes for some commodities as part of retaliatory plans, according to the Globe and Mail," Ward reported. "Asked whether this could feature in future retaliatory measures, Trudeau didn't rule it out, but said that he would only impose measures that disproportionately hurt a single Canadian industry or region after consulting with regional leaders and industries."

Mexico Retaliatory Tariffs Details

Reuters' David Alire Garcia and Ana Isabel Martinez reported that "Mexican President Claudia Sheinbaum on Saturday ordered retaliatory tariffs in response to the U.S. decision to slap 25% tariffs on all goods coming from Mexico, as a trade war broke out between the two neighbors."

"Mexico has been preparing possible retaliatory tariffs on imports from the U.S., ranging from 5% to 20%, on pork, cheese, fresh produce, manufactured steel and aluminum, according to sources familiar with the matter," Garcia and Martinez reported. "The auto industry would initially be exempt, they said."

Economists Say Tariffs Likely to Increase Costs and Inflation

NBC News' Shannon Pettypiece reported that "economists across the political spectrum expect tariffs to increase what consumers pay for a range of goods, including vehicles, electronics, produce and lumber. Tariffs are paid by companies importing goods into the U.S., similar to a tax. A range of businesses from homebuilders to alcohol producers warned of the negative economic impact the tariffs would have for businesses and consumers following the tariff announcement."

The Associated Press' Paul Wiseman reported that "the Budget Lab at Yale University estimates Trump's tariffs would cost the average American household $1,000 to $1,200 in annual purchasing power."

"Gregory Daco, chief economist at the tax and consulting firm EY, calculates the tariffs would increase inflation, which was running at a 2.9% annual rate in December, by 0.4 percentage points this year. Daco also projects the U.S. economy, which grew 2.8% last year, would fall by 1.5% this year and 2.1% in 2026 'as higher import costs dampen consumer spending and business investment,'" Wiseman reported.

More Information

Read the White House Fact Sheet on the tariff implementation here.

Read the White House Order imposing tariffs here.


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