Trade War Escalates: Mexico Stays Calm as Canada Retaliates, U.S. Declares National Emergency
The ongoing trade war between the United States and its neighbors has taken a new turn, with Canada retaliating against recent U.S. tariffs while Mexico remains calm amidst the escalating tensions. President Donald J. Trump has declared a national emergency to bolster the U.S.'s competitive edge, protect sovereignty, and enhance national and economic security.
Canada's response comes after the U.S. imposed tariffs on various Canadian goods, prompting a tit-for-tat escalation. Meanwhile, Mexico has been spared from new U.S. tariffs, a move that has been praised by Mexican officials as a sign of preferential treatment. This decision by the U.S. may help preserve the free trade agreement between the two nations, despite the broader trade war.
The White House's fact sheet outlines the reasons behind the national emergency declaration, emphasizing the need to counteract unfair trade practices and safeguard American industries. This declaration is seen as a strategic move to strengthen the U.S.'s position in global trade negotiations.
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What are the new tariffs on Mexico and Canada?
For Canada and Mexico, the existing fentanyl/migration IEEPA orders remain in effect, and are unaffected by this order. This means USMCA compliant goods will continue to see a 0% tariff, non-USMCA compliant goods will see a 25% tariff, and non-USMCA compliant energy and potash will see a 10% tariff.
Are tariffs free trade?
Serving as a barrier to trade, tariffs raise the price of an imported product for businesses and consumers. The US bank JP Morgan has estimated that tariffs of 25% would raise new car prices by $4,000 (£3,092). They provide an incentive to buy a domestic tariff-free equivalent, where possible.
Why are Canada and Mexico tariffs?
Trump has said the tariffs are intended to reduce the U.S.'s trade deficit with Canada and Mexico, force both countries to secure their borders with the U.S. against illegal immigration and fentanyl smuggling, and promote domestic manufacturing in the United States.
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