‘We will not back down’: Trump tariffs spark instant retaliation by Canada, Mexico

Washington: President Donald Trump has imposed sweeping tariffs on the United States’ three largest trading partners – Canada, Mexico and China – sparking a trade war that economists warn will lead to higher prices for struggling American consumers.

Canadian Prime Minister Justin Trudeau announced matching 25 per cent tariffs would begin on Tuesday for $30 billion worth of American imports, and tariffs on another $125 billion would begin in 21 days. Mexican President Claudia Sheinbaum announced “tariff and non-tariff measures” would be taken against the US.

Donald Trump announced the tariff plans on Friday.Credit: AP

The White House portrayed the US tariffs as necessary to force the three countries to co-operate on efforts to stop the supply of drugs such as fentanyl to the US. Trump is a long-standing tariff enthusiast who deployed them frequently in his first term.

The executive orders apply a 25 per cent tariff to all goods imported from Mexico, a 25 per cent tariff on all Canadian goods except energy, for which the rate would be 10 per cent, and a 10 per cent tariff on Chinese goods on top of existing ones. The taxes will be collected from Tuesday.

Renowned Australian economist and former Reserve Bank board member Warwick McKibbin said Trump’s tariffs on Canada and Mexico could be a net positive for Australia, as both countries would probably send their exports to countries without hefty tariffs, potentially reducing prices for certain goods.

But this would be completely offset by the impact of the 10 per cent tariff on China, as the demand for Australian goods and services would be likely to fall as the world’s second-largest economy slowed.

He said a broader problem was the impact of the tariffs on American monetary policy, with the US Federal Reserve either holding interest rates steady for longer or even pushing them up to deal with the inflation pressures caused by Trump’s actions.

“This isn’t good for anyone with a mortgage or hoping for lower interest rates,” he said.

McKibbin said all nations were at risk from the president’s actions.

He said the fact Trump had only put a 10 per cent tariff on Canadian energy exports, which overwhelmingly flow into the US, showed he understood that tariffs increased prices.

The biggest economic problem would be China, Canada and Mexico responding to Trump’s actions by implementing their own tariffs, he said. “This is dangerous. The world has to stand united against this sort of action,” he said.

Responding to the tariffs, China said the move “seriously violates” World Trade Organisation rules, and it would file a lawsuit with the international body.

“China deplores and firmly opposes this,” China’s Commerce Ministry said in a statement. It also vowed to take “corresponding countermeasures” to safeguard the country’s rights and interests, but did not elaborate on what form this would take.

On his TruthSocial account, Trump said the tariffs were levied under the International Emergency Economic Powers Act because of the urgent threat posed by illegal migration and drugs such as fentanyl.

Canadian Prime Minister Justin Trudeau announced immediate retaliatory tariffs following US President Donald Trump’s executive orders.Credit: AP

“We need to protect Americans, and it is my duty as president to ensure the safety of all,” he said. “I made a promise on my campaign to stop the flood of illegal aliens and drugs from pouring across our borders, and Americans overwhelmingly voted in favour of it.”

In a post on X, the White House claimed the Mexico tariffs would be “paid by Mexican producers”. In reality, they are paid by US importers at the border.

The orders were released on Saturday evening (Washington time), but match what Trump had vowed to do in November after winning the election. The president has a long affinity with use of tariffs as an economic tool, using them extensively in his first term, and frequently describing the word tariff as “one of the most beautiful words in the dictionary”.

Trudeau announced the retaliatory Canadian tariffs at a late night press conference in Ottawa following a cabinet meeting and a phone call with his Mexican counterpart. In a passionate plea directly to American viewers, he drew on the two countries’ shared history, reminding the US of Canada’s assistance in the Iran hostage crisis, on September 11, 2001, and with the recent California bushfires.

“We were always there, standing with you, grieving with you, the American people,” Trudeau said. “The better path is to partner with Canada, not to punish us. Canada has critical minerals, reliable and affordable energy, reliable and stable institutions, shared values and the natural resources you need.”

Trudeau then told Canadians they should stand up for their country by buying Canadian bourbon and taking holidays locally rather than in the US. He also noted relatively little fentanyl came into the US from Canada. Customs officials reported 19 kilograms of fentanyl was seized on the border with Canada last year, compared with 9600 kilograms on the southern border.

Trudeau said he had tried unsuccessfully to contact Trump since the inauguration. Canada wanted to do even more to prevent fentanyl crossing the border, he said, “but this trade action against Canada is not the best way we can actually work together to save lives”.

“We don’t want to be here. We didn’t ask for this. But we will not back down,” Trudeau said.

Sheinbaum said she categorically rejected as “slander” Trump’s assertion that the Mexican government had alliances with criminal drug cartels. “If such an alliance exists anywhere, it is in the United States armories that sell high-powered weapons to these criminal groups,” she said in translated statement on X.

Rather than using tariffs, the US should do more to combat the sale and consumption of drugs on the streets of its cities, Sheinbaum said, and better manage the synthetic opioid epidemic that has gripped the US for decades.

Mexican President Claudia Sheinbaum said retaliatory measures would be taken, including tariff and non-tariff measures.Credit: AP

The tariffs announced at the weekend might represent the start of an escalating trade war, with Trump warning in his executive orders that if Canada, Mexico or China retaliated, he may increase the rates.

On Friday, Trump flagged the tariffs would be the start of a broader push, vowing to slap the import taxes on oil, gas, steel, copper, microchips and pharmaceuticals.

“The tariffs are going to make us very rich and very strong,” he said. “We’re going to treat other countries very fairly but … other countries charge us tariffs, we don’t charge them tariffs, and it’s about time that changes.” Asked if he would put tariffs on the European Union, he said: “Absolutely.”

A briefing paper by the Tax Foundation, a non-partisan pro-business think tank based in Washington, estimated the tariffs “would shrink economic output by 0.4 per cent and increase taxes by $US1.2 trillion between 2025 and 2034 on a conventional basis”. That equated to a tax increase of $US830 ($1332) per American household in 2025, it said.

Trump disputes such claims, arguing that inflation remained low when he imposed broad tariffs in his first term. “I had almost no inflation and took in $US600 billion in money from other countries,” he said.

“Tariffs don’t cause inflation, they cause success. They cause big success. There could be some temporary short-term disruption and people will understand that.”

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