On January 20, 2025, President-elect Donald Trump intends to implement substantial tariffs on Mexico, Canada, and China as a measure to address the issue of illegal immigration and drug smuggling into the United States.

Trump detailed his plans through a succession of messages on his Truth Social site.

• A 25% tariff on all products imported from Mexico and Canada13
• An additional 10% tariff on all Chinese imports, on top of existing tariffs14

The tariffs will persist until, as stated by Trump, there is an end to the invasion of our country caused by drugs, especially Fentanyl, and illegal immigrants.

Trump’s objective with his tariff warnings is to tackle multiple significant concerns:

1. Illegal immigration: Trump claims that “thousands of people are pouring through Mexico and Canada, bringing Crime and Drugs at levels never seen before”1.
2. Drug trafficking: The president-elect specifically mentioned fentanyl as a major concern13.
3. Border security: Trump is demanding that Mexico and Canada take more aggressive action to solve what he calls a “long simmering problem”1.

If put into effect, these tariffs could result in significant and wide-ranging impacts.

• Dramatic price increases on a wide range of consumer goods, including gas and automobiles15
• Significant challenges for the economies of Canada and Mexico7
• Potential disruption of the U.S.-Mexico-Canada Agreement (USMCA), which currently promotes duty-free trade between the three countries4

The financial markets have already been impacted by the announcement, causing significant turbulence.

• Shares of General Motors and Ford dropped by 4% and 2% respectively4
• The Canadian dollar fell to its lowest point in four years8
• The Mexican peso approached its weakest level since 20228
• The Chinese yuan saw a slight decline in offshore trading8

Responses and Reactions

• The Chinese Embassy in Washington stated that “No one will win a trade war or a tariff war”1.
• Canadian officials, including Deputy Prime Minister Chrystia Freeland, emphasized the strong trade relationship between Canada and the U.S., noting that Canada is essential to U.S. domestic energy supply10.
• Scott Bessent, Trump’s nominee for Treasury Secretary, has previously suggested that tariffs are a means of negotiation17.

Several experts and analysts have raised concerns regarding the practicality and prudence of President Trump’s proposed tariffs.

• Economists warn that such measures could lead to higher inflation and disrupt global supply chains4.
• There are questions about whether Trump will actually follow through with these threats or if they are being used as a negotiating tactic37.
• The proposed tariffs may violate the terms of the USMCA trade deal2.

As the inauguration on January 20 draws near, global observers eagerly await President-elect Trump’s decision on implementing the extensive tariffs. The international community is keen to witness the reactions of global markets and trade partners as they adapt to this potential change in U.S. trade policy.