Trump's trade war draws swift retaliation with new tariffs from Mexico,
Canada and China
[March 05, 2025] By
JOSH BOAK, PAUL WISEMAN and ROB GILLIES
WASHINGTON (AP) — President Donald Trump launched a trade war Tuesday
against America’s three biggest trading partners, drawing immediate
retaliation from Mexico, Canada and China and sending financial markets
into a tailspin as the U.S. faced the threat of rekindled inflation and
paralyzing uncertainty for business.
Just after midnight, Trump imposed 25% taxes, or tariffs, on Mexican and
Canadian imports, though he limited the levy to 10% on Canadian energy.
Trump also doubled the tariff he slapped last month on Chinese products
to 20%.
Beijing retaliated with tariffs of up to 15% on a wide array of U.S.
farm exports. It also expanded the number of U.S. companies subject to
export controls and other restrictions by about two dozen.
In an address to Congress Tuesday night, Trump repeated two different
explanations for his tariffs on Canada and Mexico. He cited the trade
deficits the U.S. has with both countries, but also said, “they’ve
allowed fentanyl to come into our country at levels never seen before,
killing hundreds of thousands of our citizens.”
Trump also acknowledged there could be “a little disturbance” from the
tariffs, a possible nod to the stock market's sharp falls in the past
two days as well as concerns about inflation.
“It may be a little bit of an adjustment period,” he said after claiming
that farmers would benefit from reciprocal tariffs on countries that
have tariffs on U.S. exports. “You have to bear with me again and this
will be even better.”
Canadian Prime Minister Justin Trudeau said his country would plaster
tariffs on over $100 billion (U.S. dollars) of American goods over the
course of 21 days.
“Today the United States launched a trade war against Canada, their
closest partner and ally, their closest friend. At the same time, they
are talking about working positively with Russia, appeasing Vladimir
Putin, a lying, murderous dictator. Make that make sense,” Trudeau said.
Later in the day, Commerce Secretary Howard Lutnick said the U.S. would
likely meet Canada and Mexico “in the middle,” with an announcement
coming as soon as Wednesday.
Lutnick told Fox Business News that the tariffs would not be paused, but
that Trump would reach a compromise.
“I think he’s going to figure out, you do more, and I’ll meet you in the
middle in some way,” Lutnick said.
A Canadian senior government official said Lutnick called Ontario
Premier Doug Ford after Ford’s press conference and asked him to stand
down. The official, who spoke on condition of anonymity because they
were not authorized to speak publicly about the call, said Ford told the
U.S. commerce secretary he’ll go harder.
The official said Lutnick told Ford that Trudeau’s “very dumb” comment
and remarks by other Canadian officials were not helpful, but said
Lutnick seemed to acknowledge the tariffs are a part of negotiation
toward a trade deal.
A senior Canadian official said Trudeau told the premiers of Canada’s
provinces that he hopes to speak to Trump on Wednesday. The official
spoke on condition of anonymity because they were not authorized to
speak publicly about the call.
Mexican President Claudia Sheinbaum said Mexico will respond to the new
taxes with its own retaliatory tariffs. Sheinbaum said she will announce
the products Mexico will target on Sunday. The delay might indicate that
Mexico still hopes to de-escalate Trump's trade war.
China indicated on Tuesday night that it would not back down.
“If war is what the U.S. wants, be it a tariff war, a trade war or any
other type of war, we’re ready to fight till the end,” China's embassy
to the United States posted on X.
The president is abandoning the free trade policies the United States
pursued for decades after World War II. He argues that open trade cost
America millions of factory jobs and that tariffs are the path to
national prosperity. He rejects the views of mainstream economists who
contend that such protectionism is costly and inefficient.
Import taxes are “a very powerful weapon that politicians haven’t used
because they were either dishonest, stupid or paid off in some other
form,” Trump said Monday. “And now we’re using them.”
Dartmouth College economist Douglas Irwin, author of a 2017 history of
U.S. tariff policy, has calculated that Tuesday’s hikes will lift
America’s average tariff from 2.4% to 10.5%, the highest level since the
1940s. “We’re in a new era for sure."
As the trade disputes escalated, stocks racked up more losses Tuesday on
Wall Street, wiping out all the gains since Election Day for the S&P
500. Markets in Europe also fell sharply.
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Trucks line up to cross the border into the United States as tariffs
against Mexico go into effect, Tuesday, March 4, 2025, in Tijuana,
Mexico. (AP Photo/Gregory Bull)
 The American president has injected
a disorienting volatility into the world economy, leaving it off
balance as people wonder what he will do next.
During his first term, Trump imposed tariffs only after lengthy
investigations — into the national security implications of relying
on foreign steel, for example, said Michael House, co-chair of the
international trade practice at the Perkins Coie law firm.
But by declaring a national emergency involving the
flow of immigrants and illicit drugs across U.S. borders, “he can
modify these tariffs with a stroke of the pen,’’ House said. “It’s
chaotic."
Democratic lawmakers were quick to criticize the tariffs.
“Presidents don’t get to invent emergencies to justify bad
policies,” said Rep. Gregory Meeks, the top Democrat on the House
Foreign Affairs Committee. "Abusing emergency powers to wage an
economic war on our closest allies isn’t leadership — it’s
dangerous.”
Even some Republican senators raised alarms. "Maine and Canada’s
economy are integrated,” said Sen. Susan Collins, R-Maine,
explaining that much of the state’s lobsters and blueberries are
processed in Canada and then sent back to the U.S.
Truck driver Carlos Ponce, 58, went about business as usual Tuesday
morning, transporting auto parts from Ciudad Juarez, Mexico, to El
Paso, Texas, just as he’s done for decades.
Like many on the border, he was worried about the fallout from the
tariffs. “Things could change drastically,” Ponce said. Truckers
could lose their jobs or have to drive farther to coastal ports as
Mexican manufacturers look for trading partners beyond the U.S.
Alan Russell, head of Tecma, which helps factories set up in places
like Ciudad Juarez, is skeptical that Trump’s tariffs will bring
manufacturing back to the United States.
"Nobody is going to move their factory until they have certainty,”
Russell said. Just last week, he said, Tecma helped a North Carolina
manufacturer that moved to Mexico because it couldn’t find enough
workers in the United States.
U.S. businesses near the Canadian border scrambled to deal with the
impact. Gutherie Lumber in suburban Detroit reached out Tuesday to
Canadian suppliers about the cost of 8-foot wood studs. About 15% of
the lumber at the Gutherie yard in Livonia, Michigan, comes from
Canada.
Sales manager Mike Mahoney said Canadian suppliers are already
raising prices. “They’re putting that 25% on studs.'' Builders will
strain to stay within their budgets.
After years of effort and thousands of dollars in investment, Tom
Bard, a Kentucky craft bourbon distiller, gained a foothold in the
Canadian provinces of British Columbia and Alberta and watched his
sales grow north of the border. Now Kentucky bourbon is in Canada's
crosshairs, and an order from his Canadian distributors is on hold.
“That hurts,” he said. At his small distillery "every single pallet
that goes out the door makes a huge difference ... The last thing
you want is to have an empty spot where your bottles are supposed to
be on a shelf.”
Bard co-owns the Bard Distillery with his wife, Kim, in western
Kentucky's Muhlenberg County, about 135 miles (217 kilometers)
southwest of Louisville, Kentucky.
Trump overwhelmingly carried Kentucky in the November election. In
Muhlenberg County, Trump defeated Kamala Harris by a more than
3-to-1 margin.
The China tariffs also threaten the U.S. toy industry. Greg Ahearn,
president and CEO of the Toy Association, said the 20% tariffs on
Chinese goods will be “crippling,” as nearly 80% of toys sold in the
U.S. are made in China.
Rachel Lutz owns the Peacock Room, four women’s boutique shops with
about 15 employees in Detroit. She’s been bracing for the tariffs
but doesn’t understand the logic behind them.
“I’m struggling to see the wisdom in picking a fight with our
largest trading partner that we’ve had historically wonderful
relationships with,” Lutz said Tuesday from her shop. “I’m
struggling to really understand how they can’t see that will
profoundly impact our economy in ways that I think the American
consumer has not predicted. We’re about to find out."
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