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.
Canadian Prime Minister Justin Trudeau said his country would plaster tariffs on more than $100 billion 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, they are talking about working positively with Russia, appeasing Vladimir Putin, a lying, murderous dictator. Make that make sense,” Trudeau said.
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 in a public event in Mexico City's central plaza. The delay might indicate that Mexico still hopes to de-escalate the trade war set off by Trump.
Trump 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 at the White House. “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."
U.S. markets dropped sharply Monday after Trump said there was "no room left" for negotiations that could lower the tariffs. Shares were mostly lower Tuesday after they took effect.
According to estimates by the Yale University Budget Lab, Trump’s tariffs amount to a tax hike of roughly $1.4 trillion to $1.5 trillion over 10 years and would disproportionately hit lower-income households.
Trump has said tariffs are intended to address drug trafficking and illegal immigration. But he's also said the tariffs will come down only if the U.S. trade deficit narrows.
The tariffs may be short-lived if the U.S. economy suffers. But Trump could also impose new tariffs on the European Union, India, computer chips, autos and pharmaceutical drugs.
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 last month 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.
“Donald Trump is not a king," Rep. Gregory Meeks, top Democrat on the House Foreign Affairs Committee, said in a statement. "Presidents don’t get to invent emergencies to justify bad policies. 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. Transporters like him 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 Gutherie yard in Livonia, Michigan, comes from Canada.
Sales manager Mike Mahoney said Canadian suppliers are already raising prices. “They’re quoting higher. They’re putting that 25% on studs.'' Projects that have been ongoing for months will strain to stay within their budgets.
The tariffs come at a bad time for builders, already hurt by inflation and high mortgage rates. "We’re trying to work with our customers so that they won’t get buried,” Mahoney said.
Tim Houston, the leader of Canada’s Atlantic coast province of Nova Scotia, said he would direct the Nova Scotia Liquor Corporation to remove all U.S. alcohol from store shelves. Houston also said his government will limit access to provincial procurement for American businesses and double the cost for commercial vehicles from the United States on a tolled highway.
Greg Ahearn, president and CEO of the Toy Association, said the 20% tariffs on Chinese goods will be “crippling” for the toy industry, as nearly 80% of toys sold in the U.S. are made in China.
Steve Rad, CEO of the Austin, Texas-based toy maker Abacus Brands Inc., hopes to find ways to avoid raising prices in the wake of the 20% tax on Chinese goods.
The company will have to “go to war” with its pricing and cost structure and figure out how to avoid penalizing consumers. For one product, a $39.99 kit that teaches children how volcanoes work, he’s thinking of switching to cheaper, lower-quality paper.
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 she 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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Gillies reported from Toronto. Associated Press writers Anne D’Innocenzio in New York, Corey Williams in Detroit, Didi Tang and Lisa Mascaro in Washington and Megan Janetsky and Maria Versa in Mexico City contributed to this report.
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