- Donald Trump says tariffs with China, Canada and Mexico a priority
- He says he will bring them in via an executive order on 20 January
- The policy could violate existing trade agreements
Donald Trump is threatening to bring in tariffs on goods from China, Mexico and Canada.
The president-elect, who beat Vice-President Kamala Harris on November 5 in the popular vote and the electoral college, claims it will be one of his first orders of business. Trump is set to be inaugurated on 20 January next year.
Via Truth Social, he said that the United States “will be charging China an additional 10% tariff, above any additional tariffs” until they up the work towards stamping out fentanyl smuggling.
Why is Donald Trump threatening tariffs?
Donald Trump is keen to bring this in as an incentive to stop countries from smuggling drugs into America. This was also something outgoing President Joe Biden tried to work on to no avail. According to reports, drugs kill an estimated 75,000 Americans annually.
His leverage is supposedly that the US is the world’s biggest importer. According to official stats, China, Canada, and Mexico make up 40 per cent of the country’s imports.
It could create many problems for these three nations and present a few issues for American businesses and consumers.
How do tariffs work?
Plainly, they are a tax on imported goods.
A tariff is a domestic tax on goods when they are imported into the country. It is proportional to the good’s value. For example, a car shipped into the US priced at 100,000 with a 25 per cent tariff would incur an additional $25,000 fee.
The importer pays the cost, namely the company shipping the good and not the foreign seller that exports them to the US.
Why is Trump a fan of tariffs?
They form a huge part of Trump’s economic plans for the United States. They are being sold to his ever-increasing ‘Make America Great Again’ crowd as a vital part of boosting the US economy.
Previously, he added that they aren’t “going to be a cost to you, it’s a cost to another country.”
However, experts, such as economists, do not think this paints an accurate picture. As with all operating cost increases, the cost is usually passed onto the customer.
Following his 2016 electoral victory, Trump implemented another round of tariffs during his first term. Biden, who took over in 2021, did not remove them during his time in office. Most economic forecasts show that tariffs punish consumers the most.
Who are the targets of the Trump tariffs?
Well, China, Mexico and Canada.
China has ruled out doing anything further to stop drug smuggling and actually defended its record. They also stated this battle was futile as no winner could be crowned.
A Chinese government official told BBC News that “the idea of China knowingly allowing fentanyl precursors to flow into the United States runs completely counter to facts and reality.”
They added: “China believes that China-US economic and trade cooperation is mutually beneficial in nature. No one will win a trade war or a tariff war.”
Mexico also reminded the US of its rank in its trading relationships, saying, “Mexico is the United States’ top trade partner, and the USMCA provides a framework of certainty for national and international investors.”
This comes after there was speculation that the proposed tariffs violated the existing trade deals, namely the US-Mexico-Canada Agreement.
According to Reuters, Canada’s Prime Minister Justin Trudeau apparently had a “good discussion” with Trump about the policy.
What is unclear about Trump’s plan?
Well, a lot! For starters, there is much confusion about whether Trump’s “additional 10% tariff, above any additional tariffs” on China’s imports was included in the 25 per cent intended for goods coming from Canada and Mexico.
It also seems to go against many existing agreements and it seems that it will face a lot of resistance like many of Trump’s MAGA commitments.
