US President Donald Trump said on Monday that 25 per cent taxes on imports from Mexico and Canada would start on Tuesday, sparking renewed fears of a North American trade war that already showed signs of pushing up inflation and hindering growth.
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“Tomorrow – tariffs 25 per cent on Canada and 25 per cent on Mexico. And that’ll start,” Trump told reporters in the Roosevelt Room at the White House in Washington. “They’re going to have to have a tariff.”
Trump has said the tariffs are to force the two US neighbours to step up their fight against fentanyl trafficking and stop illegal immigration. But Trump has also indicated that he wants to even the trade imbalance with both countries as well and push more factories to relocate in the United States.
His comments quickly rattled the US stock market, with the S&P 500 index down 2 per cent in Monday afternoon trading. It is a sign of the political and economic risks that Trump feels forced to take, given the possibility of higher inflation and the possible demise of a decades-long trade partnership with Mexico and Canada.
Yet the Trump administration remains confident that tariffs are the best choice to boost US manufacturing and attract foreign investment. Commerce Secretary Howard Lutnick said on Monday that the computer chipmaker TSMC had expanded its investment in the United States because of the possibility of separate 25 per cent tariffs.
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In February, Trump put a 10 per cent tariff on imports from China. He re-emphasised on Monday that the rate would be doubling to 20 per cent on Tuesday.