On Sunday Trump acknowledged that newly imposed tariffs could bring economic “pain” to American consumers, but it would be “worth the price” as it would increase US revenue, protect US interests, and restrain illegal immigration. This move regarding tariffs has a significant effect on North America. Trump imposed 25% tariffs on imports from Mexico and Canada. Along with that, Trump slapped China with a 10% tariff, accelerating the trade war.
Economic consequences of this tariff are going to be profound and potentially devastating. Due to these tariffs, the automotive and electronic sectors would face major changes along with vulnerability, including significant disruption in their supply chains. According to some economists, there are certain risks in the current approach, but according to Trump's vision, tariffs would act as a tool that will boost revenue, bring steadiness in trade, and bring adversary nations to the haggle table. The response to this move by Trump from different partners varies as Mexico has announced punitive tariff , Canada plans for equivalent duty on US imports whereas China’s reaction is uncertain.
Trump's tariff policies have faced sharp criticism; tariff policies are categorised as "The Dumbest Trade War in History ” by The Wall Street Journal’s editorial board, and a warning is also given that US consumers will ultimately face the strain of higher prices. Trump's economic offensive, which is substantial tariffs on the United States, leads to several predictions, like it could increase inflation, there could be potential fallout, there could be a reduction in IS GDP growth in 2025, the average US household could lose their purchasing power, and this move by Trump is going to be a massive risk.
Canada's Tesla Tariff War: Musk Targeted in Trade Dispute
Canada's EV adoption rate is high as compared to the US, as 17% of new cars that are fully electric are being sold as compared to the US, which is just 8%. With leading sales of the Model Y and Model 3, Tesla is currently dominating Canada’s electric vehicle market. Due to tariffs that are imposed, they could now disrupt automakers. The tariff standoff between the US and Canada is creating a Canada-US trade war. Former Canada’s finance minister and current Liberal Party leadership has slapped 100% tariffs on selected American goods, including Tesla, in response to Trump’s threatened tariffs on Canadian and Mexican imports.
Freeland cleared her intentions during an interview with The Canadian Press. “We need to be very targeted, very surgical, and precise.” She said. The US president said that this step is taken due to concern regarding immigration and drug trafficking, the main reason on which he was elected. Along with Canada and Mexico's response to this tariff, even China responded and added it would take “necessary countermeasures to defend legitimate rights and interests.”
The White House said, “Today’s tariffs announcement is necessary to hold China, Mexico, and Canada accountable for their promises to halt the flood of poisonous drugs into the United States.” According to Trump’s economic vision, a tariff is a domestic tax on goods as they enter the country, proportional to the value of the import. According to Trump, this will increase tax revenue, protect jobs, and help in growing the US economy.
Canada Strikes Back: Trudeau Responds to Trump Tariffs
Canadian Prime Minister Justin Trudeau launched a robust response to President Donald Trump's tariffs, announcing a comprehensive 25% retaliatory tariff on $155 billion worth of US goods. The strategic countermeasure will be implemented in two phases: $30 billion of tariffs effective immediately and the remaining $125 billion within three weeks. Trudeau emphasized that while these actions are unwelcome, Canada would "not retreat" in defending its economic interests.
The targeted US products include a diverse range of goods spanning multiple sectors: beer, wine, bourbon, fruits, vegetables, perfumes, clothing, shoes, sporting equipment, lumber, and household appliances. Trudeau explicitly warned that "Americans will suffer" from these economic measures, highlighting the interconnected nature of US-Canada trade. The Prime Minister also encouraged Canadians to support domestic products, suggesting they choose Canadian alternatives and potentially modify vacation plans to bolster the national economy.
Trudeau challenged Trump's justification for the tariffs, particularly the claim about drug trafficking. He pointed out that less than 1% of fentanyl entering the US originates from Canada, and the country has already pledged C$1.3 billion in border security measures. "Tariffs are not the ideal means to collaborate for saving lives," Trudeau stated, underscoring the diplomatic tensions. The Canadian government is also considering non-tariff measures related to critical minerals and procurement, though specific details remain undisclosed.
The potential economic impact is significant, with experts warning that these tariffs could disrupt the approximately $22 billion daily cross-border trade flow. The automotive industry may be particularly vulnerable, as car parts frequently cross borders multiple times during production. TD Economics estimates that the average US car price could increase by $3,000. Trudeau stressed that while Canada values its relationship with the US, it will not compromise its economic interests, setting the stage for a potentially prolonged trade confrontation.
