By Akayla Gardner and Josh Wingrove | Bloomberg
President Donald Trump said he would follow through on his threat to impose 25% tariffs on imports from Canada and Mexico on Feb. 1, citing the flow of fentanyl and large trade deficits as among the reasons for his decision.
“We’ll be announcing the tariffs on Canada and Mexico for a number of reasons,” Trump told reporters Thursday in the Oval Office as he signed executive actions in response to a deadly airplane collision.
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“Number one is the people that have poured into our country so horribly and so much. Number two are the drugs fentanyl and everything else that have come into the country. Number three are the massive subsidies that we’re giving to Canada and to Mexico in the form of deficits,” he said.
Trump added that the tariff levels “may or may not rise with time.”
California’s largest building trade association warned the new tariffs would complicate rebuilding efforts following wildfires in Los Angeles County.
“The new tariffs threaten to add significant costs to home building and complicate rebuilding after California’s devastating fires,” the California Building Industry Association wrote in a post on LinkedIn following Trump’s announcement.
Trump also said he would be making a determination as soon as tonight on whether the tariffs would apply to Canadian oil imports, a decision which would hinge upon the price of oil.
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“We don’t need the products that they have. We have all the oil that you need. We have all the trees you need,” Trump added, referring to major imports from Canada.
West Texas Intermediate oil futures climbed above $73 a barrel following the comments. The dollar rose to a daily high and Canadian loonie slumped.
Trump’s move was closely anticipated by markets as well as global business and political leaders who have scrutinized his words and actions for any indication on whether the US president would deliver on his levy threats or use them as the starting point for negotiations on trade.
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Tariffs against the two countries, who are major trading partners and export markets for the US, threaten to have dramatic economic consequences and potentially launch a trade war by undermining protections from the US-Mexico-Canada free trade agreement.
Both Canada and Mexico had pledged to respond to any trade levies, including with potentially retaliatory tariffs, even as the nations sought to assure the US they were addressing border concerns in a bid to defuse the conflict.
In the first 11 months of 2024, US trade with Canada totaled $699 billion and $776 billion with Mexico. And the magnitude of tariffs Trump will enact could have stark impacts on particular industries, such as the auto industry and the energy sector. Shares of US automakers
Ford Motor Co. and General Motors Co. turned negative on the announcement, erasing earlier gains.
Trump is also promising sectoral tariffs, such as on pharmaceuticals, semiconductor chips, steel, aluminum and copper, which could apply widely to many countries, including Canada and Mexico.
Trump has also floated 10% tariffs against China, which he has accused of failing to follow through on promises to prevent fentanyl and the chemicals used to make the deadly drugs from flowing into the US. Trump has ordered his administration to investigate whether China complied with a trade deal struck during his first term, setting the stage for tariffs against the world’s second largest economy.
The US president is an avowed believer in tariffs, saying they will force a renaissance in domestic manufacturing, though industry groups warn that it will upend supply chains and endanger existing factories by raising costs of source materials.
He’s hailed tariffs as a source of revenue as lawmakers move to renew and expand expiring tax cuts and approve a host of other credits and benefits the president promised on the campaign trail. Trump wants to reduce the corporate rate to 15% for firms that manufacture goods in the US, compared to the current 21% rate.