Donald Trump’s trade tariffs on Canada, Mexico and China explained visually

Donald Trump’s trade tariffs on Canada, Mexico and China explained visually

Following on-the-go phone calls between President Donald Trump and Canadian and Mexican leaders from Monday, the US has delayed planned 25 percent tariffs by a month.

Justin Trudeau, the prime minister of Canada, and Claudia Sheinbaum, the president of Mexico, agreed to improve border security to stop illegal immigration into the US, preventing a trade war for the time being.

However, Beijing took retaliatory measures after the 10% tariffs on Chinese goods went into effect on Tuesday. Prior tariffs on Chinese goods began in Trump’s first term, starting in 2017 and ending in 2021.

The tariff war by the US, the second-largest goods trader in the world after China, has rattled markets worldwide. From January to November 2024, the value of goods traded between the US and the world reached $4.88 trillion, with $2.98 trillion in exports and $1.90 trillion in imports.

The United States’s top trading partners – Mexico, Canada and China – account for more than 40 percent of total goods traded, valued at more than $2 trillion.

How do tariffs operate and what are they?

A tariff is a government-imposed tax on imported goods and services, paid by businesses bringing them into the country. Tariffs frequently increase consumer costs because they make foreign goods more expensive, potentially lowering demand, and are intended to protect domestic industries.

(Al Jazeera)

For example:

  • A Chinese exporter pays $10 for a pair of jeans imported from the US.
  • Chinese goods are subject to a 10% tariff from the US government.
  • The US importer will now have to pay the federal government an additional $1 for the jeans, increasing the cost by $11 to the US government.
  • The jeans will sell for $20 once expenses and profits are added.
  • The US consumer will likely spend more on the jeans.

What does Canada and Mexico’s pending tariff pause mean?

Trump and Trudeau both pledged to improve security along their shared borders with the US after speaking with them.

I just spoke with Mexico’s president Claudia Sheinbaum. She agreed to immediately provide 10,000 Mexican soldiers on the border that separates Mexico from the United States, according to Trump in a friendly conversation on Truth Social on Monday.

Mexico's President Claudia Sheinbaum
Mexico’s President Claudia Sheinbaum gestures as she speaks about US President Donald Trump’s policies during a news conference at the National Palace, in Mexico City, Mexico, on January 21, 2025]Henry Romero/Reuters]

Following his call with Trump, Trudeau announced that Canada would move forward with its previously outlined $1.3bn border plan, while also committing to appointing a “fentanyl czar” and officially designating cartels as “terrorist” organisations.

Trudeau
Canada’s Prime Minister Justin Trudeau is joined by Finance Minister Dominic LeBlanc, Minister of Foreign Affairs Melanie Joly, and Minister of Public Safety David McGuinty, as he speaks during a press conference while responding to US President Donald Trump’s orders to impose tariffs on Canadian imports, in Ottawa, Ontario, Canada, on February 1, 2025]Patrick Doyle/Reuters]

According to Vina Nadjibulla, vice president, research and strategy at the Asia Pacific Foundation of Canada, “Fundamentally it’s very good news that tariffs have been halted and Canada needs to do everything to work with Trump to address border security issues, etc.”

Beyond the immediate crisis, however, we must address structural issues that contributed to this over-dependence on the US. We need to build capacity to export]to places other than the] US and invest in our own competitiveness”, Nadjibulla added.

Are tariffs a new idea?

No, tariffs have been used by several countries before. Historically, in the US from 1790 to 1860, tariffs produced 90 percent of federal revenue.

Tariffs can also be used to “punish” a foreign producer of goods for breaking international trade standards. In response to unfair trade practices and intellectual property theft, the US began imposing tariffs on Chinese goods worth hundreds of billions in 2018. This marked the start of the US-China trade war, where items such as semiconductors, batteries and electronics such as washing machines were taxed.

In the same year, Trump also introduced a 25 percent levy on steel and 10 percent tariff on aluminium, affecting a number of countries including Canada, Mexico, India, Brazil and Argentina.

Why are tariffs used?

Tariffs are frequently employed to shield domestic industries from foreign competitors. This occurs by raising the cost of imported goods. The idea behind tariffs is that customers will favor domestic goods over expensive imported goods, which will help the domestic industry expand. However, this isn’t always the case.

For example, for the US to produce avocados – 90 percent of which are imported from Mexico – would be a long and arduous feat given that avocados are produced in just three states: California, Florida and Hawaii.

Why did Trump impose tariffs?

Trump made the promise to impose tariffs on the US’s largest trading partners in retaliation for drug trafficking, particularly fentanyl, during his campaign.

Trump also emphasized the importance of using tariffs to encourage foreign companies to set up factories in the US.

With the additional income from taxes levied on imported goods being used for public expenditures, tariffs are also used to generate revenue for a nation. For example, in 2019, $79bn of revenue was generated in tariffs, double the value from 2017, according to the Brookings Institution. However, consumers who paid higher prices received the majority of this burden.

“During 2018-2020, President Trump mainly used tariffs as a bargaining chip”, Nadjibulla told Al Jazeera. The motivations “seem to be more diverse this time, including a desire to rein in more manufacturing in the US, shift the burden of taxes to tariffs, and use tariffs as leverage as well as punishment. We’re examining things on a much larger scale than we did during Trump’s first term.

What products will be affected by tariffs?

A range of goods will be heavily affected by Trump’s imposed tariffs. Based on what the US imports the most from Canada, Mexico and China, this will include items such as cars, fuel, computers and electrical equipment. Avocados, for example, are also likely to see a price increase.

What tariffs did Trump intend to impose on China, Mexico, and Canada?

Trump also enacted three executive orders, each one imposing a 25% tariff on all products imported from Canada and Mexico, as well as an additional 10% tariff on Chinese goods and a 10% tariff on Canadian oil.

In contrast to Mexico, which exports a sizable amount of produce like fruits and vegetables as well as auto parts, 97 percent of its crude oil exports will go to the US in 2023.

China exports a lot of electronics, including chips, laptops, and smartphones.

INTERACTIVE-China’s exports to the US-US-FEB3-2025 copy 4-1738673639
(Al Jazeera)

What are retaliatory tariffs?

Retaliatory tariffs would be a response from Canada, Mexico, and China, respectively. A slew of US imports, which have since been halted, will be subject to a 25% levy, according to Trudeau’s statement on Saturday.

Beijing criticized the most recent tariff, saying it would file a complaint with the WTO, an intergovernmental body overseeing international trade. US imports will be subject to counter-tariffs from China starting on February 10.

What tariffs are currently in place against China?

US trade representatives have the authority to stop unfair trade practices by foreign countries under Section 301 of the US Trade Act of 1974. This has been at the heart of Washington’s trade war with China since 2018 when tariffs were placed on the world’s largest exporter.

In a significant move, the Biden administration expanded these tariffs in September 2024 to target items such as electric vehicles, batteries, semiconductors and solar panels, with levies ranging between 25-100 percent.

Can trade war be caused by tariffs?

“It appears that tariffs against Mexico and Canada are temporarily halted. However, starting on February 4, tariffs on China are likely to go into effect, and President Trump has already imposed additional tariffs on the EU and other countries. So yes, we could be heading into a trade war”, Nadjibulla told Al Jazeera.

“In response, countries will likely adopt a range of strategies – from direct retaliation to hedging their trade relationships among the US, China, and other partners. We can anticipate significant disruptions to supply chains and inflationary effects on a global scale.

Will this drive up inflation?

“Yes. According to Nadjibulla, both the tariffs themselves and any mitigation measures, such as subsidies or support programs for the affected sectors, will contribute to inflation. “Higher prices associated with tariffs, combined with the cost of remedy efforts, will lead to inflationary pressures overall”.

What can consumers do to protect/plan for this?

“Where possible, buying local products and avoiding certain imports may help consumers manage rising costs”, Nadjibulla told Al Jazeera.

However, they are unable to completely withstand the tariff war’s inflationary pressure.

Will other items’ prices increase?

Yes, most items will cost more in most cases. This would raise production costs and cause higher costs for final products, as well as capital goods, which are both of which are final product goods. Additionally, higher costs for raw materials and parts would raise prices through the supply chain.

Machineries and electronics will be subject to the most import taxes, according to an analysis from the Peterson Institute for International Economics (PIIE), a nonprofit organization based in the US that studies the global economy. They are most likely sourced from China, and they are currently subject to low tariff rates.

Toys and other sporting goods would likely be among the hardest-hit US imports from China.

Who pays the price?

Ultimately the consumer. Higher taxes will be required for US-based businesses. In the majority of cases, consumers pick up the cost of tariffs indirectly because importing companies are likely to raise the cost of those goods to reduce taxes.

Higher prices will bear a lot of the brunt, according to the report. According to Nadjibulla from the Asia Pacific Foundation of Canada, industries like the US and Canadian auto sectors may be particularly hit.

Can tariffs affect jobs?

In theory, the imposition of tariffs would encourage more domestic production, which, in turn, would require more employment. Similarly, if foreign companies are being encouraged to bring their factories to the United States, it would increase employment.

For example, after Trump imposed 20-50 percent tariffs on washing machines, more jobs were brought to two regions where appliances were not previously manufactured: Clarksville, Tennessee and Newberry, South Carolina.

In 2018, LG completed an investment in a new smart factory in Clarksville, to be staffed with 700 employees. Similarly, in 2018, Samsung built an appliance manufacturing facility in Newberry, South Carolina, hiring 1, 000 employees.

Source: Aljazeera

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