Is Mr. Trump "aiming" at China and North America, starting a new trade war or just a bargaining chip?

US President-elect Donald Trump has threatened to impose comprehensive tariffs on the country's three largest trading partners, Canada, Mexico and China, as soon as he takes office on January 20, 2025.

'Ngắm bắn' vào Trung Quốc và Bắc Mỹ, ông Trump khơi mào cuộc chiến thương mại mới hay chỉ là 'con bài' mặc cả?

Mr. Trump has vowed to impose tariffs of 60% or more on goods imported from China and hinted that he could impose tariffs of more than 100% on imported cars from Mexico. (Source: Getty Images)

Specifically, the new White House boss announced that he would impose a 25% tax on all products from Mexico and Canada from the first day of his inauguration and a 10% tax on goods from China.

Explaining this statement, Mr. Trump said that he imposed taxes on imported products from the above countries due to illegal immigration and illegal drug trafficking.

How high is the tax rate that Mr. Trump proposed?

It is not yet clear whether the proposed tax rate will be in addition to the tax rate he proposed during the campaign.

During the election campaign, the 47th President of the United States announced that he would impose a tax of 60% or more on imported goods from China and hinted that he could impose a tax of more than 100% on imported cars from Mexico.

The new tariffs will apply until Beijing takes action to stem the flow of fentanyl, a synthetic opioid that causes tens of thousands of deaths each year, into Washington, Trump said.

Some US allies say the president-elect sees the tariff threat primarily as a bargaining chip to use in future negotiations with foreign countries.

Reactions from Canada, Mexico and China

Following Mr. Trump’s announcement, Mexican President Claudia Sheinbaum held a press conference on November 26. She said she would send Mr. Trump a letter highlighting the importance of cooperation between the two countries.

President Sheinbaum warned that imposing tariffs would lead to inflation, putting businesses at risk.

For his part, Canadian Prime Minister Justin Trudeau revealed that he spoke with Mr. Trump by phone on the evening of November 25.

“We talked about some of the challenges that the two countries can address together,” he said.

Meanwhile, Ontario Premier Doug Ford issued a more direct warning, saying that US tariffs would “damage workers and jobs in both the world’s largest economy and Canada.”

On the side of the country of a billion people, the Chinese Embassy in the US commented that a trade war would not benefit any side.

Embassy spokesman Liu Bang Vu said: "On the issue of tariffs, China believes that economic and trade cooperation with the US is mutually beneficial in nature."

How have global markets reacted?

The Canadian dollar and the peso fell to their lowest levels against the dollar since 2020 and 2022, respectively, following the announcement by the new White House chief. Meanwhile, the yuan weakened to its lowest level since July.

Other major currencies, including the EUR, Pound Sterling, and Won, also "went hand in hand" downhill.

In the stock market, on November 26, most major Asian stock indexes fell.

Mr. Steve Okun, founder and CEO of APAC Advisors based in Singapore, commented that the market is assessing that Mr. Trump will be really serious about reducing the trade deficit of the world's largest economy with other countries.

China, Mexico and Canada are the country's three largest trading partners, according to the Office of the US Trade Representative. The world's largest economy is importing more from these three countries.

Last year, the trade deficit was $67.9 billion with Canada, $152.4 billion with Mexico and $279.4 billion with China, according to the US Bureau of Economic Analysis.

In fact, Washington has a trade deficit with many of its trading partners. This is an issue that has preoccupied Mr. Trump since his first term in the White House. This is also one of the reasons why he launched a trade war with the country of a billion people in 2018.

“With bilateral relations, Mr. Trump looks at relationships based on whether the United States has a trade deficit or a trade surplus with that country. If so, he will address it with tariffs,” Mr. Okun said.

Many experts believe that Mr. Trump intends to renegotiate the United States-Mexico-Canada Trade Agreement (USMCA). (Source: The Fabricator)

What effect will tariffs have?

The immediate impact of tariffs would increase the cost of exporting goods to the US for Canadian, Mexican and Chinese companies, cutting into profits.

In turn, companies can pass these higher costs on to customers, leading to higher prices for goods.

In addition, tariffs could have a serious impact on Mexico’s auto industry. The Central American country is home to manufacturing plants for Honda, Nissan, Toyota, Mazda and Kia, as well as several Chinese auto parts suppliers.

Tariffs would also hit Asian tech companies like Foxconn, Nvidia, Lenovo and LG, which have expanded operations in Mexico, with factories making everything from electric vehicle parts to flat-screen TVs.

As for Canada, the country's media reported that even a 10% tariff from the US could cause economic losses of $21 billion per year for Ottawa.

The country's main exports to the world's largest economy are oil, gas and vehicles.

And of course, it's not just the taxed countries that suffer.

In the long run, tariffs will have an inflationary impact in the US and negatively affect global trade, said Gary Ng, senior economist for Asia-Pacific at Natixis in Hong Kong.

"Tariffs could lead to higher inflation, making it harder for the US Federal Reserve (Fed) to cut interest rates," said Gary Ng.

What is Trump's real purpose?

Some analysts believe Mr Trump is using the tariffs to signal to Canada and Mexico that he intends to renegotiate the United States-Mexico-Canada Agreement (USMCA) – a free trade agreement he signed in 2020 to replace the North American Free Trade Agreement (NAFTA).

While the USMCA updates trade provisions in some areas, it largely retains the original terms of NAFTA.

Mr. Okun stated that Mr. Trump has been very clear that the USMCA is something that needs to be revisited and renegotiated when he returns to the White House. These tariffs on Mexico and Canada are a prerequisite for this.

Meanwhile, Mr. Tim Harcourt, an economist at the University of Technology Sydney (Australia), emphasized that the tariff will actually end free trade between the US, Canada and Mexico.

Goldman Sachs described Mr Trump’s tariff announcement as more reminiscent of his first administration, when tariffs were a negotiating tactic and the White House boss did not impose some of the tariffs he threatened because he had achieved his goals.

But to CNN , the 47th President of the United States' statement seems to be the opening act of a long-promised trade war with China and North American countries.