A 25% tariff on Mexico and Canada was effected on 4 March 2025 with the exception of Canadian energy, which was charged at a lower rate of 10%. An additional 10% has also been imposed on Chinese imports, adding to the 10% imposed on 4 of February. These new tariffs are set to be implemented (supposedly) to force these countries to curb the importation of fentanyl into the US. China and Mexico are the main producers of fentanyl drugs, making it socially acceptable that the US is taking remedial actions to curb thousands of overdose deaths in the US; however, using tariffs and sanctions is not economically viable.
The US will not be spared the spillover effects of tariff barriers, and the US stock indices are already showing a decline in market performance. New tariff rates add additional burdens to American businesses and consumers. The Dow Jones Industrial Average was down 1.58% for the day, the S&P 500 was down 1.78%, and the Nasdaq Composite was down 2.47%. Tariff hikes will likeyo lead to higher inflation and, to a certain extent, could push the global economy into recession. US importers of cars Mexico and Canada and sell them in the US will have to pass the majority of the additional 25% tariff on to customers because there is not enough production in capacity in America to absorb the volume from these two countries.
The exporters were encouraged to build their manufacturing plants in the US to avoid tariffs. But how will they be protected in America as immigrant business owners? It also takes years to build a plant. In the meantime, American consumers will see car prices rise. Ironically, countries like South Korea and Japan, who are not subject to these duties, will be able to sell more of their cars into the US.
Reciprocal tariffs?
President Donald Trump also threatened to impose reciprocal tariffs on countries that impose duties on US products, but does that work in the real world? Reciprocal tariffs are intended to address the US’s perception of unfair trade practices by trading partners. Reciprocal tariffs are therefore meant to boost the US economy and strengthen trade ties with trading partners by promoting more balanced and reciprocal trade. It is rhetorical that the US uses unfair trade barriers to correct “unfair trade,” as such barriers deter trade relationships even further and have a negative impact on globalisation.
US trade partners are targeting US exports in retaliation, giving special attention to US agricultural products. Such actions will have a negative impact on the food availability, agricultural, and energy industries. Between 1998 and 2023, US agricultural exports more than doubled to satisfy the growing demand for agricultural goods (a non-trivial part of US Agricultural exports are subsidised, which will no doubt receive special attention).
This increase in the demand for agricultural imports can be attributable to the seasonal nature of agricultural production, as it tends to create seasonal scarcity. The White House is aware of the possible food shortage as it is urging farmers to produce more crops for domestic sales while casually ignoring that tariffs will jack up their costs, limit their markets, and potentially drive many out of business. This is less likely to be achievable as the growing season is long and requires planning that is in line with weather and environmental conditions. American farmers now have to brace themselves for higher input costs and retaliatory tariffs from trading partners.
To protect its interests, China has already threatened to take the necessary actions by raising tariffs on specific American energy imports and designating American businesses as unreliable to limit their capacity to conduct business in China. This tit-for-tat tariff will have a negative impact on the global supply chain and the global economy, as affected businesses will seek out new regions to export to, and an oversupply to new regions will disrupt incumbent producers.