Investing.com -- President Donald Trump has initiated a trade war, imposing tariffs of 25% on Canada and Mexico and 10% on China. The orders for these tariffs were signed on Saturday and will come into effect on Tuesday, according to White House officials.
The tariffs on energy imports from Canada will be less severe, with a 10% tariff rather than the full 25% levy.
"Today, I have implemented a 25% Tariff on Imports from Mexico and Canada (10% on Canadian Energy (OTC: CESDF )), and a 10% additional Tariff on China," Trump said in a statement on his Truth Social account.
Trump stated that the purpose of these tariffs is to reduce the influx of drugs and undocumented immigrants into the United States. However, the policy could potentially lead to significant price increases for American consumers on a wide range of goods.
"This was done through the International Emergency Economic Powers Act (IEEPA) because of the major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl," Trump said. "We need to protect Americans, and it is my duty as President to ensure the safety of all. I made a promise on my Campaign to stop the flood of illegal aliens and drugs from pouring across our Borders, and Americans overwhelmingly voted in favor of it."
This new policy is a significant shift away from the nearly duty-free trade that has been the norm between the three North American countries for many years. It also marks an expansion of the ongoing trade war between China and the United States, which has been escalating over the past two administrations.
While the Trump administration officials stated on Saturday that these tariffs are meant to halt the flow of fentanyl and undocumented immigrants, they did not provide a specific criterion for when these new import taxes would be lifted.
They only stated that the tariffs would be removed when the flow of drugs and undocumented immigrants into the country stops.
In a briefing on Friday, President Trump indicated that the U.S. will eventually place tariffs on "chips," with tariffs for oil and gas to be introduced "fairly soon." He specified the 18th of February as a key date.
Further tariffs are planned for steel, aluminum, and ultimately copper , building on the original tariffs on steel which, according to Trump, "saved the U.S. steel industry." The President emphasized the inevitability of these tariffs and stated that there is nothing the affected countries can do to prevent their implementation.
In addition to these measures, President Trump also hinted at significant tariff actions in Europe. He suggested the U.S. would be "doing something very substantial” regarding tariffs in Europe.
In his statements, President Trump reflected on the past strength of the U.S., attributing it to being a tariff country rather than an income-tax country. He questioned the effectiveness of the latter model, asking, "How did that work out?"
The announcement of these tariffs led to a sell-off in U.S. stocks on Friday. The Dow closed down 0.75%, the S&P 500 fell 0.5%, and the NASDAQ dropped 0.28%. Automakers such as General Motors Company (NYSE: GM ), Ford Motor Company (NYSE: F ), andStellantis NV (NYSE: STLA ), which have significant exposure to Mexico and Canada, could potentially face significant impacts from these tariffs.