"Momentum is growing among President Trump's advisers to slap 25% tariffs on Mexico and Canada as soon as Saturday, bucking conventional wisdom in Washington and on Wall Street that he would back off the threatened levies as he has in the past in exchange for concessions.
Trump has shown a willingness to move swiftly on tariffs in recent days without allowing for drawn-out talks. On Sunday, Trump said he would impose 25% "emergency" tariffs on Colombia due to its refusal to accept repatriation flights from the U.S. A senior administration official said the decision proves that Trump views tariffs as an "effective negotiating tool" and "effective punishment" for nations that don't hew to his agenda.
The president remains "very serious" about his threats to Mexico and Canada, and expects them to cooperate, the official added.
This could be a wake-up call for investors and businesses. Goldman Sachs told clients last week that there was only a 20% chance that Trump would impose tariffs on Saturday, noting that he had made similar threats in the first term but didn't always follow through. But Trump is amenable to the tariffs-before-negotiations strategy, according to people familiar with the discussions, though no final decisions have been made.
Tariffs against Mexico and Canada would be the next salvos in a multifront trade war Trump launched unexpectedly on Sunday with his Colombia duties. He has also threatened to hit China, Denmark and a range of other European countries with tariffs, but he appears intent to turn his aim next on the U.S.'s North American neighbors.
In a sign of how this approach might be sinking in, there is growing alarm in Mexico and Canada that their overtures to the new administration are falling flat, even as they move to comply with Trump's demands.
Mexico has made strides to cooperate with Trump's repatriation flights, the senior administration official acknowledged, accepting four flights in one day, and has reinstated the remain-in-Mexico policy for migrants while deploying its own national guard.
Still, the official insisted that the Mexican government hasn't yet done enough to avoid tariffs and wouldn't specify which other steps it or the Canadian government would need to take to avoid new duties.
The tariff threats risk setting off a continental trade war. Canada has been prepping a list of what it considers would be retaliatory trade moves if Trump acts first. Some in Canada believe such a skirmish could tip their country into a recession if tariffs stay in place too long.
"He's as serious as a heart attack," said Sen. Kevin Cramer, (R., N.D.), a close Trump ally in the Senate.
The president has tangled with both countries before and doesn't feel that Canada and Mexico are taking his threats seriously, some advisers said. He wants to hit them with tariffs first to prove he isn't bluffing, these people said, and to drive them to the negotiating table on a number of issues, from migration to drug smuggling and reforms to the U.S.-Mexico-Canada Free Trade Agreement to encourage more manufacturing in the U.S.
The U.S. imports billions of dollars of crude oil, lumber, passenger cars and bakery products from Canada.
Economists say that adding tariffs to those items will cause prices on many basic items to rise for U.S. consumers. Trump and his advisers believe it will bring in more revenue to the U.S. and incentivize more domestic manufacturing as well.
The U.S. had a $64 billion trade deficit in goods with Canada in 2023, according to the Census Bureau, far below Trump's claim, repeated on Friday, of a $200 billion deficit.
Protectionist advisers such as Commerce Secretary nominee Howard Lutnick and deputy chief of staff for policy Stephen Miller are advocating the tariff-first-talk-second approach, according to people familiar with the discussions. Tariffs on China, which Trump has threatened with additional 10% levies, are likely to come after the initial action on Canada and Mexico, said the people familiar with the issue. Other options are also in play, including announcing tariffs on Saturday but giving a grace period before they are implemented.
Canadian and Mexican officials have been frustrated in their attempts to reach out to Trump's economic team -- most of whom aren't in office yet because they haven't been confirmed by the Senate. The trading partners are quietly expressing confusion and bewilderment, saying they aren't even sure what Trump wants, particularly since they argue that Canada has taken action to address border security, and Mexico has worked to stem migration.
For North American industries, any of Trump's tariffs risk major disruption. A 25% tariff could grind the auto industry to a halt across the continent, depending on how it is imposed, because vehicles and auto parts cross borders multiple times before a final car is completed." [1]
Some of our colleagues in rich countries will go to build cars in search of better wages. Therefore, our salaries will all rise. Some of the money that Musk received by moving production to China will remain in our pockets.
1. U.S. News: Levies on Mexico, Canada Put on Fast Track --- Trump aides press for 25% tariff as soon as Saturday rather than wait for talks. Bade, Gavin; Monga, Vipal; Vieira, Paul. Wall Street Journal, Eastern edition; New York, N.Y.. 27 Jan 2025: A2.
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