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Economy
U.S. President Donald Trump looks on as he signs an executive order in the Oval Office at the White House in Washington, U.S., January 31, 2025.
In a stunning blow for America’s top three trade partners, including two of its closest allies, President Donald Trump on Saturday imposed high tariffs on products coming into the United States from Canada, China, and Mexico. The tariffs take effect on Tuesday.
Products imported from China will face a 10% tariff, while Canada and Mexico must pay 25% duties. Trump did make an exception: He imposed a lower rate of 10% on Canadian energy imports. But that's not all. The US president also threatened to escalate tariffs further if any of the countries retaliated, which two have already done.
Canadian Prime Minister Justin Trudeau responded to Trump's move late Saturday, retaliating with a rollout of 25% tariffs on $155 billion worth of US imports. This will impact US products such as orange juice, coffee, and peanut butter, and could eventually impact cars and steel products. Mexican President Claudia Sheinbaum, meanwhile, also retaliated with "tariff and non-tariff measures in defense of Mexico's interests," but she did not specify the rates.
China also responded with plans to implement countermeasures and called Trump's tariffs a "serious violation" of international trade rules. Beijing intends to challenge the tariffs at the World Trade Organization.
How much trade? Total US turnover with Canada and Mexico each year is about $1.8 trillion, three times the volume with China. The US trade deficit with China is its largest, nearing $300 billion last year, followed by Mexico at more than $160 billion. The deficit with Canada is about $60 billion.
Major imports from Canada and Mexico include automobiles and auto parts. Oil is the single largest US import from Canada (why? See here). The US also imports a sizable volume of agricultural products from Mexico. Imports from China, meanwhile, include a raft of machinery products, electronics, and toys.
What is the aim? It's not entirely clear. Trump believes in the power of tariffs to rebalance trade and create more US manufacturing jobs.During his first term, he revised the 1994 NAFTA free trade agreement with Mexico and Canada, addressing loopholes concerning the national origin of auto components and labor protections. This resulted in the United States-Mexico-Canada Agreement, which these new tariffs would appear to violate.
China, meanwhile, is already under a welter of tariffs imposed by both Trump’s first administration and the Biden administration. These focus on a range of products in advanced technology, natural resources, EV production, and medical supplies.
Trump has recently blamed all three countries for allowing undocumented migrants and illegal drugs to enter the US, but he hasn’t laid out specific benchmarks for removing the new tariffs. On Saturday, he said the tariffs are being used to force the countries to halt the flow of fentanyl into the US.
What will the effect be? Chaotic and potentially expensive, at least in the short term. Complex North American supply chains, particularly in the auto industry, could be disrupted. And as companies in Canada, Mexico, and China simply pass along the cost of the tariffs to US consumers, Americans could see higher prices at the pump and the register for a range of goods.
Retaliation. Rather than turn the other cheek, Canada and Mexico are likely to slap back, imposing retaliatory tariffs of their own, which could harm American export industries.
But Trump seems to be willing to run those risks. For months, he has threatened to take a staggering turn towards protectionism. Now he’s doing it, and he's taking direct aim at the largest trade relationships in the world. Buckle up.
“I can tell you Europe is absolutely committed to tackling climate change, to developing this green economy, and to making the green transition a European success,” said Nadia Calviño, President of the European Investment Bank.
The rollout of artificial intelligence has raised big questions about how it will impact Europe’s transition to a more sustainable economy. During a Global Stage livestream at the World Economic Forum in Davos, Calviño stressed the continent’s role in addressing risks generated by AI. She said, “I think it will be key when we're talking about these technologies that have such a huge demand for energy supply.” Alongside countries being energy-conscious, Calviño stresses that building strong trust between businesses and citizens will help the new technologies “unleash their full potential.”
This conversation, moderated by Becky Anderson, was part of the Global Stage series at the 2025 World Economic Forum in Davos, Switzerland, presented by GZERO in partnership with Microsoft.
Click to watch the full discussion for our panel's insights on AI's future and how it is expected to transform our economy and society by 2030.
"We are on the right path to building, what I call, the 'intelligence grid' alongside the electricity grid," said Peng Xiao, CEO of G42.
As Donald Trump begins his new term, artificial intelligence has reemerged as a major topic of discussion. During a Global Stage livestream at the World Economic Forum in Davos, Peng highlighted the benefits and challenges of advancing AI technology. He praised Trump’s global infrastructure build-out initiative and AI’s potential to integrate seamlessly into daily life but underscored, "We cannot afford for intelligence not to be equally distributed."
Peng emphasized the need for global governance and development to be "equitable, systematic, and coordinated across regions." Thus as private sector investments in AI surge, policy decisions in the coming months will be closely watched
This conversation, moderated by Becky Anderson, was part of the Global Stage series at the 2025 World Economic Forum in Davos, Switzerland, presented by GZERO in partnership with Microsoft.
Click to watch the full discussion for our panel's insights on AI's future and how it is expected to transform our economy and society by 2030.
"AI has (the) potential to do one thing which is very important to get developing countries more integrated into global markets and that is reduced trade costs,” said Ngozi Okonojo-Iweala, Director-General of the World Trade Organization, during a Global Stage livestream at the World Economic Forum in Davos.
She shares that the organization’s new report “Trading with Intelligence,” shows significant upsides to AI in trade. At a time when supply chains remain fragile, Iweala notes that "we've done simulations that show that world trade could increase by about 14% by 2040.”
However, Iweala emphasizes that technology adoption must happen across the board and include the Global South in the conversation. That means ensuring developing countries have the electrical infrastructure and capacity to handle the technology. Otherwise, she warns that the “increase drops substantially; it halves actually.”
This conversation, moderated by Becky Anderson, was part of the Global Stage series at the 2025 World Economic Forum in Davos, Switzerland, presented by GZERO in partnership with Microsoft.
Click to watch the full discussion for our panel's insights on AI's future and how it is expected to transform our economy and society by 2030.
United Nations Secretary-General Antonio Guterres speaks during the 55th annual World Economic Forum (WEF) meeting in Davos, Switzerland, January 22, 2025.
GZERO’s very own Tony Maciulis is in the Alps all week to report from the 55th World Economic Forum in Davos, Switzerland.
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I learned today there’s a guided meditation session each morning in the Congress Centre, the main hub of activity for WEF programming. I’d drop by, but I’m afraid it would make me nervous. I’m sticking to the coffee bar in the UAE Pavilion on the Promenade where I tried my first qahwa, an Arabic coffee, this week, flavored with rosewater and cardamom. The United Arab Emirates has a big presence here this year, with a delegation of at least 100 from the government and private sector, promoting its investments in AI innovation. And the UN Secretary-General António Guterres also had a big presence today--telling Davos participants that we're living in a "rudderless world," despite the Forum's theme of "collaboration."
Three highlights from Wednesday:
- Spain’s Prime Minister Pedro Sánchezsaid “sí” to continued support for multilateral public health efforts, an obvious rebuttal to President Donald Trump’s order that the US withdraw from the World Health Organization. But he devoted much of his appearance to a critique of social media, which he says has oversimplified and polarized public debate.
- Apparently, Iran isn’t a security threat. Well, at least that’s what its Vice President for Strategic Affairs Javad Zariftold the Davos crowd, saying that if Iran wanted a nuclear weapon the country would have one by now. He also said of Gaza, “Hamas is still there,” and that Israeli PM Benjamin Netanyahu did not achieve his goal.
- The world may be in the middle of a “masculine wave,” as fashion icon Diane von Furstenbergtold me in Davos this week, and, yes, President Trump did issue anexecutive order essentially ending Diversity, Equity, and Inclusion initiatives in federal government, but gender parity was on the agenda in Davos. A panel including government ministers from Congo and Mexico and the head of Europol, notably a woman, tackled the reasons why women make up just 15% of heads of state and 33% of parliamentarians globally. (Note: In 2024, only 28% of WEF participants were women. Just sayin’.)
And three things to watch today:
- Trump, of course. He joins the Forum via video conference at 5 p.m. local time (11 a.m. ET) here in Davos for a session introduced by WEF founder Klaus Schwab and facilitated by the organization’s President and CEO Børge Brende. I’ll be in the Congress Centre for it and will report on reactions from Davos participants.
- We’ll also hear from Argentina’s President Javier Milei who is continuing his first international trip of 2025. His trip to Davos follows his appearance at President Trump’s inauguration in Washington, DC, where it was actually colder than it is here in the Alps right now.
- Also be on the lookout for appearances by members of the US delegation. Tomorrow WEF features a discussion with US Governors Sarah Huckabee Sanders of Arkansas and Andy Beshear of Kentucky.
Container ships in front of the port of Bremerhaven.
On Wednesday, President Donald Trump used his social media platform to threatenVladimir Putin with “high levels of Taxes, Tariffs, and Sanctions on anything being sold by Russia to the United States” unless he struck a bargain over Ukraine.
There’s just one problem: Russia has very little trade with the US. Americans imported just $2.8 billion in goods from Russia from Jan. to Nov. 2024, less than a tenth of the pre-war figure and less than 1% of all US imports over the same time period. The extensive sanctions already in place have hardly brought Moscow to its knees, and arguably benefited US rivals like China, Iran, and North Korea. It’s tough talk, but it’s not likely to push Putin to the table.
China is a different story. Trade with the US added up to an average of $54 billion per month in 2024, and the 60% tariffs Trump threatened to put on China on the campaign trail would cause severe damage to both economies. That may be why Trump is backing off the high sticker number and said Tuesday he is considering imposing at 10% tariffs on Chinese goods as soon as Feb. 1.
Now, 10% is a number that Beijing feels is much more manageable. China is experiencing price deflation — a really damaging phenomenon with one silver lining in that it could mean US consumers wind up paying about the same prices even if Trump hikes tariffs. The central government is also promising funds to stabilize the stock market in the face of potential tariffs and prevent investors from seeking safer shelter for their cash.
The fears are more real in Europe, where Trump threatened to impose tariffs without specifying a rate on Tuesday. Growth in the region’s most important economies is already stagnating, and even small barriers to trade with their most important partner will have serious consequences. Further economic troubles could empower far-right movements across the continent, which may suit Trump just fine. We have our eye on Germany, which will hold elections in precisely one month.
And don’t forget Canada and Mexico, which are staring down the barrel of 25% tariffs that Trump threatened on Tuesday as well. It’s creating a decidedly tense atmosphere in North America, with Canadian Prime Minister (for now) Justin Trudeau promising retaliation, which Mexican President Claudia Sheinbaum has hinted at as well.
The bottom line? You’re probably in for rising prices in the near future … unless everyone can come up with a reason for Trump to let them slide. We’re watching what Trump says when he speaks at the World Economic Forum in Davos on Thursday.
FILE PHOTO: A view of a logo during the 54th annual meeting of the World Economic Forum, in Davos, Switzerland, January 19, 2024.
GZERO’s very own Tony Maciulis is in the Alps all week to report from the 55th World Economic Forum in Davos, Switzerland.
_______
Grüetzi! That means “hello” in Swiss German, and it’s the only word I know in that language. But there are people from 130 countries gathered in this little Alpine village right now, so a smile and a nod will generally get you through anything but the security line.
As we head into the third day of the World Economic Forum, conventional wisdom is that newly inaugurated President Donald Trump is dominating all the conversations here. That isn’t wrong. But it’s kind of a “Yes, and ...” as they teach you in improv.
A few notes from yesterday:
- China’s Vice Premier Ding Xuexiang made headlines with his address at the forum, though it read like a speech meant to counter an executive order on tariff hikes that hasn’t yet been issued. Instead, it felt like a preemptive strike as he warned, “Protectionism leads to nowhere, and there are no winners in a trade war.” He made a case for multilateralism on the most multilateral of stages, perhaps setting the stage for moves China will make to fill a leadership void if the US backs out of major global efforts like the World Health Organization.
- If China’s on offense, Europe is building defense. In two big speeches Tuesday, both Ukrainian President Volodymyr Zelensky and European Commission President Ursula von der Leyen laid out arguments for a stronger, more self-reliant Europe. Zelensky called for increased defense spending that could give the Continent a shot at going it alone if US support diminishes. “Europe has too often outsourced its security, but those days are gone,” Von der Leyen declared.
- And I overheard more than a few grumblings on the Promenade about the déjà vu of another US withdrawal from the Paris Climate Agreement. Trump puts America in the company of only three other countries — Yemen, Libya, and Iran. But who’s counting?
What to watch for today:
- Speaking of Iran, that nation’s Vice President for Strategic Affairs Javad Zarif is set to speak on Wednesday, as is Syria’s new Foreign Minister Asaad Hassan al-Shibani. These are two prominent moments in an agenda that has several programs focused on the Middle East.
- UN Secretary-General António Guterres will be here just days afterhe warned the world has opened “a Pandora’s box of ills” with regard to growing inequalities and protracted conflicts. (Close the box, please.)
- And our Global Stage series is set to premiere a new conversation from Davos! “The AI Economy: An Engine for Local Growth,” streams at 11 a.m. ET today. The program features Ian Bremmer, Microsoft’s Vice Chair and President Brad Smith, WTO Director General Ngozi Okonjo-Iweala, European Investment Bank President Nadia Calviño, and G42’s CEO Peng Xiao. Watchhere.