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Stacked containers in American and Chinese national colors symbolize a trade war between the US and China.
Beijing and Brussels react to Trump tariffs
Of greater interest are nontariff measures, including anti-monopoly investigations launched into Google and the placing of Calvin Klein’s parent company, PVH, on China’s “unreliable entities” list, limiting the brand’s operations there. Beijing also imposed export controls on 25 rare metals, including tungsten, critical for electronics and military equipment.
In the US, consumers might not like Trump’s cancellation of the “de minimis exemption,” which allowed the purchase of goods under $800 without duties. The move is expected to hurt low-income Americans who rely on direct shipping from online vendors while having a minimal impact on Chinese firms. While Trump has said he’s in “no hurry” to talk to President Xi Jinping, we’re watching whether public backlash in the US changes his tune.
Next, the European Union? Trump has put Brussels on his hit list but has not given any dates or specifics. EU trade chief Maros Sefcovic said on Tuesday, "We are ready to engage immediately“ and hoping “to avoid the measures which would bring a lot of disturbance to the most important trade and investment relationship on this planet.”
Canada's Prime Minister Justin Trudeau is joined by Finance Minister Dominic LeBlanc, Minister of Foreign Affairs Melanie Joly, and Minister of Public Safety David McGuinty, as he responds to President Donald Trump's orders to impose 25% tariffs on Canadian imports, in Ottawa, Ontario, on Feb. 1, 2025.
Trump ignites trade war. Will there be a legal response?
On Saturday, US President Donald Trump signed an executive order applying 25% tariffs on all Canadian and Mexican imports, excluding Canadian energy, which will be tariffed at 10%. The order, which takes effect on Tuesday, also imposes a 10% tariff on all Chinese imports. Trump threatened to escalate tariffs further if any of the countries retaliated, which Mexico and Canada have already done.
Canada will apply 25% tariffs on $155 billion of American goods, from orange juice to appliances to car parts, phased in over three weeks. Ottawa will also consider nontariff measures relating to energy and procurement, and provincial liquor monopolies areremoving American alcohol from their shelves. Mexican President Claudia Sheinbaum also retaliated with “tariff and non-tariff measures in defense of Mexico's interests,” without specifying the rate.
China has responded with plans to implement “countermeasures” and called Trump’s tariffs a “serious violation” of international trade rules, which it will contest before the World Trade Organization.
On what basis did Trump issue the order? Trump expanded the scope of the national emergency he declared on Jan. 20 at the southern border of the United States, due to “the sustained influx of illicit opioids and other drugs” that is “endangering lives and putting a severe strain on our healthcare system, public services, and communities.” It now covers both Canada and China, which he accuses of not doing enough to combat fentanyl production, money laundering, drug gangs, and transnational crime.
Could legal challenges derail Trump’s tariffs? To declare this emergency, Trump invoked the US International Emergency Economic Powers Act, or IEEPA, the National Emergencies Act, or NEA, as well as sections 604 of the Trade Act of 1974 and section 301 of Title 3, United States Code.
But the IEEPA hasnever been used to justify tariffs. It allows for the imposition of sanctions, suchas those imposed by the Biden administration against Russia, which can be invoked immediately. Trump chose the IEEPA because it allowed him to bypass the lengthy investigations and consultations required by other trade laws he invoked during his first term.
It also allows him to claim the tariffs are legal under World Trade Organization rules, as the General Agreement on Tariffs and Trade’s Article XXI designates a national security exception. President Richard Nixon similarly invoked the Trading with the Enemy Act to impose 10% tariffs after the US quit the gold standard in 1971 to stave off a balance-of-payments crisis.
This may not bode well for a challenge by China before the WTO. But if American courts rule against Trump on his use of the IEEPA, his emergency declaration could be considered invalid, opening the door to penalties under global trade rules.
Finally, there’s the USMCA. A Congressional analysis found that tariffs would violate the tripartite treaty, but with Trump already threatening to withdraw from the agreement, it would appear he does not care. Trump said on Truth Social on Sunday that Americans will feel “SOME PAIN” but that “IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID.”
We’ll be watching to see who might challenge the US president in court – and whether they succeed. Meanwhile, the markets were taking a hit as of early Monday with stock futures lower and the dollar and oil rising.
DeepSeek puts US-China relations on edge
Ian Bremmer shares his insights on global politics this week on World In :60.
How is China's AI app DeepSeek disrupting the AI industry?
It certainly seems to be making people concerned that the Chinese are a lot closer to the Americans and the Trump administration is not sleeping on this. They clearly feel that China is technologically very capable, very advanced. Frankly, different than Biden felt when he first became president, though he got up to speed on that pretty quickly. And I think that's going to lead to a much tougher competition between the United States and China. Those that think that a deal is coming, that Trump is going to engage with China because he wants to find a way to not have to put tariffs on, I don't think that's going to happen because you're going to have so much more efforts to contain the Chinese in all sorts of areas of advanced technology broadly speaking.
They are way ahead in data. The Americans are ahead in compute, and they're both going to lean into the opportunities that they have. And the Americans are going to use their firepower from a government perspective with other countries around the world as well. That's what I think.
Trump has issued a 90-day pause on nearly all US foreign aid. What's the likelihood it'll be extended beyond that?
I don't know how long it's going to be extended, but I do know that so many of the contractors that are involved, for example, USAID, which is like half of their capable workforce, are gone. And within 30 days they then lose their security clearances and they're not going to have capability to execute. So I think there will be permanent damage to the ability of the Americans to actually get a lot of development programs done around the world, and this is an important piece of US soft power.
And if the Americans aren't doing it, other countries around the world will, most particularly China,. This is an opportunity for the Chinese to have more influence, especially in the Global South than the United States. And this is pennywise and pound foolish for the Americans. And unlike the suspension of domestic support and funding and programs, which led to a whole bunch of outrage and then the order was rescinded, on foreign aid there's not a lot of domestic outrage. And companies don't want to stick their necks out because they think that they're going to get whacked hard by the Trump administration. So, I think it's more likely to have a longer-term impact.
What do I make of the Rwandan-backed rebels' advancements in Congo?
Definitely it is expanding the civil war. A lot of Congolese are really unhappy that this is happening with the support of external actors. You've seen a bunch of embassies in Congo ransacked, a lot of riots as a consequence, and not a lot of interest in trying to resolve the problem other than from folks like the United Nations who are pretty weak on the ground. So like we're seeing in Sudan, in Congo, an expanding civil war that is causing a lot of humanitarian hardship and havoc. That's it for me, and I'll talk to you all real soon.
President Donald Trump makes a special address remotely during the 55th annual World Economic Forum meeting in Davos, Switzerland, on Jan. 23, 2025.
The Big Tar-iffs: Will he or won’t he start a trade war?
The big Trump tar-“iff” now has a when: Feb. 1.
That’s when the busy new US president has promised to slap 25% tariffs on both Canada and Mexico. In his virtual address to the folks attending the World Economic Forum in Davos, Switzerland, on Thursday, President Donald Trump again singled out Canada for harsh treatment. “We have a tremendous deficit with Canada,” he said, reiterating his usual inaccurate tariff mantra. Trump claims the trade deficit is between US$200 and US$250 billion a year when it is significantly less than half of that, mainly due to energy exports.
Trump then followed up with his favorite new expansionist taunt. “You can always become a state,” he said to Canadians. “If you’re a state, we won’t have a deficit. We won’t have to tariff you.”
But what he said next was more dire because it was aimed directly at the industries that are core to the Canadian economy. “We don’t need them to make our cars,” President Trump said. “We don’t need their lumber, because we have our own forests. We don’t need their oil and gas. We have more than anybody.” In other words, we don’t need Canada at all.
Cue the economic peril clutching.
Let’s slow-walk through all this.
Will President Donald Trump really follow through with tariffs, or is it a negotiating tactic?
Yes, tariffs are coming the way cold comes in winter. Why so certain? Our general rule is to take the president of the United States both seriously and literally. As Trump said in his inaugural address, tariffs are now his primary source of government revenue, not just a tool for negotiation.
“Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens,” he announced. “It will be massive amounts of money pouring into our treasury coming from foreign sources.” He even floated the idea of an “External Revenue Service,” so tariffs are the flywheel in the engine that Trump promises will drive a golden age.
In his Davos speech on Thursday, the president emphasized the warning. “If you don’t make your product in America,” he said to a large group of CEOs, “then, very simply, you will have to pay a tariff, differing amounts, but a tariff which will direct hundreds of billions of dollars, even trillions of dollars, into our treasury to strengthen our economy and pay down debt.”
Is he right that high tariffs will really work for the US?
Not as promised. This is where the Trump math breaks down and politics and economics collide. Trump’s tariff threats will drive some businesses to keep factories in the US instead of, say, Canada. For example, this week Stellantis announced it was going to build the new Dodge Durango in Detroit and not move it to Canada as initially thought. It will also reopen a previously closed plant in Illinois to build another vehicle. So, expect some short-term “wins” from the America-first, protectionist agenda.
After all, in his first term, Trump used tariffs on goods like steel, aluminum, and products from China to more than double the amount the government collected from duties to about $111 billion.
Sounds like a lot, but it’s not. In 2023, the US government took in over $4.2 trillion in income and payroll tax. Even with 10% tariffs on all goods from China and 25% tariffs on Canadian and Mexican goods, the US government would take in only another $140 billion in 2025, according to the Committee for a Responsible Budget.
That’s not nearly enough to finance new tax cuts. For example, Trump has promised to extend his 2017 tax cuts in 2026. The Congressional Budget Office estimates doing so will cost about $4.7 trillion in lost revenue between now and 2035. That leaves a Grand Canyon-size hole that revenue from tariffs and savings from government cuts can never fill. Deficits will explode.
So will tariffs really be 25% across the board on Canada and Mexico, or will President Trump come down to a more manageable level on a few select goods?
That remains very unclear. The president didn’t slap these tariffs on week one, revealing they may have dropped as a symbolic priority for him. That opens up some room to maneuver to negotiate until the Feb. 1 deadline, and now there is even further hope for exceptions. The president has also asked for a report on trade and unfair practices to be delivered to him by April 1, which offers yet another potential delay in the tariff war. There will be lobbying, networking, and a full-bore strategy to give Canada some kind of carveout.
Still, neither date removes the possibility of the promised tariffs happening at some level. The president needs revenue, and tariffs are his preferred tool, despite the math.
Will Canada retaliate dollar for dollar?
Yes. The same strategy Canada deployed in Trump 1.0 during the steel and aluminum tariffs will be deployed again, and the list amounting to CA$37 billion worth of goods — including things like Florida Orange juice — is already made and ready to be deployed. After all, if Trump goes through with the tariffs, Canada could get pushed into a recession, with up to 5% of its GDP hit. While goods and services in both countries will get more expensive for citizens, it will hurt Canada much more for one reason: Canada sends almost three-quarters of its exports to the US, compared to just a little more than 17% of US exports crossing the other way.
If there are 25% tariffs across the board, will Canada use the nuclear option and try to cut off energy exports to the US, risking a full national unity crisis?
Very unclear. All the premiers and territory leaders met this week with Justin Trudeau to align their retaliation strategy, which includes energy … except for Alberta Premier Danielle Smith, for whom any inclusion of fossil fuel exports in a trade war is strictly off-limits. This is the lifeblood of the Alberta economy, after all, and she is protective of her province. However, her position deeply hampers a united Canadian response and allows the new US administration to deploy a divide-and-conquer strategy, knowing they can absorb any trade shocks better than Canada, especially if they do not include energy.
Is Trump still serious about taking over Canada by economic force?
Unclear. That view has certainly created a surge of patriotism in Canada and escalated tough trade talk as politicians jockey to wear the “Captain Canada” label. But if there is a desire to have an integrated North American economy — newsflash! — we already have one.
Energy alone is the best example. The US imports 24% of its crude oil from Canada, and that is very hard to replace because US refineries are retooled to process Canadian heavy crude oil, not the kind of oil the US extracts from fracking. Not only that, when looking at all energy products that flow across the border, like natural gas, there is a combined network of pipelines in North America that is over 281,000 miles long! With the free trade agreement, integrated fossil fuel pipelines, and hydroelectric systems in the East supplying electricity to the Northeastern states, it would be hard to find two more interconnected economies anywhere in the world.
In other words, on Feb. 1, the US and Canada are headed for a trade war they don’t need over a prize they both already have.
Fukuyama: It’s hard to build anything in the US with so many rules
Stanford's Francis Fukuyama is no conservative. However, in a wide-ranging interview with Ian Bremmer on GZERO World, he argues that excessive proceduralism in the United States has made it nearly impossible to build critical infrastructure, even for projects aligned with liberal priorities like renewable energy. He warns that this gridlock erodes public trust in government and fuels frustration that can drive people toward authoritarian solutions as they seek leaders who promise decisive action over endless bureaucracy.
"You can't build anything in the United States right now because there are way too many rules... we've lost sight of the need for governments to actually deliver concrete results," Fukuyama tells Bremmer. "Part of the impulse toward more authoritarian government is that people are just fed up with all the rule-of-law constraints on doing stuff.
Watch the full episode: Francis Fukuyama on the new leaderless global order
GZERO World with Ian Bremmer, the award-winning weekly global affairs series, airs nationwide on US public television stations (check local listings).
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Is an EU-China trade war brewing?
Carl Bildt, former prime minister of Sweden and co-chair of the European Council on Foreign Relations, shares his perspective on European politics from Vienna, Austria
Is there a risk of a full-scale trade war between the European Union and China?
Hopefully not. But it was a decision, somewhat controversial, the other day by the EU to impose tariffs, not too high but still substantial, on electric vehicles coming from China. The US, of course, has done something similar but much higher tariffs and without much of a theoretical justification. I mean, the EU tried to ground its different decisions in analysis of the subsidies generated or given to the different Chinese car manufacturers. China will retaliate in one way or the other. But talks are going on and there's no interest in a trade war either from the EU side or from the Chinese side. And we should not forget, by the way, that for the moment, there are 100 times more cars sold by European companies in China than Chinese vehicles or cars exported to Europe.
Why is the deal between Italy and Albania on refugee centers so controversial?
Well it's been criticized by human rights groups, whether that is justified or not, it's difficult for me to judge. But the idea is for roughly 3,000 asylum seekers to Italy to be roughly 3,000 of them every month to be processed in two centers in Italy that are going to be run by and financed by Italy. We'll see how this would work out. They would be coming from primarily what they call "safe countries," and that means that the expectation is, of course, that the majority of them, or the vast majority of them, will have to be repatriated to their respective countries. It's part of the effort by X numbers of European governments to deal with the migration issue that is in very many of the countries the number one domestic policy concern at the moment.
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British Chancellor of the Exchequer Rishi Sunak leaves Millbank Studios after a media interview in London, Britain, May 27, 2022.
Hard Numbers: Sinking Sunak, Mellon's millions for Trump, Israelis bearish on two-state solution, Thousands displaced in Haiti, Chinese carmakers take aim at EU
516: British Prime Minister Rishi Sunak might be on the verge of making history … and not in a good way. He could be the first sitting prime minister to lose their seat in a general election, according to a new poll, which predicts Labour could win a whopping 516 seats in Parliament. Meanwhile, the poll suggests that Sunak’s Conservative Party will win just 53 seats.
50 million: Conservative billionaire Timothy Mellon reportedly sent $50 million to Donald Trump's presidential campaign the day after the former president was convicted on 34 felony counts in his hush-money trial last month. Donations disclosed to the Federal Election Commission show that the Trump campaign raked in $68 million from donors in May. Oddly, Mellon has also been the biggest donor to independent candidate Robert Kennedy Jr.’s campaign, having donated at least $20 million to his super pac in the past.
26: Amid the ongoing Israel-Hamas war in Gaza, just 26% of Israelis think a way can be found for Israel and an independent Palestinian state to coexist peacefully, according to new polling. This is a drop from 35% who said the same last year.
580,000: Nearly 580,000 people have been displaced by gang violence in Haiti, according to the UN, which amounts to roughly 5% of the country’s population. It’s estimated that gangs control more than 80% of Port-au-Prince, the Haitian capital. The country is now awaiting the arrival of a Kenya-led international police force to battle the gangs and lend support to a governing council overseen by a prime minister who was appointed in April.
25: It’s a trade war summer!Chinese carmakers are calling for a 25% tax on large European cars over the EU’s plans to impose tariffs of up to 38% on electric vehicles made in China beginning on July 4. The US also recently moved to hit Chinese electric vehicles with higher tariffs — all the way up to a staggering 100%.
Canada's Deputy Prime Minister and Minister of Finance Chrystia Freeland takes part in a press conference in Ottawa, Canada, on Jan. 29, 2024.
Canada’s threatened tax on tech giants risks trade war
Canadian Finance Minister Chrystia Freeland plans to unveil the federal budget on April 16, a release that will be keenly watched north and south of the border. Big Tech companies, in particular, will be looking for clues about when Canada will implement its long-promised digital services tax.
Justin Trudeau’s cash-strapped Liberal government hopes to raise up to $2.5 billion over five years by imposing a 3% tax on companies like Alphabet, Meta, Uber, Amazon, and Airbnb. First promised in the 2021 budget, the Trudeau government said it would implement the tax on Jan. 1, 2024, retroactive to 2022.
Aside from raising much-needed funds, targeting tech giants has the additional benefit for Trudeau of being popular politically. His government has already whacked Alphabet and Meta with its Online News Act, forcing them to share revenues with Canadian news publishers (Meta responded by removing news links from Facebook in Canada), and its Online Harms bill, which compels social media platforms to regulate harmful content or face punitive fines.
Freeland says the digital tax is a “matter of fairness,” given that tech giants have been booking their profits in low-tax jurisdictions.
A move by OECD countries to implement a global minimum corporate tax rate of 15% has gained traction, but US opposition persuaded a majority to vote for a year-long delay last summer. Freeland said she preferred a multilateral approach but that Canada is prepared to move forward alone.
US trade representative Katherine Tai has warned that the Biden administration considers the tax discriminatory and will retaliate with tariffs.
A letter from Senate Finance Committee chair Ron Wyden (D-Ore.) and Ranking Member Mike Crapo (R-Idaho) in October said that any retaliatory steps would have bipartisan support.
Those threats seem to have registered with Freeland. In her fall economic statement, she removed the Jan. 1 deadline, while introducing legislation that would allow the federal government to implement the tax later. The budget may indicate whether Canada still plans to go it alone and risk Washington’s wrath, or wait for a new multilateral effort.