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President Donald Trump talks with Canada's Prime Minister Justin Trudeau during a North Atlantic Treaty Organization Plenary Session at the NATO summit in Watford, Britain, in December 2019.
Mexico, Canada get tariff reprieve
On Thursday, US President Donald Trump announced a one-month tariff reprieve on all Mexican and Canadian goods governed by the USMCA, as well as potash,until reciprocal tariffs are imposed worldwide on April 2.Canada supplies 80% of US potash, a critical component of fertilizer. The decrees follow Wednesday’s one-month tariff reprieve for America’s Big 3 automakers: Stellantis, Ford, and General Motors.
What will be tariff-free? According to senior administration officials, 50% of goods entering the US from Mexico and 38% of goods from Canada would qualify. Some Canadian energy products will still be subject to a 10% tariff, and some Mexican products, like computers, will still face a 25% tariff.
How have Canada and Mexico responded? Mexican President Claudia Sheinbaum had not imposed tariffs but was set to announce them Sunday if no deal was reached.
Canada’s initial set of tariffs on $30 billion in American goods imposed on Tuesday will remain. A second wave of $150 billion set to take effect after 20 days has reportedly been suspended until April. Ontario Premier Doug Ford also said that Canada would be imposing a 25% tariff on electricity exports starting Monday, regardless of whether tariffs would be lifted. Canadian provinces have also removed US-made alcohol from store shelves and barred American firms from procurement contracts, and there is no sign that this measure will be reversed.
Why did Trump change course? Trump said “I wasn’t even looking at the market” but major stock indexes plummeted this week, as investors were spooked by the uncertainty. In the Oval Office, Trump said “This is about companies and countries that have been ripping off our country and they won’t be ripping off our country anymore.”
Trump’s reprieve on Mexico specifically mentioned actions taken to stem the flow of illegal aliens and fentanyl into the US. This contrasts with his conversation Wednesday with Canadian Prime Minister Justin Trudeau in which Trump claimed Canada’s efforts on fentanylwere insufficient to drop US tariffs.
But the US president has citedother reasons for tariffs on Canada, including accusing the country of not allowing US banks to operate there and falsely claiming that the US “subsidizes” Canada to the tune of $200 billion a year. Commerce Secretary Howard Lutnick alsoaccused Canada of having a “national tariff” on US products because it has a 5-15% federal-provincial sales tax.A ''Buy Canadian Instead'' sign is displayed in a liquor store after the top five US liquor brands were removed from sale as part of a response to President Donald Trump's 25% tariffs on Canadian goods, in Vancouver, British Columbia, Canada.
Hard Numbers: US whiskey takes a Canadian shot, Toronto home sales plunge, US charges Chinese “hack-for-hire” ring, Ukrainian refugees get a reprieve in Canada, What does a dinner with Trump cost?
1: What’s worse than a tariff? Well, if you’re the maker of Jack Daniels it’s a decision by several Canadian provinces to remove your product from shelves as part of the deepening US-Canada trade war. Still, the Great White North accounts for just 1% of the famous Tennessee sour mash’s sales. Mexico is another story entirely: It throws back seven times as much.
28.5: Meanwhile, that trade war is starting to hit home for Canada – literally. Home sales in the Toronto area plunged 28.5% from January to February as buyers sat tight over uncertainty about the economy.
12: The US Justice Department has charged 12 Chinese nationals, including at least eight employees of a private hacking firm, with involvement in a global cyberespionage campaign that allegedly targeted political dissidents, news organizations, and the US Treasury Department. China’s burgeoning hack-for-hire companies reportedly bill the government up to $75,000 for each inbox they crack.
300,000: Ottawa has extended the deadline for Ukrainian refugees living in Canada to renew their work and study visas by one year, to March 2026, and will continue providing free settlement services until that time. Canada has granted visas to approximately 300,000 Ukrainians since the start of the war with Russia. Meanwhile, a report said the Trump administration is considering a move to fast-track the deportation of up to 240,000 Ukrainians by revoking their temporary legal status. White House Press Secretary Karoline Leavitt called it “fake news” and said “no decision has been made at this time.”
5 million: Want to meet face-to-face with Donald Trump at his Mar-a-Lago compound? That’ll cost you $5 million, according to a report by Wired. For the more frugal set, a seat at a candlelight group dinner with the 47th president will run you a mere $1 million, according to an invitation seen by the publication.
Graphic Truth: Who’s most vulnerable in the North American trade war?
This week, Donald Trump fired the opening shots in a new North American trade war, slapping 25% tariffs on Mexico and Canada, America’s top two trade partners.
Both countries responded in kind, but by the numbers at least, the US has significantly more leverage in this showdown. That’s because the economies of Canada and Mexico are vastly more dependent on exports to the US than the US is on exports in the other direction.
Here is a look at that dependency, measured by looking at how much of Mexican and Canadian GDP comes directly from exports to the US, and vice versa.
The caveat: These are national-level numbers. At the state level, the picture changes a bit, with the economies of some individual US states way more dependent on Mexican or Canadian trade than the country as a whole is.
North Dakota, for example, derives about 10% of its GDP from exports to Canada alone. Michigan’s exports to Mexico and Canada combined account for 6% of its economy. New Mexico sends 70% of its exports to “old” Mexico.
We’ll look at that in more detail in an upcoming Graphic Truth. For now, here’s the (lopsided) picture at the national level.
Staff remove bottles of US alcohol from the shelves of a Liquor Control Board of Ontario store as part of retaliatory moves against tariffs announced by President Donald Trump, in Toronto, Canada, on March 4, 2025.
Canada, Mexico, and China retaliate against Trump’s tariffs
It’s official: The United States is now waging a full-blown trade war against three of its largest trading partners. On Tuesday, Washington imposed tariffs of 10% on energy and 25% on all goods imported from Canada and Mexico and doubled its existing tariffs on Chinese imports from 10 to 20%. All three countries responded with harsh words and retaliatory measures.
Canada imposed an immediate 25% retaliatory tariff on $30 billion worth of US goods, with an additional $125 billion worth of products to be tariffed in 21 days. Provincial liquor stores removed American alcohol and Ontario Premier Doug Ford ripped up a $100 million contract with Elon Musk’s Starlink. Ford alsothreatened a 25% retaliatory tariff on electricity exports. Canadian Prime Minister Justin Trudeau called the tariffs “dumb,” prompting US President Donald Trump to repeat his taunt of “Governor Trudeau” and promiseeven higher tariffs in response to retaliatory efforts.
Mexico’s President Claudia Sheinbaum took a slower approach. “We have said it in different ways: cooperation and coordination, yes; subordination and interventionism, no,” she said. Sheinbaum plans to speak with Trump by phone on Thursday and will announce retaliatory measures on Sunday if no deal is reached.
China, meanwhile, placed an additional 10% to 15% tariffs on imported US goods, including chicken, wheat, soybeans, and beef as of March 10. Beijing says it will “fight to the bitter end of any trade war” but left the door open for talks, advising the US to “return to the right track of dialogue and cooperation before it is too late.”
The tariff war had immediate economic effects.Markets plunged, the price of a Dodge Ram truck reportedly rose from $80,000 to $100,000, and by mid-March American gas prices could rise by as much as40 cents per gallon, while Ford said the auto manufacturing sector in Canada could shut down.
Could Trump change course? We’ll be watching for further market volatility as well as blowback from consumers, businesses, and politicians. But stay tuned for a possible course correction: US Commerce Secretary Howard Lutnick already hinted Tuesday that Trump is considering “relief for USMCA-compliant goods” and “may roll back Canada and Mexico tariffs tomorrow.”
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.