Tariffs on Canada and Mexico Go Into Effect Plus 10% More on China

Media Hit, 3/4/25

Later this morning, I’m doing a radio interview with Jay Oliver of LI News, talking about (you guessed it) Trump’s tariff plans and him actually following through with the 25% tariffs on Canada and Mexico.

I’ve got two or three articles coming out on this either this week or next, so I’m drawing from those pretty heavily. These tariffs, like all tariffs really, are just bad policy. On to the talking points, first with the country-by-country responses, then overall effects, followed by the bottom line.

Canada’s Response

• Canada has promised to respond.

  • Doug Ford, Premier of Ontario, says that he’s going to stop shipments of nickel, shutting down our manufacturing, cut off billions of dollars of contracts, shut down the electricity going down to the US, shutting off power to 1.5 million homes, uranium that we use for our nuclear power…

  • He says, that we’re going to feel a pain like we’ve never felt before.

  • Trudeau response is in: 25% tariff on U.S. goods.

Mexico’s Response

• Mexico has tried appeasing Trump, again, by slapping tariffs of their own on China in addition to cracking down on fentanyl production.

• Mexican President Sheinbaum has promised that there’s a planned response if the US follows through.

• With her approval ratings soaring, she could easily be emboldened to take more drastic measures.

China’s Response

• China hit the US with 10-15% tariffs

• Notably, the Chinese response has been delivered with a “stronger tone” this time around than the first time

Overall Effects

• Market Responses:

  • Japan’s Nikkei index dropped over 2%

  • Hong Kong’s Seng down 1.5%

  • S&P 500 down 1.8%

  • NASDAQ down 2.6%

  • Dow down 1.5%

• We’re already seeing both countries courting free trade agreements with other nations. This is only going to accelerate their efforts.

  • Canada’s trade minister, Mary Ng, has been telling the Canadian people to stop buying American goods as much as possible.

  • Mexico is continuing on with it’s Plan Mexico strategies, which include finding new trading partners and expanding the number of free trade agreements.

    • Interestingly, Mexico has more free trade agreements with other countries than any other country.

• Atlanta Fed’s GDPNow projects -2.8% GDP growth (as of 3/3/25).

Bottom Line

• This is just not smart.

• Much like a friendship, once damaged, it doesn’t just snap back to peace at the sign of the first olive branch.

• Politics is all about feelings, wishes, and hypotheticals. Economics (and science in general) is all about facts, evidence, and history.

  • We need less of the former and more of the latter guiding decision-making.

• Trump wants to achieve laudable goals.

  • Who doesn’t want to see the amount of fentanyl in this country reduced? Or a return of manufacturing jobs? Or lower prices?

• But the way he’s going about doing this is antithetical to these goals.

  • You don’t solve the opioid crisis in this country by making 340 million people poorer.

  • You don’t get manufacturing jobs to return by making manufacturing more expensive to do in the US.

  • You don’t lower prices by implementing massive taxes on your biggest trading partners.

• All these policies are doing is driving customers away from the US.

  • We might not feel it immediately. But the pain of this unwise policy direction is coming.

Going Forward

Now, we look forward to April 2nd, when the “reciprocal” tariffs are supposed to be coming into effect. Will Trump double down on this failed strategy or will he, at 78 years old, finally figure out that tariffs don’t work the way he thinks they do?