President Trump held true to earlier promises to begin imposing tariffs of 25% on Mexico and Canada with an added 10% tariff on China. His action unleashed a torrent of concern over the weekend that these new tariffs will ignite a multi-country trade war, while Canada promised counter measures.
The justification for the new tariffs came in his post on Truth Social late Saturday, pointing to his efforts to reduce “the threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl.”
The official declaration of the tariffs was made through the international Emergency Economic Powers Act described in an executive order that includes a 10% tariff on energy resources from Canada.
Canada supplies the largest amount of oil of any country outside the US, even ahead of OPEC. The president’s order, however, warns that if Canada retaliates, the president “may increase or expand in scope the duties imposed under this order…”
Last Friday, President Trump told reporters that chips and electronics as well as pharmaceuticals and steel will be eventually be subject to tariffs, with the potential for oil and gas import tariffs on other countries.
While the new tariffs are expected to affect a broad range of products, including food and consumer goods, their impact on the auto industry in the US could be the largest to indirectly affect the electronics industry. Economists have predicted a new car sold in the US could see a price increase of up to $3,000 per car. The average laptop could increase by $357 and the average smartphone could jump by $213, according to an October analysis from the Consumer Technology Association.
With more than 5,000 electronics components in a modern car, hundreds of suppliers from dozens of countries are involved. A single car sold in the US could cross borders with Mexico and Canada up to eight times before final assembly, with perhaps some or all of the components subject to a tariff at each crossing into the US, supply chain experts have warned.
Trade associations for chip and other electronics manufacturers, including the Semiconductor Industry Association and Semi remained quiet in response to the tariff order, waiting to see what tariffs explicitly might apply to electronics components. Trade groups were apparently waiting to get input from members before making public statements.
In early January at CES, Nvidia CEO Jensen Huang dismissed concerns that new Trump administration tariffs would affect Nvidia profitability. But notably, Huang met with President Trump at the White House on Friday before the tariff order came out on Saturday. Afterwards, Trump described the meeting as a “good meeting, but eventually we’re going to put tariffs on chips.”
After the Huang-Trump meeting, an Nvidia spokesperson said, “We appreciated the opportunity to meet with President Trump and discuss semiconductors and AI policy. Jensen and the president discussed the importance of strengthening U.S. technology and AI leadership.”
Canadian leaders have been taken aback by the new tariffs on Canadian goods, because the US and Canada have long been solid trading partners. Canadian Prime Minister Justin Trudeau said Canadians are “perplexed” at the tariff action. In televised comments, he spoke to Americans, calling them “our closest friends and neighbors” and then announced Canada would impose a 25% tariff of its own on $155 billion worth of US goods shipped north of the border.
Mexico’s President Claudia Sheinbaum ordered her economy minister to create tariffs in response. China’s commerce ministry said the country would file a legal action against the US at the World Trade Organization.
Some of the broadest reaction to the Trump tariffs came from unexpected sources, including The Wall Street Journal in an editorial, “ The Dumbest Trade War in History.”
Trump responded to the editorial on Truth Social, saying the “always wrong” WSJ and the Globalist are heading up a “Tariff Lobby” which works hard to justify actions of Canada, Mexico, China “and too many others to name, [that] continue the decades long RIPOFF OF AMERICA…”
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