On
1 February 2025 the U.S. White House released a Fact Sheet entitled
"Donald
J. Trump Imposes Tariffs on Imports from Canada, Mexico and China".
Stripping
away 90 per cent of the rhetorical posturing contained therein, the fact sheet stated
that:
"President Donald J. Trump is implementing a 25%
additional tariff on imports from Canada and Mexico and a 10%
additional tariff on imports from China. Energy resources from
Canada will have a lower 10% tariff."
Going
on to assert:
"Access to the American market is a
privilege. The United States has one of the most open economies in
the world, and the lowest average tariff rates in the world.
While
trade accounts for 67% of Canada’s GDP, 73% of Mexico’s GDP, and
37% of China’s GDP, it accounts for only 24% of U.S. GDP. However,
in 2023 the U.S. trade deficit in goods was the world’s largest at
over $1 trillion.
Tariffs
are a powerful, proven source of leverage for protecting the national
interest. President Trump is using the tools at hand and taking
decisive action that puts Americans’ safety and our national
security first."
That
same day in immediate response to these increased US tariffs, the
Canadian Government released the following:
News
release (excerpt)
"February
1, 2025 - Ottawa, Ontario - Department of Finance Canada
Today,
the Honourable Dominic LeBlanc, Minister of Finance and
Intergovernmental Affairs, and the Honourable Mélanie Joly, Minister
of Foreign Affairs, announced that the Government of Canada is moving
forward with 25 per cent tariffs on $155 billion worth of goods in
response to the unjustified and unreasonable tariffs imposed by the
United States (U.S.) on Canadian goods.
These
countermeasures have one goal: to protect and defend Canada’s
interests, consumers, workers, and businesses.
The
first phase of our response will include tariffs on $30 billion in
goods imported from the U.S., effective February 4, 2025, when the
U.S tariffs are applied. The list includes products such as orange
juice, peanut butter, wine, spirits, beer, coffee, appliances,
apparel, footwear, motorcycles, cosmetics, and pulp and paper. A
detailed list of these goods will be made available shortly.
Minister
LeBlanc also announced that the government intends to impose tariffs
on an additional list of imported U.S. goods worth $125 billion. A
full list of these goods will be made available for a 21-day public
comment period prior to implementation, and will include products
such as passenger vehicles and trucks, including electric vehicles,
steel and aluminum products, certain fruits and vegetables, aerospace
products, beef, pork, dairy, trucks and buses, recreational vehicles,
and recreational boats.
In
addition to this initial response, Ministers LeBlanc and Joly
reiterated that all options remain on the table as the government
considers additional measures, including non-tariff options, should
the U.S. continue to apply unjustified tariffs on Canada......"
On
1 February 2025 the Government of Mexico also responded to the
new US tariffs by instructing its Secretary of Economy to implement
"tariff and non-tariff measures in defense of Mexico's
interests" and its President strongly countering the
absurd claims in the White House 'fact sheet' with:
"We
categorically reject the White House's slander against the Mexican
government of having alliances with criminal organizations, as well
as any intention of intervention in our territory.
If
such an alliance exists anywhere, it is in the United States armories
that sell high-powered weapons to these criminal groups, as
demonstrated by the United States Department of Justice itself in
January of this year."
As
yet, Mexico has not indicated which US goods would be included in
retaliatory tariffs. However media reports canvas the possibility of
pork, cheese, fresh produce, manufactured steel and aluminium being
included.
China's
response became known on 2 February 2025.
China
Daily, 2 February 2025:
China
will file a lawsuit with the World Trade Organization and take
necessary countermeasures to safeguard its rights and interests, the
Ministry of Commerce said on Sunday after the United States announced
it would impose 10 percent additional tariffs on goods from China.
The
Ministry of Commerce said in a statement that the unilateral
imposition of tariffs by the US seriously violates the rules of the
WTO, fails to address US domestic issues, and undermines regular
economic and trade cooperation between the two countries.
"We
urge the US to objectively and rationally view and handle its own
fentanyl and other issues, rather than resorting to tariff threats
against other countries," the commerce ministry said in a
statement.
China
urges the US to correct its wrong actions, move toward the same
direction as the Chinese side, face problems directly, engage in
frank dialogue, strengthen cooperation and manage differences on the
basis of equality, mutual benefit and respect, the commerce ministry
said.
Exactly
how much Trump's trade war is going to cost all four national
economies is uncertain but it is not unreasonable to start the count
in the billions of dollars annually if the situation continues
unchecked. If so this can be expected to knock percentage points of
the Gross Domestic Product of Canada, Mexico and probably that of the
national debt-ladened United States.
The
implications for Australia are uncomfortable to say the least.
In
the first instance because assurances appear to have been given to
Canada and Mexico in 2024 that the US tariffs imposed on their goods &
services in 2025 would not reach anywhere near 25 per cent and,
Australia can no longer have confidence that the new tariff level
discussed with it will be a low as promised.
In
the second instance because there is no way that global trade will
not experience some disruption as these tariffs are rolled out to
more OECD countries during the coming months and, as Australia with
an export market spanning at least 27 of the 38 countries in this
category we have a potential risk exposure independent of whatever
absurd import/export trade demands Trump decides to makes of us.
BACKGROUND
Financial
Review
30 January 2025, p.19 excerpt:
US
national debt is around $US30 trillion ($48 trillion), bringing
annual interest costs for the government near $US1 trillion and
helping tip the nation's budget into a $US1.8 trillion deficit in
fiscal 2024.
Sovereign
debt accelerated sharply following the COVID-19 pandemic. That has
sparked wider market concerns about the sustainability of the US
balance sheet and sent bond yields advancing since Trump's election
win in November. The bond market reaction is a concerning sign,
according to Mr Lamm, given the US Federal Reserve has already begun
to cut rates.
"The
bond market appears to be taking a cautious view on rising inflation
risks and elevated US budget deficits into an environment where there
remains a high degree of uncertainty regarding the ultimate form and
impact of President Trump's economic policies."
Meanwhile,
gold - traditionally perceived as a safe haven asset to ride out
wider market volatility - rose more than 25 per cent last year,
touching a record high of nearly $US2800 an ounce in October.
Its
best year in more than a decade was attributed to strong demand from
global central banks - particularly the People's Bank of China, which
revealed last month that it had resumed buying gold in November after
a six-month hiatus....
