World awaits Trump tariff deadline on Canada, Mexico and China

AFP | Washington

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The global economy is bracing for impact as US President Donald Trump’s deadline to impose sweeping tariffs on the three largest US trading partners -- Canada, Mexico and China -- draws near.

Trump said shortly after taking office that he planned to introduce 25 percent tariffs on neighbors Canada and Mexico on February 1, unless they cracked down on illegal migrants crossing the US border and the flow of deadly fentanyl. He is also eyeing an additional 10 percent duty for Chinese goods on Saturday, similarly over fentanyl.

While Trump has not specified tools for the new tariffs, analysts have suggested he could tap emergency economic powers -- which allow the president to regulate imports during a national emergency. But this could be hindered by lawsuits.

On Thursday, he reiterated commitment to levies on all three countries, while re-upping threats of 100 percent tariffs on BRICS nations -- a bloc including Brazil, Russia, India, China and South Africa -- if they create a rival to the US dollar.

Fentanyl, many times more powerful than heroin, has been responsible for tens of thousands of overdose deaths a year. Beijing has rebuffed claims of its complicity in the deadly trade, while Canada has countered that below one percent of undocumented migrants and fentanyl entering the United States comes through its northern border.

JPMorgan analysts believe tariffs are “a bargaining chip” to accelerate the renegotiation of a trade deal between the United States, Mexico and Canada.

“However, potentially dismantling a decades-long freetrade area could be a significant shock,” said a recent JPMorgan note.

One lesson from Trump’s first term was that policy changes could be announced or threatened on short notice, it added. Tariffs are paid by US businesses to the government on purchases from abroad and the economic weight can fall on importers, foreign suppliers or consumers.

Another looming deadline is April 1, by which Trump has called for reviews including on trade deficits.