US President-elect Donald Trump is proposing new tariffs of 25% on goods from Canada and Mexico and an additional 10% on Chinese-made items, Kallanish learns from a Trump social media post. 

The announcement, released early Monday, immediately introduces additional confusion in the North American steel supply chain for 2025. Downstream steel consumers including automotive, energy and farm machinery segments would see their inputs and finished goods similarly reshuffled. Because the tariffs are tied to grievances over illegal immigrants and dangerous drugs, two issues on which the target nations already made concessions during the first Trump administration, steel interests may have little ability to influence the outcome. 

On Monday, Trump took to Truth Social to pronounce plans for increasing tariffs against the other members of his own United States-Mexico-Canada Agreement (USMCA) as a means of curbing illegal drugs and people crossing over US borders. He returns to the White House on 20 January.

“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country! Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem. We hereby demand that they use this power, and until such time that they do, it is time for them to pay a very big price!” stated Trump. 

The leaders of Mexico and Canada immediately acted to defend their nation's business communities on Monday. Canada and Mexico are consistently the largest recipients of US steel exports, according to the US International Trade Administration.

In her weekly address, Mexican President Claudia Sheinbaum read from a letter she plans to send to Trump on Tuesday. She urges him to consider the implications of a 25% tariff and says Mexico would have little choice but to levy retaliatory measures.

“One tariff will be followed by another in response, and so on, until we put common companies at risk. The main exporters from Mexico to the US are General Motors, Stellantis and Ford Motor Company, which arrived 80 years ago. Why put in place a tariff that puts them at risk?” Sheinbaum stated.

Canadian Prime Minister Justin Trudeau called Trump to discuss the president-elect’s proclamations, according to published reports from Ottawa. An unidentified Canadian official said of Trudeau’s phone call with Trump: “It was a good discussion and they will stay in touch."

Last week Canada's deputy prime minister, Chrystia Freeland, agreed with Trump's concerns that Mexico is not imposing harsh-enough tariffs against Chinese imports (see Kallanish 26 November).

During Trump's first tenure as president, he threatened Mexico with a 25% tariff for what he said was Mexico's lax protection of the US border. In response, Mexico sent troops to stop people from physically crossing the border. Trump did not pursue the tariff measure after the Mexican guards were installed. 

However, in response to the Trump administration's steel tariffs on Mexico's steel exports to the US, Mexico targeted its 2018 tariffs against Republican districts. Mexico placed identical import duties on US pork, cheese, apples and bourbon whiskey.

Domestic steel producers that rely on exports to both Mexico and Canada could experience suboptimal trade conditions should the countries respond to Trump’s threats in kind. Automobile manufacturers and steel producers will suffer if Trump imposes a 25% tariff. Roughly 2.5 million cars are made in Mexico and sold in the US. In Canada, 7% of the vehicles produced are sold in the US, according to research performed by Ward Intelligence. 

Taxfoundation.org asserts that imposing tariffs “raise prices and reduce available quantities of goods and services for US businesses and consumers, which results in lower income, reduced employment, and lower economic output.”