On February 1st, President Donald Trump signed an executive order imposing a 25% universal tariff on Canada and Mexico, and an additional 10% tariff on China. This decision was made in the context of using tariffs as a tool for national security issues, including the influx of undocumented immigrants and drugs, such as fentanyl, which is largely manufactured in China. The tariffs on Canada, Mexico, and China take effect on February 4th, with Canadian energy products like oil only facing a 10% tariff, suggesting consideration of the impact on U.S. inflation.
The Trump administration has also indicated that retaliatory tariffs from affected countries will lead to further increases. Canada has already announced a 25% tariff on American products worth 155 billion Canadian dollars in response, signaling a potential trade standoff. Mexico, though it hasn’t specified details, is reportedly planning its countermeasures, called “Plan B,” which may include tariff and non-tariff actions.
The escalation of trade tensions is expected to ripple through markets, with Europe, Korea, and others potentially facing similar actions as a broader warning to align with U.S. policies. The ultimate target appears to be China, as recent geopolitical and technological tensions have heightened. Following these measures, China’s Ministry of Commerce has announced its firm opposition and plans to file a complaint with the WTO.
South Korea, positioned as the eighth largest trade surplus nation with the U.S., is particularly concerned. Acting President Choi has urged careful monitoring and preparation to mitigate any negative impacts on Korean companies.