President Donald Trump fired the latest shot in the global trade war, imposing steep new tariffs on the United States’ three biggest trading partners—Canada, Mexico, and China. The move? A 25% tariff on Canadian and Mexican imports and a 10% levy on Chinese goods, all justified under Trump’s national emergency declaration over drug trafficking and illegal migration, the Atlantic Council reports.
So, what does this mean for the global economy? And how will these countries hit back? Our experts break it down.
China: A Smaller Hit Than Expected
Given Trump’s previous threats of 60% tariffs on Chinese goods, Beijing might actually be breathing a sigh of relief, says Josh Lipsky, senior director at the Atlantic Council’s GeoEconomics Center. “China’s leaders must be wondering why Washington slapped its allies with a 25% tariff but only hit its biggest economic rival with 10%.”
The reasoning? Inflation. “Higher tariffs on Mexico and Canada will already raise costs for American consumers, and Trump knows there’s only so much price pressure they’ll tolerate,” Josh explains. Plus, China is less dependent on U.S. trade than its North American counterparts.
But don’t expect Beijing to sit still. “China has a trick up its sleeve: currency devaluation,” Josh warns. “Watch the yuan—it’s likely China will absorb much of the tariff impact through exchange rates.” That means fiery rhetoric from Beijing but possibly milder economic retaliation.
Mexico: An Economic Gut Punch
The tariffs on Mexico will hit hard, and they may backfire on Trump’s efforts to curb immigration, argues María Fernanda Bozmoski, director at the Atlantic Council’s Adrienne Arsht Latin America Center. “Weakening the Mexican peso and economy will likely drive more migration north—not less.”
But it’s not just about immigration. These tariffs put the USMCA trade deal at risk. “The economic growth and supply chain security we gained from USMCA? That’s now in jeopardy,” María says.
And then there’s the White House’s rhetoric. The administration’s announcement accused Mexico’s government of having an “intolerable alliance” with drug cartels—marking a major shift in U.S.-Mexico relations. “For the first time in decades, economic collaboration between these neighbors is being explicitly tied to security concerns,” María points out.
Canada: The Energy Loophole
Canada got hit with the same 25% tariff as Mexico—except for one key sector: energy. Trump’s order carves out a lower 10% tariff on Canadian ‘energy resources’, which could be a big deal, says Joseph Webster, senior fellow at the Atlantic Council’s Global Energy Center.
“The impact on energy markets will depend on what Trump defines as an ‘energy resource,’” Joe explains. If the exemption doesn’t include things like electricity, batteries, or key minerals, “it could disrupt U.S. industries tied to electric vehicles, defense tech, artificial intelligence, and drones.”
One thing is certain: U.S. refineries are in trouble. “They rely on Canadian and Mexican crude, and with these tariffs, prices will climb,” Joe warns. Refineries in the Midwest, which don’t have many alternatives to Canadian oil, will likely pass those costs straight to consumers.
The Bottom Line
Trump’s tariffs are here, and the economic fallout is just beginning. Will China devalue its currency? Will Mexico retaliate? And how will American consumers react to higher prices? Stay tuned—this trade war is far from over.
