Economy

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldUS consumers face the possibility of higher prices for popular goods such as tomatoes, avocados and tequila following Donald Trump’s decision to slap tariffs on imports from China, Mexico and Canada. The potential price rises point to the political risk Trump is taking in pursuing a trade policy that could drive up the costs of consumer goods following a presidential election in which voters expressed their frustration with high inflation. The tariffs hark back to similar actions during Trump’s first term, but that was during a period of moderate inflation and the current measures are larger. “I can imagine retailers might absorb tariffs in the short run, but I think with such sweeping tariffs, prices are going to go up,” said Amit Khandelwal, professor of global affairs and economics at Yale University. China, Mexico and Canada are three of the US’s largest trading partners, responsible for about 40 per cent of the country’s trade. The US is the largest market for tequila. Mexico and Canada are among the biggest suppliers of agricultural products including tomatoes and avocados — between 2019 and 2021 almost 90 per cent of all avocado shipments into the US came from Mexico. “You feel the pain of these price rises when you don’t have good substitutes,” said Khandelwal. “The Super Bowl is coming up, people like to eat guacamole. It could be as simple as that if there’s no real good substitute for that.”China sells the US machinery and mechanical equipment worth tens of billions of dollars a year that go into any number of popular appliances, from TVs to iPhones.  “We still don’t know how China will respond to the additional 10 per cent tariff, but it will most likely be retaliatory and lead to even higher consumer prices,” said Sina Golara, assistant professor of supply chain and operations management at Georgia State University’s business school.Some of the impact will be offset by the weaker Mexican peso and Canadian dollar, but Trump at least nodded to the inflationary risks by putting in place a lower 10 per cent tariff on energy resources from Canada, which is the US’s biggest import from the country.Morgan Stanley economists warned that the impact of the tariffs would first show up in higher inflation, with a lag to economic activity. They warned this could delay any policy action by the US Federal Reserve to lower interest rates. “If we are correct that broad tariffs on Mexico, Canada, and China will firm inflation before they slow activity, then the Fed may be on the sidelines for some time,” Morgan Stanley wrote in a note to clients on Sunday. The White House said the tariffs were aimed at putting pressure on the three countries to combat illegal immigration and the flow of drugs such as fentanyl into the US, popular issues among US voters. There is hope that signs of these numbers trending in the desired direction could mean the tariffs are lifted or pared back quickly. In Canada, the most immediate impact will be seen on the shelves of liquor stores. Most provinces sell alcohol through government-owned stores, and several have ordered their retailers to pull imported US booze from sale starting on Tuesday. Doug Ford, premier of Ontario, said its liquor stores sold nearly C$1bn of US products annually. Ontario’s ban will largely cut off a market of some 16mn people for American producers. British Columbia’s ban will be targeted on alcohol imported from Republican-led “red states,” according to premier David Eby.  Canada’s federal government on Sunday published a list of 1,256 products that will be hit in its first round of retaliatory tariffs on Tuesday.Poultry and dairy products, fresh fruit and vegetables, lumber and paper products including toilet paper, as well as some manufactured goods such as washing machines, pyjamas and handbags will all be affected. Ministers hope shoppers will be able to switch to international or domestic alternatives for these goods, while they work on details of a more far-reaching tariff response. Canadian officials said the list of goods was designed to mobilise constituencies in the US that have influence with Trump, including exporters in Republican-led states. That includes products such as orange juice from Florida, and appliances made in South Carolina and Ohio. Additional reporting by Christine Murray in Mexico City More

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Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldUS secretary of state Marco Rubio told Panamanian President José Raúl Mulino on Sunday to reduce China’s influence over the Panama Canal or face immediate consequences.Rubio met Mulino in Panama City and said US President Donald Trump had determined that China posed “a threat to the canal” and had violated a treaty concerning its neutrality, according to state department spokesperson Tammy Bruce. Unless the situation changed, the US would “take measures necessary to protect its rights under the Treaty”, wrote Bruce.On Sunday night, Trump told reporters: “China is running the Panama Canal. It was not given to China, it was given to Panama foolishly. But they violated the agreement and we’re going to take it back, or something very powerful is going to happen.”Mulino, Panama’s conservative pro-business president, has described a previous Trump claim that Chinese soldiers were operating the canal as “nonsense” and has insisted the waterway “is and always will be Panama’s”.The US built the 82km canal connecting the Pacific and the Caribbean more than a century ago and controlled it and an adjacent stretch of territory until it signed a treaty in 1977 for a gradual handover to Panama, which was completed in 1999. The treaty guarantees the permanent neutrality of the canal and allows the US to intervene if neutrality is violated.When attacking Chinese influence, US critics of Panama have focused on two ports at either end of the canal which are run by Hutchison Ports, an arm of Hong Kong-listed conglomerate CK Hutchison Holdings, under long concessions. They were renewed without a bidding process in 2021 for 25 years.  Mulino on Sunday acknowledged US concerns over the ports and noted that his government had launched an audit of the port concessions, which have a nearly 40 per cent market share, amid speculation in Panama that they may be cancelled. It is not clear, however, whether the cancellation of the Chinese concessions would be sufficient to satisfy Trump, who has called the canal fees “a complete rip-off” and demanded that the US take back the canal.About 200 people marched in Panama’s capital on Sunday, carrying national flags and shouting “Marco Rubio out of Panama” while the US secretary’s meeting was going on, the Associated Press reported. Some burnt a banner with images of Trump and Rubio.In another gesture towards the US, Mulino said Panama’s participation in China’s Belt and Road infrastructure initiative would not be renewed, without giving a date for its expiry. Panama joined BRI in 2017 when it switched diplomatic recognition from Taiwan to China.In recent years, Chinese state-controlled companies have built a huge convention centre close to the mouth of the canal and are constructing a new bridge over the waterway and a cruise ship port, contracts that were secured through bidding processes. Beijing was seeking to build a big embassy on land near the canal until US objections killed the scheme.In his meeting with Mulino and Panamanian foreign minister Javier Martínez-Acha, Rubio also praised Panama’s efforts to end illegal migration and “underscored the desire for an improved investment climate and ensuring a level playing field for fair competition by US firms”, according to Bruce.The number of migrants illegally crossing the Darién jungle between Panama and Colombia — a major international migration route towards the US in recent years — has plunged since Trump took office. Numbers were down 94 per cent last month compared with the same month a year earlier, according to Panama’s national migration authority. More

The invoking of national security to unravel trade agreements could scramble the international trading system in China’s favor.President Trump’s move this weekend to slap sweeping tariffs on Canada, Mexico and China is threatening to fracture the global trading system and a world economic order that once revolved around a U.S. economy that prized open investment and free markets.The speed and scope of the import duties that Mr. Trump unveiled in executive orders on Saturday prompted widespread criticism from many lawmakers, economists and business groups, who assailed the actions as economic malpractice. They warned that the tariffs, which were levied in response to Mr. Trump’s concerns about fentanyl smuggling and illegal immigration, could inflame inflation, cripple American industries and make China an even more powerful global trade hub.Mr. Trump on Sunday defended the tariffs while acknowledging that there could be some negative consequences.“WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!),” he wrote on social media.The executive orders mean that on Tuesday at 12:01 a.m., all goods imported from Canada and Mexico will be subject to a 25 percent tariff, except Canadian energy products, which will face a 10 percent tariff. All Chinese goods will also face a 10 percent tariff.Canada and Mexico have vowed to retaliate swiftly with tariffs of their own, and China said it would pursue unspecified “countermeasures” to safeguard its interests.Speaking on NewsNation on Sunday, Mr. Trump’s senior trade adviser, Peter Navarro, said it was unlikely that the tariffs would be stopped at the last minute.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

President Trump is moving forward with extensive tariffs on America’s closest trading partners. Beginning Tuesday, companies bringing products into the United States from Canada and Mexico will pay a 25 percent tariff; importers bringing products in from China will pay an additional 10 percent on top of existing levies.The president has insisted that these tariffs will not increase prices for American consumers and that if anyone pays the cost, it will be foreign countries.But a simple review of how tariffs work suggests that is not the case. Here’s what to know about who pays.Who pays for tariffs up front?A tariff is an extra surcharge put onto a good when it comes into the United States. It is the so-called importer of record — the companies responsible for importing that product — that physically pays tariffs to the federal government.The tariff fee of 10 percent or 25 percent is often charged not on the full sticker price of the good you see at the store, but a lower import price that companies pay to buy a good from abroad, before they mark up the price for sale at a store.Many importers of record are enrolled in the government’s electronic payment program, and have tariff fees automatically deducted from their bank accounts as they bring products into the country. Tariff revenue is collected by U.S. Customs and Border Protection, though Mr. Trump has floated the idea of creating an entirely new agency to deal with money earned from his tariffs.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

President Trump said on Saturday that he would impose tariffs on Mexico, Canada and China using a decades-old law that gives the president sweeping economic powers during a national emergency.“This was done through the International Emergency Economic Powers Act (IEEPA) because of the major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl,” Mr. Trump wrote in a social media post on Saturday. “We need to protect Americans, and it is my duty as President to ensure the safety of all.”On his first day back in office, Mr. Trump declared a national emergency at the southern border. On Saturday, he said he would expand the scope of the emergency and hit the country’s three largest trading partners with tariffs because they had “failed” to do more to stop the flow of migrants or illegal fentanyl into the United States.In recent weeks, Mr. Trump had threatened to use the law to impose steep tariffs on other countries like Colombia, which eventually agreed to allow U.S. military planes to fly deportees into the country after Mr. Trump said he would seek tariffs on all Colombian imports.“This is a very broad tool that affords the president a lot of latitude to impose potentially really substantial economic costs on partners,” said Philip Luck, the economics program director at the Center for Strategic and International Studies and a former deputy chief economist at the State Department during the Biden administration. “This is a pretty big stick you can use.”What is IEEPA?The International Emergency Economic Powers Act of 1977 gives the president broad powers to regulate various financial transactions upon declaring a national emergency. Under the law, presidents can take a wide variety of economic actions “to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy or economy” of the country.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More