Trade War Escalates as Canada and Mexico Retaliate Against US Tariffs

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In a significant escalation of trade tensions, Canada announced on February 2, 2025, that it will impose a 25% tariff on $155 billion worth of US imports in response to President Donald Trump's recently signed order imposing stringent tariffs on imports from Canada, Mexico, and China. The Canadian government views these tariffs as a necessary move to protect its economic interests, according to Prime Minister Justin Trudeau.

Trump's order includes a 10% tariff on Chinese imports and a 25% tariff on imports from Mexico and Canada, citing “the major threat of illegal aliens and deadly drugs” including fentanyl. The tariffs are set to take effect on February 6, prompting concerns about a potential economic standoff that could destabilize relations with key trading partners.

Mexican President Claudia Sheinbaum has instructed her economy minister to implement retaliatory measures to safeguard Mexico’s interests. She criticized the US government's narrative regarding drug trafficking, emphasizing that the US should focus on combating drug sales on its own streets.

The decision could exacerbate inflationary pressures in the US, potentially affecting millions of American households, as suggested by economic analyses from institutions like the Budget Lab at Yale.

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