Donald Trump signs 26 executive orders in his first day in office and National Party MPs gather for their annual caucus retreats. Video / NZ Herald / AFP
Canada vowed strong pushback while Mexico has urged calm in the face of US President Donald Trump’s trade threats that risk throwing their economies into disarray.
The President has accused both neighbours of being lax in preventing migrants and illicit drugs from coming into the US, and called fora tightening of the borders.
Hours after taking the oath of office on Tuesday, Trump signalled that 25% punitive tariffs against the US’ two major trading partners could come as early as February 1.
He also said he would order troops to its border with Mexico to stem migrant flows.
“Canada will respond and everything is on the table,” Prime Minister Justin Trudeau told a news conference, saying Ottawa’s reaction would be “robust and rapid and measured,” but also match dollar for dollar the US tariffs on Canadian imports.
A Canadian Government source said Ottawa was considering higher duties on US goods, including steel products, ceramics such as toilets and sinks, glassware and orange juice — in a first phase of tariffs that could be extended.
Provincial and opposition leaders have also called for blocking exports of Canadian oil, electricity and critical minerals.
Mexican President Claudia Sheinbaum, meanwhile, downplayed the tariff threat while urging calm in the face of Trump’s announcement of severe new restrictions on migration.
“It’s important to always keep a cool head and refer to signed agreements, beyond actual speeches,” she said at her regular morning conference.
‘Bad neighbours’
Trump defended the tariffs on his first day in office, telling reporters as he signed an array of executive orders that Canada and Mexico were allowing “vast numbers of people to come in, and fentanyl to come in”.
He signed an order directing agencies to study a host of trade issues, including deficits, unfair practices and currency manipulation.
These could pave the way for further duties.
Sheinbaum, who has reacted to months of threats from Trump with a mix of pragmatism and firmness, noted several of the measures dated from Trump’s first mandate.
Donald Trump has accused both Canada and Mexico of being lax in preventing migrants and illicit drugs from coming into the United States. Photo / Getty Images
On trade, Canada and Mexico are theoretically protected by the Canada-United States-Mexico Free Trade Agreement (USMCA), signed during Trump’s first term and hailed as “the best and most important trade agreement ever signed by the United States”.
The pact replaced an earlier continental trade agreement from the 1990s and included new labour provisions aimed, in particular, at improving worker rights in Mexico.
It is due to be reviewed in 2026.
“For now, the trade treaty remains in effect,” Sheinbaum noted.
Mexico leapfrogged China in 2023 to become the United States’s largest trading partner. That year, the American trade deficit with Mexico rose to US$150 billion ($264b).
Trade conflicts between the three signatories have multiplied in recent years, concerning, for example, American genetically modified corn, Canadian dairy products, and trade in auto parts.
Trudeau today warned a trade war would cost the United States, but also “there will be costs for Canadians”.
“This is a crucial moment for Canada and Canadians,” he said.
According to economists, a trade war could plunge Canada, which sends about 75% of its exports to the US, led by its energy and auto sectors, into a recession.
One scenario from Scotiabank suggests any bilateral trade disruption could slash more than 5% from Canadian GDP, increase unemployment significantly and fuel inflation.
US GDP could fall by 0.9%, analyst Jean-François Perrault said in a research note.
According to the Canadian Chamber of Commerce, tit-for-tat tariffs would cause Canadian GDP to fall by 2.6%, while American GDP would suffer a decline of 1.6%.
