Mexico Threatens Trump With Counter-Tariffs, China Cries Foul

One day after President-elect Trump pledged to slap a 25% tariff on all goods coming from Mexico and Canada until they tighten border security, and an extra 10% on China until the CCP cracks down on fentanyl smuggling, Mexican President Claudia Sheinbaum – a leftist ideologue trained in radical student protest movements – lashed out.

First, she threatened counter-tariffs…

“One tariff would be followed by another in response, and so on until we put at risk common businesses,.” Sheinbaum said, referring to US automakers operating plants on both sides of the border.

But then she said Mexico had made progress stemming the flow of migrants, insisting that “caravans of migrants no longer reach the border,” (though was that really due to Mexico, or Trump’s election?) before blaming American culture for the drug epidemic – calling it “a problem of public health and consumption in your country’s society.”

“It is unacceptable and would cause inflation and job losses in Mexico and the United States,” Sheinbaum continued, before criticizing US spending on weapons – suggesting that the money should instead be spent regionally to address the migration problem.

“If a percentage of what the United States spends on war were dedicated to peace and development, that would address the underlying causes of migration,” she said.

Of note, Mexico leads in total percentage of goods imported into the United States, followed by China and Canada.

We assume ‘underlying causes of migration’ = bribing Guatemala, Honduras and Colombia – the thing Kamala Harris was sent down to negotiate. 

Chinese spokesperson for the Chinese embassy in Washington, Liu Pengyu, responded as well – saying “No one will win a trade war or a tariff war,” adding “the idea of China knowingly allowing fentanyl precursors to flow into the United States runs completely counter to facts and reality.”

On Monday, Trump took to Truth Social to blast Mexico, Canada and China over drug smuggling and border security, writing:

As everyone is aware, thousands of people are pouring through Mexico and Canada, bringing Crime and Drugs at levels never seen before. Right now a Caravan coming from Mexico, composed of thousands of people, seems to be unstoppable in its quest to come through our currently Open Border. On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders. This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country! Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem. We hereby demand that they use this power, and until such time that they do, it is time for them to pay a very big price!

Trump then ‘truthed’ about China… writing:

I have had many talks with China about the massive amounts of drugs, in particular Fentanyl, being sent into the United States – But to no avail. Representatives of China told me that they would institute their maximum penalty, that of death, for any drug dealers caught doing this but, unfortunately, they never followed through, and drugs are pouring into our Country, mostly through Mexico, at levels never seen before. Until such time as they stop, we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America. Thank you for your attention to this matter.

Trump has previously threatened tariffs of up to 60% on Chinese exports to the US, stirring concerns over international trade.

“Many companies will completely halt their trade with the U.S.,” said Tu Xinquan, director of the China Institute for WTO Studies at the University of International Business and Economics in Beijing.

“If the tariffs were not that huge, larger companies could cope better with the situation than medium and small companies. But if it’s 60%, no one can face that.“

Among the industries expected to be hit hardest by new tariffs are light manufacturing and textiles, as well as steel and computers, according to Chinese brokerage Caicong Securities.

During Trump’s first term in office, he imposed tariffs on more than $360 billion worth of Chinese products – of which the Biden administration maintained the vast majority, and layered on new tariffs on products such as steel, solar cells, and electric vehicles.

Trump also wants to end an exemption for Chinese goods valued at under $800 – many of which are offered through Amazon’s third-party marketplace as well as Chinese platforms Temu and Shein.

“This would be a crushing blow to Chinese exporters who have built business models around those low-value exports,” said Eswar Prasad, a professor of trade policy at Cornell University and a former head of the China division at the International Monetary Fund, AP reports.

As ING noted on Tuesday:

Whilst most in the market assume that Trump will be using tariffs as a large bargaining stick – in this case to tighten US border controls – we would be careful of dismissing their market impact as some grandstanding. If 25% tariffs came close to seeing the light of day in Mexico, USD/MXN would be a 24/25 story, not just 21. We already think the currencies of Mexico and Canada will have a tougher Trump 2.0 than they did during his first term.

In response to Trump’s tariff threat, the Mexican peso slumped more than 2%, paring losses to trade 1.4% lower later in Tuesday morning trade.