Donald Trump says he will hit China, Mexico and Canada with new tariffs on the first day of his presidency, in an effort force them to stop illegal immigration and drug trafficking into the US.
The president-elect said shortly after his inauguration on January 20 that he will sign an executive order imposing a 25% tariff on all goods from Mexico and Canada.
He also said that a 10% tax will be levied in China until the government stops the smuggling of the synthetic opioid fentanyl from the country.
If Trump follows through on these threats it will signal a major escalation of tensions with America's three major allies.
These measures have the potential to cause disruptions in the global supply chain and could hit the three countries that are the target of tariffs hard.
Taxes in Mexico and Canada will remain in place until the two countries reduce drugs, especially fentanyl, and immigrants who cross the border illegally, Trump said in his post on the Truth Social platform.
“Both Mexico and Canada have the full right and power to easily resolve this chronic problem,” he said.
“It's time for them to pay a huge price!”
In another post, Trump attacked Beijing for failing to follow through on promises he said Chinese officials had made to impose the death penalty on people caught using fentanyl.
A spokesperson for the Chinese embassy in Washington told the BBC “the idea that China is allowing fentanyl precursors to flow into the United States is completely contrary to facts and reality”.
“China believes that China-US economic and trade cooperation is mutually beneficial. No one will win a trade war or a tariff war,” he added.
The Biden administration has been asking Beijing to do more to stop the production of ingredients used in fentanyl, which Washington estimates killed nearly 75,000 Americans last year.
During his election campaign, Trump threatened Mexico and China with tariffs of up to 100%, if he deemed it necessary, much higher than those he imposed during his first term in office.
Trump also said he would end China's most favored trade deal with the US – the most lucrative terms Washington has offered in tariffs and other restrictions.
Last year, more than 80% of Mexico's exports went to the US, while about 75% of Canada's exports went to its big neighbors.
Even after years of intense trade friction between the world's two largest economies, the US still accounts for about 15% of China's exports.
Taxes are a key part of Trump's economic vision – he sees them as a way to grow the US economy, protect jobs and raise tax revenues.
Previously, he said that these taxes “will not be an expense for you, they are an expense for another country”.
This is almost universally regarded by economists as misleading.
“It is consistent with his campaign promise to use taxes as a weapon to achieve many of his policy agendas,” Stephen Roach, Senior Fellow at the Paul Tsai China Center at Yale Law School told the BBC's Business Today.
Trump's choice for Treasury Secretary, Scott Bessent, has previously suggested that the president-elect's threats to raise tariffs are part of his negotiating strategy.
“My general view is that he is ultimately a free trader,” Bessent said of Trump in an interview with the Financial Times before he was appointed to the role.
“It's getting worse.”
It comes as China's economy is in a more vulnerable position than during the Trump presidency.
The country has been struggling with a number of serious issues, including the ongoing housing market crisis, sluggish domestic demand and rising local government debt.
The new tariffs appear to violate the terms of the US-Mexico-Canada Agreement (USMCA) on trade.
The agreement, which Trump signed into law, went into effect in 2020. We largely continued the duty-free trade relationship between the three neighboring countries.
After Trump made his tariff threat, he discussed trade and border security with Canadian Prime Minister Justin Trudeau, according to Reuters news agency.
The Mexican Ministry of Finance said: “Mexico is a leading trading partner of the United States, and the USMCA provides a reliable framework for national and international investors.”
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