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Is Trump serious about tariffs? We now have our answerpublished at 12:29 Greenwich Mean Time

12:29 GMT

Faisal Islam
Economics editor

Image source, Getty Images

"Is Trump serious about tariffs?" This has been the question hanging over not just world markets but the whole world economics.

The popular wisdom had become that he wasn’t really that serious, and the key bit of evidence for that was his appointment of hedge fund investor Scott Bessent as Trump’s preferred Treasury secretary.

The answer overnight, though, was pretty brutal. Yes, he is serious, and in the most unexpected way. By choosing to target Mexico and Canada as well as China, he is confirming threats made on the campaign trial that appeared the most fanciful.

For starters he is willing to blow up the Mexico-Canada- America trade deal that he signed in his first term, on day one of his second term. What does a Trump free trade deal even mean now, if the new White House is willing to tariff your country?

And specifically, the rationale for these moves is not mainly or even much about trade or economic policy. These tariffs are about getting Mexico, Canada and China to alter their policies on crackdowns over migration and illicit drugs.

Earlier, we heard Ontario's premier had said that the US imposing a 25% tariff on imported Canadian goods would be "devastating" for both American and Canadian workers.

Now the head of Quebec - Canada's second biggest province after Ontario - says the tariff.

"We must do everything possible" to avoid it, François Legault adds.

Others have joined in with their warnings. David Eby, the premier of British Columbia, says, adding that "Canadians must stand united".

And Alberta's premier, Danielle Smith, around concerns from Trump's incoming administration about "illegal activities at our shared border", which would avoid "any unnecessary tariffs on Canadian exports to the US".

Jonathan Josephs
����ý business reporter

In Donald Trump’s first term in office there were two prevailing reasons for using tariffs.

With China in particular there was a big desire to cut the trade deficit - that’s the gap between the amount the US bought from China than sold.

That deficit meant that in 2018 - the year Trump first introduced tariffs - the US bought $418bn more goods from China than went the in the other direction.

Trump saw that as a drain on the US economy and eventually a deal for China to buy $200bn more goods was signed in January 2020. But China has struggled to live up to that commitment.

Although the deficit has see-sawed it is now lower and last year’s figure of $279bn was the lowest since 2010.

The other reason Trump gave for the use of tariffs in his first term was protecting American jobs. The new trade deal he agreed with Mexico and Canada may have helped but it's more difficult to quantify the impact.

Neither deficits nor jobs were mentioned in his post about his plans for new tariffs in January.

Nick Edser
Business reporter

Donald Trump’s comments on tariffs sent a ripple through currency markets as traders scrambled to get to grips with the move.

Initially, the US dollar jumped in value against the currencies of those countries being targeted. It rose more than 2% against the Mexican peso and hit the highest level for four and a half years against the Canadian dollar.

The US dollar also strengthened against other currencies, although it has since lost some of the earlier gains, and share prices in Europe fell as investors worried about the potential impact.

Trump appears to be a man in a hurrypublished at 11:39 Greenwich Mean Time

11:39 GMT

Sarah Smith
North America editor

People were never quite sure whether Trump actually meant literally the things he was saying in the campaign - if that’s really what he would do.

On this, he certainly seems to be making good on his campaign promises, and in a hurry as well.

He has said very clearly that he plans to do this on day one. So this is not going to be the culmination of a negotiation with these countries to impose a tariff, he wants to do this from as early as he possibly can.

And I suspect you might see this with some other policies as well - that he is a man in a hurry who wants to start imposing his agenda just as quickly as he can.

Image source, EPA

More reaction now, from Germany’s Vice-Chancellor Robert Habeck, who says the European Union must "respond united, and not tear itself apart into two or three blocs of countries but speak as a united Europe".

“We must make clear that ultimately, everyone loses: the United States, the United States’ economic area and Europe,” he adds, according to the Reuters news agency.

Habeck says any counter-measures should only be thought about "once we have thoroughly discussed things", adding that the "first step is to seek talks".

Vanessa Buschschlüter
Latin America editor, News Online

Mexico may be the US’s top trading partner but that has not shielded it from Trump’s tariff threat.

The Mexican government has long been Trump’s whipping boy when it comes to the flow of undocumented migrants and in his post the US president-elect stressed that the tariff would remain in effect "until such time as drugs, in particular fentanyl, and all illegal aliens stop this invasion of our country".

The head of Mexico’s Senate quickly hit back, what tariffs Mexico should impose on the US to get it to stop consuming drugs and illegally exporting weapons to its southern neighbour.

And while President Claudia Sheinbaum has yet to respond to the tariff threat, her finance minister has in the past warned that any taxes imposed on Mexican goods could trigger retaliatory tariffs.

"If you put a 25% tariff on me, I’ll have to react with tariffs and I’m your main importer," the Mexican minister previously warned.

Laura Bicker
China correspondent

China has warned Washington that no-one will win a trade war as Donald Trump threatens to impose an additional 10% tariff on goods heading to the United States.

This is not the 60% tariffs Trump had pledged to slap on Chinese goods during his campaign, so some businesses who export phones, handbags and furniture who've already been hit hard by the first trade war might be breathing a sigh of relief.

Others will fear this is just Trump’s opening shot and worry more tariffs are on the way.

Chinese state media described the threat as "irresponsible", while the foreign ministry in Beijing claimed China had taken significant steps to stop the illegal flow of drugs, including fentanyl, into the US.

"China is one of the countries with the strictest and most thorough drug policies in the world," says a foreign ministry spokesperson. "Fentanyl is primarily a problem for the United States."

But Beijing was expecting this. It had time to prepare for a second Trump presidency and China has learned lessons from his first stint in the White House.

Much of the country’s agricultural imports now come from Brazil, Argentina and Russia and it has started exporting more products to non-US allied countries.

The last thing Beijing needs is another trade war as it battles slowing economic growth, a property crisis and high youth unemployment.

For now, these tariffs are just a threat. As well as tougher action on fentanyl, Trump may hope to convince President Xi to stop heavily subsidising China’s manufacturing industries which he sees as unfair competition.

But this tactic hasn’t work in the past, and Beijing is likely preparing its own robust counter-measures.

Image source, Getty Images

Doug Ford - who is premier of Ontario, Canada's most populous province - says America imposing a 25% tariff on all goods imported from Canada would be "devastating to workers and jobs in both Canada and the US".

“We need a Team Canada approach and response - and we need it now,” the Canadian politician, adding that Prime Minister Justin Trudeau, "must call an urgent meeting with all premiers".

Another politician Bonnie Crombie, leader of Ontario Liberal Party, says that US President-elect Donald Trump’s threat of tariffs "is serious and would have an enormous impact on just about everyone in Ontario".

We haven't heard from Trudeau himself yet on what he makes of Trump's announcement.

As you've read, President-elect Donald Trump is planning a 25% tariff on goods from Canada and Mexico entering the US, and an extra 10% tariff on goods from China on top of the current rate.

Tariffs are a form of domestic tax which is placed on goods as they enter the country. It's not a fixed rate, so the amount paid depends on how much the product costs.

For instance, a car that is imported to the United States with a value of $50,000 which is subject to a 10% tariff would face a $5,000 charge.

The fee is physically paid by the domestic company that imports the goods and not by the foreign company that exports them.

Image source, Reuters

Trump says as soon as he gets into office, he’ll sign an executive order imposing a 25% tariff on "all products" entering the US from neighbours Mexico and Canada.

these tariffs - which are a type of a tax - will be in place until the two countries clamp down on drugs and illegal migrants crossing the border.

"As everyone is aware, thousands of people are pouring through Mexico and Canada, bringing crime and drugs at levels never seen before," he writes.

He an extra 10% tariff will be charged on goods coming from China, on top of any other tariffs. This is lower than he threatened before - back in the campaign he promised 60%.

Trump says that will last until the Chinese government cracks down on fentanyl being smuggled out the country.

"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," he says.

Francesca Gillett
Live editor

President-elect Donald Trump says he will introduce 25% tariffs on goods entering the US from Canada and Mexico, as well as increasing existing tariffs on China by 10%, as soon as he gets into office in January.

Tariffs are a type of tax and a core part of Trump’s economic vision - it’s something he promised before he got elected, but now we’ve got more detail on what he is planning.

We’ll bring you that detail shortly, and how other countries are reacting. We’ve also got explanation and analysis coming – this piece also explains how tariffs work.