Key Highlights:
- President Donald Trump is imposing tariffs of 25% on imports from Mexico and Canada and a 10% tariff on China in a bid to stem what he says is the current problem of fentanyl distribution.
- The White House said officials will provide full documentation for the move, which will be released publicly on Saturday.
- The announcement caused massive losses in the stock market, with the Dow Jones Industrial Average losing over 300 points, or 0.7%.
- Economists warn these tariffs could restart inflation just as price pressures are starting to cool.
The White House confirmed Friday that President Donald Trump will impose new tariffs on three of the United States’ largest trading partners, after weeks of speculation.
White House Press Secretary Karoline Leavitt said that Trump will impose a 25% tariff on products coming in from Mexico and Canada, along with a 10% duty on Chinese imports. These, according to Leavitt, are in direct response to “the illegal fentanyl that they have sourced and allowed to distribute into our country.”
Administration officials wouldn’t indicate exactly how such tariffs will look but said their release is planned for Saturday morning.
It certainly did not take the markets too much time: The Dow Jones Industrial Average went negative after plunging over 300 points today, with similar results happening toward the close on both the S&P 500 and the Nasdaq Composite when it turned those early gains to a loss at the close of the day’s session.
Leavitt added that these moves represent Trump’s promises during the campaign, noting, “These are promises made and promises kept by the president.”
Speculation that there would be exemptions led to an outcry, but the White House quickly denied a Reuter’s report that suggested it would grant certain exclusions or delay the tariffs until March 1.
The United States does about $1.6 trillion in annual trade with Canada, Mexico, and China. Trump is using these tariffs as leverage for broader foreign policy objectives, particularly on immigration and drug enforcement issues.
Peter Navarro, a key Trump trade advisor, linked the move to concerns over fentanyl trafficking, stating in an interview with CNBC, “We’ve got the Super Bowl coming up, and eerily, the number of people that fit in the [New Orleans] Superdome is almost exactly equal to the number of people dying every year here in America from fentanyl, and that comes from China and Mexico.”
Economists are warning that the tariffs could re-ignite inflation just as price pressures are starting to cool. The Commerce Department reported a 2.6% gain in a key inflation measure for December, though some underlying data suggested a more encouraging picture.
Federal Reserve officials are closely watching the economic consequences of such trade actions. Fed Governor Michelle Bowman pointed to a lack of clarity on how these would be carried out and their impact on the broader economy.
Chicago Fed President Austan Goolsbee earlier echoed such concerns in an interview with CNBC on Friday, saying it was how it all plays out in the longer term that would depend on whether such tariffs were isolated actions or evoked retaliation from trading partners.
