DISRUPTING TRADE
Trump’s punitive duties and retaliatory tariffs from Canada and Mexico threaten to disrupt nearly US$1.6 trillion in North American trade and effectively end a 30-year free trade system that has deeply integrated the three economies.
The US president said on Thursday he still is considering an additional 10 per cent on Chinese imports to punish Beijing for its alleged role in the fentanyl trade. But the sources said the Mar 1 tariffs would apply only to Canada and Mexico, leaving his plans for new China duties unclear.
Decisions on the tariffs are being managed by a core White House team, not the incoming trade team to be led by Commerce Department nominee Howard Lutnick and US Trade Representative nominee Jamieson Greer, a source familiar with the matter said. Neither has been confirmed by the US Senate, but the Senate Finance Committee has scheduled a Feb 6 confirmation for Greer.
Trump hinted about possible exemptions on Thursday when he said he would soon decide whether to apply the tariffs to imports of Canadian and Mexican oil, an indication that he may be concerned about their impact on gasoline prices. Crude oil is the top US import from Canada and among the top five from Mexico, according to US Census Bureau data.
Trump trade advisor Peter Navarro told CNBC on Friday that tariff revenue will help pay for the extension of Trump’s 2017 tax cuts, which total some US$4 trillion and expire this year.
Two sources familiar with the matter said that Trump was expected to invoke the International Emergency Economic Powers Act (IEEPA) as the legal basis for the tariffs, declaring a national emergency over fentanyl overdoses that killed nearly 75,000 Americans in 2023 and illegal immigration.
IEEPA, enacted in 1977 and modified after the Sep 11, 2001 attacks on the US, gives the president broad powers to impose economic sanctions in a crisis.
Among the trade law tools at Trump’s disposal, it would give him the fastest path to imposing broad tariffs, as others require lengthy investigations by the Commerce Department or USTR.
