• Donald Trump has said the EU will face tariffs unless they make up their trade deficit with the US.
• He has told the bloc to make a "large scale purchase" of US oil and gas to balance trade relations.
• In 2022, the US purchased $131.3 billion more of goods and services from the EU than vice-versa.

US President-elect Donald Trump said he has told the European Union it must purchase a large quantity of US oil and gas, or he will impose tariffs on the trading bloc.

"I told the European Union that they must make up their tremendous deficit with the United States by the large scale purchase of our oil and gas. Otherwise, it is TARIFFS all the way!!!" Trump posted on his Truth Social platform on Friday.

The EU and US have long maintained deep economic ties, but in recent years, the balance of trade has tilted in Europe's favor. In 2022, the overall US goods and services trade deficit with the EU was $131.3 billion.

While the US imports more goods in the trade partnership than the EU, the reverse is true for services.

In 2023, the US exported €396.4 billion ($411.5 billion) of services to the EU, while importing €292.4 billion ($303.5 billion) — a US surplus of €104 billion ($107 billion), according to EU figures.

"The EU and US have deeply integrated economies, with overall balanced trade and investment," Olof Gill, a European Commission spokesperson, told Business Insider.

"We are ready to discuss with President-elect Trump how we can further strengthen an already strong relationship, including by discussing our common interests in the energy sector," he added.

"The message is clear: the European Union is committed to continue working with the United States, pragmatically, to strengthen transatlantic ties," European Council President António Costa told reporters following a meeting of the European Council on Thursday.

Trump made tariffs central to his reelection campaign, suggesting a blanket 10% tariff on goods from all countries. It is still uncertain which policies he will introduce once in office.

The US is one of the EU's largest trading partners, particularly for industries like automobiles, pharmaceuticals, and luxury goods.

Individual countries like Germany, whose stuttering auto market depends heavily on imports to the US, would be particularly hard hit by renewed tariffs.

The pressure of potential tariffs comes as the eurozone struggles with sluggish economic growth and the ongoing war in Ukraine. The bloc expanded by 0.2% in the most recent quarter, compared to 0.7% growth in the US.

On Wednesday, Federal Reserve Chair Jerome Powell said Trump's proposed tariff plans pose more uncertainty to the US economy in the coming year.

"We don't know what will be tariffed, from what countries, for how long, in what size. We don't know whether there'll be retaliatory tariffs. We don't know what the transmission of any of that will be into consumer prices," Powell told reporters.

The European Commission did not reply immediately to a request for comment from Business Insider.

• The Federal Reserve cut interest rates in its final decision of the year.
• It also penciled in two interest-rate cuts in 2025.
• Still, Powell said that Trump's proposed trade policies pose economic uncertainty.

President-elect Donald Trump's potential trade policies could change the Federal Reserve's plans in the coming year.

On Wednesday, the Federal Open Market Committee announced its third consecutive interest-rate cut of the year, lowering rates by 25 basis points. Alongside the rate cut announcement, the Federal Reserve's quarterly Summary of Economic Projections also penciled in two interest-rate cuts for 2025, based on the median prediction from voting Fed members.

Markets took a dive after the Fed announcement, with the Dow Jones Industrial Average closing down over 1,100 points, or about 2.6%.

Fed chair Jerome Powell said during the Wednesday press conference that the decision to cut rates in December was "a closer call" but ultimately "the best decision" to achieve the Fed's dual mandate of maximum employment and price stability.

"I feel very good about where the economy is. Honestly, I'm very optimistic about the economy, and we're in a really good place. Our policy is in a really good place. I expect another good year next year," Powell said.

However, Powell said Trump's proposed tariff plans pose more uncertainty to the US economy in the coming year.

The president-elect has suggested he would impose broad tariffs on imports from key trading partners with the US, including China, Mexico, and Canada, which could lead to higher prices for imported goods.

At this point, Powell said there is too much uncertainty around Trump's trade plans to make any concrete predictions about next year's policy decisions at this point.

"We just don't know really very much at all about the actual policy, so it's very premature to try to make any kind of conclusion," Powell said. "We don't know what will be tariffed, from what countries, for how long, in what size. We don't know whether there'll be retaliatory tariffs. We don't know what the transmission of any of that will be into consumer prices."

Additionally, Powell said some FOMC members did consider fiscal policy, like tariffs, in their economic predictions, showing how the Fed is facing a range of uncertain scenarios in 2025.

He said that once Trump unveils his policies, the Fed would consider any necessary changes to its policy, but "we're just not at that stage."

Over the past year, Powell has reiterated that the Fed should move more cautiously instead of risking cutting rates prematurely and having to course correct later on. That's still the Fed's outlook going into the new year as the central bank continues its goal of reaching 2% inflation.

Amid economic progress over the past year, Powell said that inflation is coming down at a slower pace than the Fed would prefer. The consumer price index, which measures inflation, rose 2.7% year-over-year in November, a slight uptick from the 2.6% reading in October.

"When the path is uncertain, you go a little bit slower," Powell said. "It's not unlike driving on a foggy night or walking into a dark room full of furniture, you just slow down."

• Trump said he plans to impose a 25% tariff on Mexican and Canadian imports, plus 10% on Chinese imports.
• Democrats have generally opposed Trump's tariff plans — but at least one is offering him praise.
• Rep. Jared Golden, who previously introduced a 10% tariff bill, says Trump's "off to a good start."

President-elect Donald Trump is winning praise from one House Democrat over his recent threat to impose tariffs on goods from Mexico, Canada, and China.

"I think Trump's off to a good start there," Rep. Jared Golden, a centrist Democrat who represents a GOP-leaning congressional district in Maine, told Business Insider at the Capitol on Thursday.

Golden isn't your average Democrat. While many in his party — including Vice President Kamala Harris, the 2024 Democratic presidential nominee — have long panned Trump's tariff plans as a burdensome tax on consumers, Golden has embraced the idea as a way to spur growth in domestic industries.

In September, Golden introduced a bill that mirrored Trump's proposal for a 10% tariff on all foreign imports. Under Golden's "Balance Unequal International Labor and Trade for the United States of America" (BUILT USA) Act, that tariff would increase by 5% for every year that the United States maintains a trade deficit.

Other Democrats have taken the opposite approach, citing economists who say that the costs of tariffs would be passed on to regular consumers. Reps. Suzan DelBene of Washington and Don Beyer of Virginia recently introduced a bill that would block Trump from unilaterally imposing tariffs via executive order.

Trump recently said that he "can't guarantee" that Americans won't pay higher prices as the result of tariffs.

The president-elect's latest tariff proposal includes a 25% tax on imports from Mexico and Canada. In a November Truth Social post, Trump said he would sign an executive order to impose those tariffs on the first day of his presidency, and that they would remain "until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country."

He announced a 10% tariff on China that same day, blaming the country for the "massive amounts of drugs, in particular Fentanyl, being sent into the United States."

Golden pointed out on Thursday that both parties have embraced tariffs in recent years, citing President Joe Biden's decision to maintain tariffs that Trump had instituted during his first term. "We've had eight years of bipartisan executive branch consensus on tariffs," he said.

"Tariffs alone are not necessarily good or bad. They've got their positives and negatives," said Golden. The congressman said he'd like to see Trump's tariffs coupled with other policies, such as investments in domestic manufacturing and subsidizing American-made goods to offset potential retaliatory tariffs from other countries.

"All of those things in combination, I think, can make for good economic policy. They don't stand necessarily well on one foot," said Golden. "I think we've seen some of that in the last four years and a little bit in the four years before that."

"You don't just take an economy that's been heading in wrong direction for decades and turn it around like that," Golden said, snapping his fingers.

• Trump said in his Person of the Year interview that lowering grocery prices is "very hard."
• He said that high food prices were part of why he won the election.
• Some economists think Trump's economic plans, like tariffs and deportations, will be inflationary.

President-elect Donald Trump didn't commit to being able to lower grocery prices in his Person of the Year interview with Time Magazine, after flagging the issue as an important part of his win.

Time asked Trump if failing to lower grocery prices, as he said he would do on the campaign trail, would make his presidency a failure.

"I don't think so. Look, they got them up. I'd like to bring them down. It's hard to bring things down once they're up," he said. "You know, it's very hard. But I think that they will."

Trump added that he thinks "energy" and "a better supply chain" will help bring down costs.

The economy consistently ranked as voters' top issue in the presidential election, with inflation in particular at the top of mind. Frustrated with the price of everything from eggs, to meat, to cereal, many voters said they supported Trump because they thought he would lower everyday costs.

On the campaign trail, Trump vowed to lower food prices, saying at a rally on September 23, "Vote Trump and your incomes will soar. Your net worth will skyrocket. Your energy costs and grocery prices will come tumbling down." When talking about groceries in an interview last week, he said that he would "bring those prices way down."

In the interview, Trump said that Democrats lost because of their failure to talk about the economics of voters' daily lives, like the experience of buying groceries. Some economists predict that the president-elect's plans, like mass deportations and broad tariffs, will be inflationary. Walmart, the country's biggest grocery retailer, is among the companies that said it will likely raise prices if Trump enacts his trade agenda.

When asked whether his proposed mass deportations, including for migrant agricultural workers, would spike food prices, Trump said no.

"No, because we're going to let people in, but we have to let them in legally," he said, before moving on to talk about not allowing prisoners into the country.

Inflation ticked up slightly in November, with the consumer price index rising to 2.7% from a year ago, as expected. The food-at-home index rose slightly as well, reaching 1.6% in November compared to 1.1% in October.

Representatives for Trump did not immediately respond to Business Insider's request for comment.

• China's exports grew 6.7% in November, hitting $312 billion, despite economic challenges.
• The growth reverses last year's decline, driven by strong global demand and frontloaded orders.
• Beijing is planning proactive fiscal policies amid tariff threats from President-elect Trump.

It's been a difficult year for China's economy, but the country is still expected to hit its GDP growth target, thanks to strong global demand for its exports.

In November, China's exports grew 6.7% from a year ago to $312 billion — the highest level since September 2022, per official data released on Tuesday.

Some of the exports in November could have been from US importers who were frontloading to avoid potential higher tariffs in President-elect Donald Trump's second term, BofA Securities analysts wrote on Tuesday. This activity could hold up in the near term, they added.

The robust November import adds to a 5.1% growth in exports through the first 10 months of this year and reversed a 4.6% decline in exports last year, presenting the "biggest upside surprise" for China's economy in 2024, wrote Lynn Song, the Greater China economist for ING, in a note last week.

However, given that China's exports in November were strong due to stockpiling, its upside could be short-lived — especially as global demand slows.

"We are likely going to see a payback of such frontloading in 2Q-3Q next year, aggravating the potential impact of tariff increases," wrote the BofA Securities analysts.

As it was, China's November imports — though robust — missed the 8.5% increase anticipated by economists in a Reuters poll. The growth was also lower than October's 12.7% rise.

And it could get worse for the world's second-largest economy amid US President-elect Donald Trump's tariff threats.

Trump has pledged to slap 60% tariffs on all imports from China and an additional 10% on China, citing its role in the fentanyl trade.

China's consumer demand also isn't holding up. Imports contracted 3.9% from a year ago, as Chinese people tighten their belts and trade down for cheaper purchases.

Beijing gets ready for Trump 2.0

Having dealt with Trump's first presidency — during which the US and China started its trade war — Beijing is getting ready for Trump 2.0.

The Chinese leadership is holding its Central Economic Work Conference this week.

The meeting comes just after a Politburo meeting on Monday, during which China's top leadership pledged "a more proactive fiscal policy and a moderately loose monetary policy" ahead, according to Xinhua state news agency.

Xinhua added that China will also step up "unconventional" counter-cyclical adjustments and boost domestic demand and consumption.

"The strong tone on policy stance suggests that Beijing is very determined to stabilize growth and will step up fiscal spending next year," wrote Ting Lu, Nomura's chief China economist, on Tuesday.

Markets viewed the Politburo's plans positively, with China's stocks and bonds rallying on Monday. Optimism faded on Tuesday, with markets relatively muted.

"We believe China is not in a typical downcycle, we think Beijing needs to do much more beyond increasing fiscal spending and printing money to achieve a real recovery," wrote Lu.

China has been pulling out moves to boost its flagging economy this year, including aggressive stimulus measures in late September that sent the stock market surging 8.5% in one day.

China's benchmark CSI300 and Hong Kong's Hang Seng Index are both about 20% higher this year to date but are far below their peaks in early 2021.

• Trump has proposed 25% tariffs on imports from Canada, China, and Mexico.
• Trump said he doesn't "believe" the tariffs would cause price increases at home.
• But, he told Kristen Welker on NBC's "Meet the Press" on Sunday, "I can't guarantee anything."

President-elect Donald Trump, in an NBC News interview that aired on Sunday, said he doesn't "believe" his tariff proposal will raise consumer prices for American families but stopped short of making a promise.

"I can't guarantee anything," Trump told "Meet the Press" moderator Kristen Welker in his first major network television interview since the November general election. "I can't guarantee tomorrow."

Trump then said that before the COVID-19 pandemic, he placed tariffs "on a lot of different countries."

"We took in hundreds of billions of dollars and we had no inflation," the president-elect told Welker. "In fact, when I handed it over, they didn't have inflation for a year and a half."

Trump in November floated 25% tariffs on imports from Canada, China, and Mexico, the top three trading partners of the United States. The president-elect has criticized what he says is the free flow of drugs and illegal migrants into the United States from the three countries.

Late last month, Trump also threatened economic sanctions against the BRICS group, a bloc of nine emerging market countries. He said he would institute "100% tariffs" if they sought to "move away" from the US dollar.

Trump, while on NBC, reiterated that he's a "big believer in tariffs" — calling them "beautiful" — and said the United States is subsidizing Canada and Mexico.

"If we're going to subsidize them, let them become a state," the president-elect said. "We're subsidizing Mexico, and we're subsidizing Canada, and we're subsidizing many countries all over the world. And all I want to do is have a level, fast, but fair playing field."

Late last month, Prime Minister Justin Trudeau of Canada traveled to Mar-a-Lago to dine with Trump after his tariff threats. Trudeau later said he had an "excellent conversation" with the president-elect.

Mexican President Claudia Sheinbaum also described her recent conversation with Trump as "excellent," stating that the two discussed her country's plans for migration.

The economy was a top issue for voters in the November election, with Trump defeating Vice President Kamala Harris largely due to dissatisfaction with President Joe Biden's handling of inflation. Harris sought to define her economic plan — zeroing in on price gouging and tackling housing affordability — but she could not reverse Trump's advantage on the issue.

Across the United States, Trump cut into traditional Democratic advantages with working-class voters and minority groups, with many siding with him at the ballot box over his focus on inflation.

China has immediately retaliated against the US following new export curbs that the Biden administration announced Monday, which restrict a wider range of Chinese businesses from accessing any foreign products that include even a single US-made chip.

On Tuesday, China's Ministry of Commerce punched back, announcing a ban that takes effect immediately on "exports of 'dual-use items' related to gallium, germanium, antimony, and superhard materials to the US," Reuters reported. Such "dual-use items" cover goods and technologies used for civil or military purposes, while the rare-earth metals are critical to tech manufacturing.

"In principle, the export of gallium, germanium, antimony, and superhard materials to the United States shall not be permitted," China's ministry said.

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• Donald Trump's latest tariff threat is to levy 100% duties on goods from the nine BRICS countries.
• He framed the threat as a bargaining chip, warning BRICS against competing with the US dollar.
• The US imported billions of dollars of goods from BRICS in 2023, including apparel and electronics.

President-elect Donald Trump's latest trade threat on nine countries could affect key US imports, risking price increases if the tariffs are implemented.

In a Saturday post on Truth Social, Trump targeted the BRICS group, which comprises nine countries: Brazil, Russia, India, China, South Africa, Ethiopia, Egypt, Iran, and the United Arab Emirates. All have pushed to curb the global dominance of the US dollar. He wrote that he would impose a 100% tariff on those countries' goods unless they committed to not creating another currency that competes with the dollar.

"There is no chance that the BRICS will replace the U.S. Dollar in International Trade, and any Country that tries should wave goodbye to America," Trump wrote.

Business Insider looked at the top goods the US imports from BRICS nations, including medicine, apparel, and electronics. While Trump appears to be using the tariff threats as a negotiating tool and could choose not to implement them at the scale he's proposing, the top imports from the targeted countries could see prices increase even with smaller tariffs.

Census Bureau trade data showed that in 2023, the BRICS nations together accounted for about $578 billion in US imports. China was responsible for the lion's share of that trade, with about $427 billion.

In 2023, the US imported $66.7 billion in cellphones and other household goods from China, $37.4 billion in computers, and $32 billion in toys, games, and sporting goods.

The US imported $151 billion in goods from the remaining eight BRICS nations, including over $11 billion in pharmaceutical preparations, followed by nearly $9 billion in gem diamonds, $6.3 billion in crude oil, and $6.1 billion in cotton apparel and household goods. India accounted for much of the imports from BRICS nations other than China.

Trump is targeting this group because some BRICS leaders have previously suggested acting to reduce their countries' reliance on the US dollar. Last year, Brazilian President Luiz Inácio Lula da Silva proposed creating a common currency among the BRICS nations.

The tariff threat on BRICS came just days after Trump said he would impose a 25% tariff on imports from Mexico and Canada that would remain in effect "until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!" He also warned of a 10% tariff on imports from China on top of any additional tariffs put in place on the country.

Russia has already responded to Trump's tariff threat. The Kremlin spokesperson Dmitry Peskov told reporters on Monday that if the US used "economic force to compel countries to use the dollar," it would empower countries to shift to other currencies for international trade.

Some companies, including Walmart and Columbia Sportswear, have already said they are preparing to increase prices should Trump implement tariffs on key trading partners.

The Trump team did not immediately respond to a request for comment on the impact of Trump's tariff threats on prices. Trump has previously said tariffs will not hurt Americans, misleadingly calling them "a tax on another country" (tariffs imposed by the US are paid by US importers).

During Trump's first term, he threatened tariffs against Mexico as a response to illegal immigration over the southern US border but later withdrew the plan. Sen. Bill Hagerty told NBC News on Sunday that trade had long been used as a "strategic tool," and he said he supported Trump using tariffs as leverage to achieve his priorities.

"We need to take a very hard look at countries that don't have our best interests at heart, countries that are allowing our borders to be violated," Hagerty said, "and use those tariffs as a tool to achieve our ends."

• Trump on Saturday floated "100% tariffs" on the BRICS group of emerging markets.
• Trump is pushing back on efforts to dethrone the US dollar as the primary global reserve currency.
• Trump's remarks come as the BRIC nations seek to flex their economic strength on the global stage.

President-elect Donald Trump on Saturday lashed out at the BRICS group of emerging market countries, threatening to impose 100% tariffs if they try to "move away" from the US dollar.

BRICS comprises nine countries — Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the United Arab Emirates — which are aiming to flex their economic power in a world where the US dollar continues to reign supreme as the leading global reserve currency.

Amid Russia's push for BRIC nations to curb the international dominance of the US dollar, Trump took to his Truth Social platform to decry such a move.

"The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER," he wrote. "We require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy."

The president-elect continued: "They can go find another 'sucker!' There is no chance that the BRICS will replace the U.S. Dollar in International Trade, and any Country that tries should wave goodbye to America."

During an October summit of the BRICS nations, Russian President Vladimir Putin accused the United States of "weaponizing" the dollar.

"It's not us who refuse to use the dollar," he said at the time, according to The Associated Press. "But if they don't let us work, what can we do? We are forced to search for alternatives."

Trump's latest remarks came just days after he threatened 25% tariffs on imports from Canada, China, and Mexico, the top three trading partners of the United States. Trump pressed the three countries on the flow of drugs and illegal migrants coming into the United States.

Justin Trudeau, Canada's prime minister, spoke with Trump earlier this week following the president-elect's pledge to target his country — and touted the long-standing relationship between the two countries. Trudeau later reiterated that tariffs would hurt both Canadian and American consumers.

On Friday, the prime minister traveled to Trump's Mar-a-Lago estate in Florida, where he said he had an "excellent conversation" with the president-elect.

Trudeau's office said in a statement that the prime minister and Trump "shared a productive wide-ranging discussion."

"As Canada's closest friend and ally, the United States is our key partner, and we are committed to working together in the interests of Canadians and Americans," the statement continued.

Mexican President Claudia Sheinbaum, meanwhile, also spoke with Trump on Thursday, saying afterward that "there will not be a potential tariff war" between Mexico and the United States.

• Trump vowed to impose tariffs on Canada and Mexico on his first day in office.
• Canada's prime minister Justin Trudeau warned tariffs will harm both Canadian and American consumers and industries.
• Trudeau said he and Trump will "work together as we previously did."

Canadian Prime Minister Justin Trudeau responded to President-elect Donald Trump's Monday vow to impose tariffs on Canada and Mexico on day one in office.

Trudeau, who's been Canada's prime minister since 2015, told reporters in Prince Edward Island, Canada, that Trump's expected action will have consequences not just on Canadians but also on American consumers, according to the Associated Press.

"Our responsibility is to point out that he would not just be harming Canadians, who work so well with the United States, but he would actually be raising prices for Americans citizens as well and hurting American industry and business," Trudeau said.

After a phone call earlier in the week to discuss the plans, Trudeau also made his way to West Palm Beach on Friday to meet with Trump, sources told Bloomberg.

Trump plans to impose 25% tariffs on goods coming from the northern and southern neighbors of the US. He said it's a direct response to the inflow of immigrants and narcotics coming into the country illegally from Canada and Mexico, he said.

Canada and the US worked together during Trump's first presidency when re-negotiating the North American Free Trade Agreement. Trump threatened to use tariffs then as well. His threat of tariffs on imports from Mexico led to an expansion of the Migrant Protection Protocols program across the US-Mexico border.

Trudeau noted that the two have been able to come to an agreement in the past.

"We can work together as we did previously," Trudeau said.

While Canada has yet to impose any tariffs of its own, a senior official told AP that it is looking into introducing retaliatory tariffs on certain items from the US.

"We're going to work together to meet some of the concerns," Trudeau said. "But ultimately it is through lots of real constructive conversations with President Trump that I am going to have, that will keep us moving forward on the right track for all Canadians."

Mexico's President Claudia Sheinbaum Pardo has already said that her country would impose tariffs on the US if Trump goes through with his plan.

Sheinbaum said during a press conference this week that "one tariff will be followed by another, and so on, until we put joint ventures at risk."

As previously reported by Business Insider, Canada was the top export destination for 32 states in 2016. According to the Toronto Region Board of Trade, about 77% of Canada's exports go to the US.

• Donald Trump's proposed tariffs could raise car prices, impacting US and European automakers.
• Tariffs may cost carmakers 17% of annual earnings and lead to credit downgrades, per S&P Global.
• General Motors, Jaguar Land Rover, Stellantis, and Volvo could be hit the hardest.

President-elect Donald Trump's new tariff proposals could hit American and European carmakers hard — and could push prices up for your next car.

A Friday note by S&P Global estimates a 25% tariff on Canadian and Mexican imports, coupled with a 20% tariff on light vehicle imports from the EU and UK, could cost some carmakers 17% of their annual earnings — and as high as over 30% — before factoring in interest, taxes, depreciation, and amortization.

Higher tariffs could hit General Motors, Jaguar Land Rover, Stellantis, and Volvo hardest, S&P Global said. Meanwhile, BMW, Ford, Hyundai, and Mercedes-Benz may be less impacted.

"Donald Trump's re-election will likely intensify the headwinds the global auto industry will face in an already challenging 2025," the authors wrote.

These tariffs could push car prices higher and lead Americans to dig deeper into their wallets for another vehicle. Wells Fargo estimated Wednesday that tariffs could raise the price of cars made in the US by an average of $2,100. For vehicles fully produced in Canada or Mexico, prices in the US may increase between $8,000 and $10,000 higher, Wells Fargo estimated.

Kelley Blue Book data from October shows the average new vehicle transaction price in the US was over $48,600.

Trump announced on Monday that on his first day in office, he would sign an executive order that would put a 25% tariff on all goods from Canada and Mexico and would remain in effect until "drugs, in particular, fentanyl, and all illegal aliens stop this invasion of our country!"

The US relies heavily on its neighbors for its cars. Commerce Department data reveals that the US imports over 2.3 million cars annually from Mexico. Of all US trade over the first three quarters, Mexico accounts for nearly 16%, while Canada is 14.5%. Business Insider previously detailed the exact car brands and models that could be most heavily impacted.

Trump is also expected to cut the $7,500 tax credit for EV purchases included in President Joe Biden's Inflation Reduction Act, which would likely reduce EV sales.

Both Mexico's President Claudia Sheinbaum and Canada's Prime Minister Justin Trudeau have spoken against the tariff proposals.

Sheinbaum suggested Tuesday that Mexico may impose its own tariffs on the US, adding Mexico has been hurt by the smuggling of drugs and weapons from the US.

Trudeau on Friday said the tariffs would have negative impacts on both Canadians and Americans.

"Our responsibility is to point out that he would not just be harming Canadians, who work so well with the United States, but he would actually be raising prices for Americans citizens as well and hurting American industry and business," Trudeau said.

• President-elect Donald Trump has threatened to slap tariffs on goods from Mexico, Canada, and China.
• Tariffs raise money but may also affect prices and employment, and they can lead to trade wars.
• Here's a guide to tariffs, including who pays them, how they work, and how they affect the economy.

Tariffs are back in the spotlight after President-elect Donald Trump pledged to impose 25% tariffs on goods from Mexico and Canada and an additional 10% duty on goods from China, unless those countries stop the flow of illegal immigration and narcotics into the US.

Trump's tariff threat could be a negotiating ploy to win better terms with America's three biggest trading partners. But if the tariffs are imposed, they could affect prices, employment, and the broader US economy — especially given the risk that China, Canada, and Mexico may retaliate with tariffs, triggering a trade war.

Here's what you should know about tariffs and why they matter.

What are tariffs?

A tariff is effectively a government tax specifically levied on foreign goods imported into a country.

Tariffs date back more than 200 years and were historically used by authorities to raise money. The US government collected most of its revenue from tariffs before introducing an income tax in the early 1900s.

Authorities now use tariffs primarily to protect domestic industries from foreign competition and punish trading partners for bad behavior.

There are four types of tariffs:

• An ad valorem tariff is calculated based on the value of the good. If an imported product is worth $10 and the tariff is 10%, the importer has to pay $1.
• A specific tariff is imposed on a per-unit basis, so the value of the item doesn't matter. An importer might have to pay $1 for every pound of cocoa beans it brings into the country, whether it brings in 10 bags or 1,000.
• A compound tariff combines elements of ad valorem and specific tariffs. The tariff on an imported item could be $1 per pound or 5% of its value, depending on which generates more revenue.
• A mixed tariff applies both an ad valorem and a specific tariff, meaning an importer might have to pay $5 a pound and 10% of its value as well.

Who pays tariffs? How do they work?

The news that Trump threatened Canada with tariffs, along with Mexico and China, has made it important to understand who pays tariffs and how they work.

In the US, the simple answer is that the person or business importing the tariffed product into the US pays the tariff, and the money is paid to the US Treasury.

For example, if General Motors imports parts from its factories in Mexico and assembles its cars in the US, it would have to pay tariffs to bring in those parts.

Customs and Border Protection agents collect tariffs at 328 ports of entry, including docks, airports, and border crossings.

How do tariffs affect prices and the economy?

Tariffs raise costs for importers, and to protect their profit margins, importers typically pass on those costs by charging higher prices to their domestic customers — whether they're companies or consumers.

Those price hikes can benefit domestic producers because the hikes make their goods relatively cheaper to bring to market than imported alternatives. For example, they might make it easier for US apparel manufacturers to compete with Chinese fast-fashion companies such as Shein and Temu.

Tariffs can also spur foreign producers to drop their prices to try to keep their products competitive, hurting their domestic industry and their country's economy, and partly offsetting the upward pressure on prices from tariffs.

The countries involved may also trade lower volumes of the product if both supply and demand fall in response to the tariffs.

A 2019 research paper on the initial impact of Trump's first-term tariffs found they fully passed through into the domestic prices of imported goods — and hurt consumer choice by reducing the availability of imported varieties.

Tariffs are frequently pitched as a tool to protect domestic jobs. A National Bureau of Economic Research working paper published in January found that the 2018-2019 trade war did not affect employment in newly protected sectors. The study also found that retaliatory tariffs from other countries contributed to job losses in domestic sectors such as agriculture and were only partly mitigated by federal subsidies.

Advantages of tariffs can include stronger domestic industries, increased government revenue, and pressure on other countries to stop unfair trading practices and help address issues such as illegal immigration and the drug trade.

Disadvantages can include tariffs' effects on consumers in terms of higher prices and reduced choice, plus the risk of retaliatory tariffs that could lead to employment losses in some industries and a full-blown trade war.

Moreover, a study published in The Economic Journal in 2021 found that retaliatory tariffs "disproportionately targeted more Republican areas," suggesting they were aimed at Trump's base to try to maximize their political power.

How Trump's tariff plan would work

Trump is no stranger to using tariffs. He called himself "Tariff Man" during his first term for imposing tariffs on products such as steel and aluminum plus a wide range of Chinese goods.

He replaced the North American Free Trade Agreement with the United States-Mexico-Canada Agreement in his first term, allowing most goods to continue freely passing between those countries.

That would change if Trump goes ahead with sweeping tariffs on Mexican and Canadian goods. Products passing into the US from its northern and southern borders would be subject to duties, and the money collected would flow to the US Treasury.

A key question is whether the tariffs would result in higher inflation. Inflation, or the annualized pace of price increases, hit a 40-year high of more than 9% in 2022, spurring the Federal Reserve to raise interest rates from nearly zero to above 5% in less than 18 months.

Inflation has dropped below 3% in recent months, freeing the Fed to begin cutting rates. The question is whether Trump's tariffs would cause price growth to accelerate again and delay further rate cuts — especially as people's deep concerns about higher living costs was a key reason they reelected him.

• On Monday, Donald Trump threatened more tariffs on China, blaming Beijing for fentanyl.
• China criticized Trump's tariff threats, calling them ineffective and unjustified.
• Global markets have reacted cautiously, with companies adjusting strategies amid higher trade tensions.

Post-election, Donald Trump is amplifying his threats to slap higher tariffs on imports into the US — and China is unsettled.

On Monday, the president-elect took aim at Canada, Mexico, and China on his Truth Social platform, saying he was planning sweeping tariffs on imports from the three countries.

In particular, Trump doubled down on China, saying he'd sign an executive order on his first day in office to impose an additional 10% tariff on imports from China.

The tariffs, Trump said, are because China is to blame for "the massive amounts of drugs, in particular Fentanyl, being sent into the United States."

Beijing hits back

China has already been the target of Trump's tariff threats in his campaign trail. The presidential-elect previously said he planned to impose 60% tariffs on Chinese goods, so his Monday post against the East Asian nation elicited a familiar response.

"China's position against unilateral tariff increases is consistent," He Yadong, a spokesperson for China's commerce ministry, said at a scheduled news briefing on Thursday. "Imposing arbitrary tariffs on trading partners will not solve America's own problems."

China's foreign ministry did not address Trump's tariff threat, but Beijing took major issue with Trump's comments that it isn't doing enough to stop the flow of drugs to the US.

"China is one of the world's toughest countries on counternarcotics both in terms of policy and its implementation," China's foreign affairs ministry said in a Thursday statement.

China's state media rallied around Beijing's official position.

"The excuse the president-elect has given to justify his threat of additional tariffs on imports from China is farfetched," wrote China Daily in a Tuesday editorial.

Markets are muted as investors wait and see

Global markets were jolted following Trump's post on Truth Social on Monday, but the effects have been felt mostly in foreign exchange. The Chinese yuan — alongside the Canadian dollar and the Mexican peso — lost ground against the greenback.

China's equities markets came under some pressure on Tuesday following Trump's post. But they have largely recovered as investors take a wait-and-see stance while assessing if Trump's comments were simply bluster that he's using to extract concessions.

"The equity market reaction has so far been very benign, we would argue likely on the back of the transactional interpretation," George Saravelos, the global cohead of foreign-exchange research at Deutsche Bank, wrote on Tuesday.

US and Chinese companies are on edge

The business world isn't so relaxed.

Some US companies are already thinking ahead, front-loading imports to the US to avoid higher tariffs, economists from Goldman Sachs wrote in a Tuesday analysis of earnings calls and media reports.

The CEO of Shenzhen Lingke Technology, a Chinese lighting manufacturing that produces in several countries including China and Thailand, told Nikkei Asia on Wednesday that US importers have placed larger-than-usual orders since Trump's election victory.

"The thinking is that American clients want to lock in as many profits as possible before a new round of tariffs kick in," Wu Zhiqiang, the company's CEO, told the media outlet.

To be sure, global firms and Chinese manufacturers have already been diversifying their operations to manage concentration risks following Trump's first term and the COVID-19 pandemic.

Larger companies, like Taiwan's Foxconn — a key supplier to Apple — have moved some production work to other emerging countries like India and Vietnam, so they may have some breathing space.

"Clients may decide to shift production locations, but looking at Foxconn's global footprint, we are ahead. As a result, the impact on us is likely smaller compared to our competitors," Young Liu, the chairman of Foxconn, told reporters in Taipei on Wednesday.

However, some smaller companies reliant on Chinese manufacturing and plants in China are uncertain about the future of their businesses, Al Jazeera reported in early November.

It doesn't help that China's domestic consumption and overall economy have been struggling to recover following the pandemic.

Against the backdrop of economic gloom and a potential escalation of trade tensions with the world's top economy, China's homegrown firms are expanding overseas, particularly in emerging markets like Southeast Asia and Africa, and in China's Belt and Road partner countries.

Macquarie analysts wrote on Monday that they expect a wave of Chinese investment into Southeast Asia, focused on consumer goods, logistics, and technology.

• President Joe Biden said that he hopes Donald Trump "rethinks" imposing tariffs on Mexico and Canada.
• Trump has said he may impose a 25% tariff on the two allies' imports after he retakes office.
• The president-elect has long had protectionist trade views.

President Joe Biden on Thursday expressed hope that President-elect Donald Trump would back down on his plan to impose tariffs on two of the US' closest allies.

"I hope he rethinks it, I think it is a counterproductive thing to do," Biden told reporters on Thanksgiving.

Days before the holiday, Trump pledged to enact a 25% tariff on all Mexican and Canadian imports until the two countries do more to address illegal drugs and immigration. He said the tariffs would be among his first actions upon taking office, reopening the door to a national security law that lets the president impose tariffs with few limitations.

Trump's vow threatens to roil relations between the US and its two neighbors and may call into question the USMCA, a rewriting of the North American Free Trade Agreement that stands as one of his biggest first-term achievements.

Biden and Vice President Kamala Harris teed off on Trump and his tariff threats throughout the 2024 campaign. Trump never retreated from more protectionist policy, a break from traditional GOP policy.

The US, Biden said, can't afford to alienate its two North American neighbors.

"The last thing we need to do is screw up those relationships," the president said.

It remains to be seen what Trump will do. His first administration imposed various tariffs on US allies' imports, including on Mexican and Canadian steel and aluminum.

In May 2019, Trump threatened to impose a 5% tariff on all Mexican imports with the chance for additional escalation if the nation failed to do more to stop illegal immigration. His threat briefly roiled financial markets, but such tariffs never came to fruition.

Mexico is mostly moving to de-escalate.

Trump spoke with Mexican President Claudia Sheinbaum not long after he made the new tariff threat.

Both sides seem happy with the conversation.

"Just had a wonderful conversation with the new President of Mexico, Claudia Sheinbaum Pardo," Trump wrote on Truth Social on Wednesday. "She has agreed to stop Migration through Mexico, and into the United States, effectively closing our Southern Border."

Sheinbaum later said in a statement on X that she had not agreed to effectively close the border. She told reporters on Thursday that she was confident a trade war could be avoided.

"There will be no potential tariff war," Sheinbaum said, according to The Associated Press.

• SolidIntel CEO advises clients on derisking supply chains amid tariff concerns.
• China's dominance in rare earth minerals poses risks to tech supply chains.
• Friend-shoring and nearshoring are strategies to enhance national security and tech resilience.

Megan Reiss has been very busy since the election. The CEO and founder of SolidIntel, a D.C.-based supply chain advisory firm, has been fielding calls from current and prospective clients looking to understand what Trump's second term could mean for their manufacturing, supply, raw materials, foundry, and businesses across sectors.

SolidIntel's clients also want to know how to derisk their operations as talk of tariffs sends markets into a volatile turn.

"People concerned about tariffs are very interested in moving their supply chains out of China as quickly as possible because they see it as the potential for everything to get really expensive, really quickly," Reiss told Business Insider.

The rare earth minerals and raw materials underpinning the AI boom and its countless clusters of chips may soon be in the spotlight because of where they're produced. Though President-elect Trump's Monday post named Mexico and Canada, all eyes are on China.

"Our technology is dependent on these rare earth minerals. China has a lot of opportunity to turn off the spigot," Reiss said.

Friend shoring to allies

Friend shoring, or moving supply chain, manufacturing, and operations to non-adversarial countries to have continuity, is one step to derisking tech's supply chain.

The potential for export controls and sanctions are also top of mind for SolidIntel's rare earth mineral clients. These raw materials serve as the building blocks for wafters, and semiconductors that power advanced AI chips. The vast majority of these minerals are commercially mined in China or quarries owned by Chinese companies.

In 2023, the U.S. imported more than 95% of rare earth compounds and minerals from China, Malaysia, Estonia, and Japan, according to the U.S. Department of the Interior.

Nearshoring and friend-shoring manufacturing and vital supply chains away from China are also important for national security and could bolster a sovereign tech sector. The near-term investment is difficult but ultimately more beneficial in the long term.

Since 2023, SolidIntel, which uses generative AI and machine learning to identify supply chain risks, has helped companies track how bad actors end up in supply chains and connects companies with compliant suppliers.

"The more these supply chains are not hung over our head, and we make national security choices that are in the best interest of the U.S., the less afraid we are that an adversary is going to try to kill our commercial sector, that's a good thing," Reiss said.

There are closer to home alternatives that could become more viable depending on the incoming administration's policies, how relations with China play out, and if Trump makes good on his tariffs talk.

"My fear is not that we will not find alternative sources because there are a lot of rare earth minerals, and they're not just in the U.S.; they're in friendly and allied countries. I'm worried about us doing it fast enough. It can take a decade or more to bring a mine online, and it can't take that long in this case," Reiss said.

Create redundancy in manufacturing

To derisk the supply chain, create redundancy. In other words, reducing parts of supply chains that are dependent on one country is a way to cut down on risks and diversify manufacturers' options.

"If I were a manufacturer and I had a couple of chokepoints in my supply, say two of three, difficult-to-source parts that are only produced in a couple of countries, you would ideally want to have production lines in multiple countries," Reiss said.

Though streamlining production to fewer or one country can be cheaper and more efficient, it only works until something goes wrong she said.

Regulation of the supply chain may increase, but tech companies and their suppliers could find solutions in data. "Technology cannot do it unto itself, because you can only rely on the data you can get to understand the whole length of the supply chain. It's about open-sourced intelligence and closed data sets, " Reiss said.

"It's not just 'is this a foreign manufacturer, it's 'what are the foreign ownership control and influence risks in partnering with a company or in having a certain investor," Reiss said. "There's a lot more to it that people are just starting to build out their understanding of."

• Donald Trump said he'd put in place 25% tariffs on Mexican and Canadian imports upon taking office.
• This would push up prices for US-assembled cars by an average of $2,100, according to Wells Fargo.
• Mexico's president said her country would retaliate in kind to tariffs, impacting joint ventures.

President-elect Donald Trump's proposed tariffs on Mexico and Canada would drive up the price of cars assembled in the US by an average of $2,100, according to estimates made by analysts at Wells Fargo.

"Autos are stuck in the middle of Trump's geopolitics," the analysts said in a note on Wednesday, per Fortune.

On Monday, Trump said that he would sign an executive order on his first day back in office imposing a 25% tariff on all goods coming from Canada and Mexico.

He said the tariffs would "remain in effect until such time as Drugs, in particular, Fentanyl, and all Illegal Aliens stop this Invasion of our Country!"

However, the tariffs would have ramifications beyond just Mexico and Canada.

If enacted, the tariffs would have a strong impact on the US top three automakers — General Motors, Stellantis, and Ford Motor Company — due to their reliance on foreign parts sourcing and Mexican imports, Wells Fargo said.

About 76% of the vehicles manufactured in Mexico are exported to the US, making nearshoring a key part of the US automaking industry.

Wells Fargo's estimates came a day after Mexico's President Claudia Sheinbaum Pardo said her country would impose its own tariffs in response to any from the US.

During a press conference on Tuesday, Sheinbaum said that "one tariff will be followed by another, and so on, until we put joint ventures at risk."

She also pointed to General Motors, Stellantis, and Ford as Mexico's main exporters to the US and as businesses that tariffs could endanger.

Colin Lewis, emeritus professor of Latin American economic history at the London School of Economics, told BI that tariffs are part of Trump's strategy to "bring jobs back home."

However, he said doing so may be more difficult than Trump expects due to massive US investments in Mexico.

On Wednesday, Mexico's economic minister, Marcelo Ebrard, said tariffs would effectively double the taxes paid by US firms producing in Mexico, and lead to the loss of 400,000 jobs in the US.

Ebrard estimated the price of pickup trucks from the top three US car manufacturers — 88% of which are imported from Mexico — would rise by an average of $3,000, describing the move as a "shot in the foot."

The Wells Fargo analysts said that prices in the US from vehicles entirely produced in Canada and Mexico would increase by $8,000 to $10,000, potentially resulting in a big hit to the earnings of Detroit's big three automakers.

"All in, we see ~$5 billion to $9 billion in EBIT risk for the D3 before pricing or plant closures," they wrote.

• Nissan is facing a fight to turn around its ailing business after sales and profits plunged.
• Trump's proposed tariffs on Mexico could make that difficult.
• Nearly one in four Nissan vehicles were made in Mexico last month, the company said on Thursday.

Nissan has had a tough 2024, and proposed tariffs from the incoming Trump administration are yet another obstacle to its turnaround plans.

The Japanese automaker has slashed its workforce as sales and profits have plunged amid growing competition from Chinese rivals, and its latest production figures for October make for particularly difficult reading.

Figures released on Thursday showed that vehicle production has dropped dramatically in all of Nissan's major markets this year except Mexico, where it rose nearly 10% compared to 2023. Overall, global production was down 7.1% in the first 10 months of 2024 compared to the previous year.

Nearly one in four Nissan vehicles made globally last month were built in Mexico, meaning the Japanese manufacturer is highly exposed to the tariffs proposed by incoming US president Donald Trump.

The president-elect has said he would impose blanket import taxes of 25% on all goods entering the US from Mexico and Canada on his first day in office and floated the idea of imposing 200% tariffs on vehicles imported from Mexico on the campaign trail.

Experts previously told Business Insider that any tariffs on trade with Mexico would have a dire impact on the US auto industry and likely increase vehicle prices.

Nissan would be one of the automakers worst-hit by the tariffs. The company has four production sites in Mexico, where it makes models including the Sentra, Versa, and Kicks.

Nissan's global sales in October were down nearly 2.7% from the previous year. The carmaker recorded double-digit drops in both China and Europe but saw sales rise in the US for the first time in three months.

The looming threat of tariffs adds to Nissan's considerable list of problems.

The automaker announced earlier this month that it would cut 9,000 jobs and 20% of its manufacturing capacity. Profit for the quarter ending in September fell to around $210 million, down from $1.4 billion over the same period last year.

Nissan is reportedly searching for extra investors after European partner Renault sold some of its holdings. A senior official close to the company told The Financial Times that Nissan has "12 or 14 months to survive."

Japan's automakers face a reckoning

Along with rivals Honda and Toyota, Nissan has come under pressure from Chinese automakers. These companies are eating into Nissan's market share in China with affordable EVs and rapidly expanding into developing markets dominated by Japanese companies.

Toyota, Honda, and Nissan are also facing a reckoning over their handling of the transition to electric vehicles. The three automakers have prioritized hybrids over pure battery-electric vehicles, a strategy that has boosted sales in the US but left them lagging behind local rivals like BYD in China.

"At the end of the day, the hybrid strategy worked in Japan, worked in the US, and worked very well in Europe, but that's not the case in China," analyst Felipe Munoz previously told Business Insider.

Nissan did not immediately respond to a request for comment from Business Insider, sent outside normal working hours.

• People are sharing a tariffs-related clip from "Ferris Bueller's Day Off" amid Trump's threats.
• The scene highlights the impact of high tariffs on the US economy after the Great Depression.
• Mexico's president has vowed to retaliate against tariffs Trump imposes.

A scene from "Ferris Bueller's Day Off" is having a viral moment after President-elect Donald Trump announced new tariff plans.

In the 1986 coming-of-age movie, Bueller's teacher, played by a famously monotone Ben Stein, recounts the impact of high tariffs on the US economy after the Great Depression to a classroom of zoned-out students.

The scene got a boost online after Trump said on Truth Social on Monday that he planned "to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders."

The "Ferris Bueller" clip began going around about a week after the election, but it's recirculating as Trump doubles down on his promise of tariffs.

"This iconic scene with Ben Stein might be 37 years old but feels like essential viewing as we all argue about tariffs," a caption from NowThis Impact reads.

In the scene, Bueller's economics teacher explains the Smoot-Hawley Tariff Act, a Republican-backed law enacted in 1930 that raised tariffs on imported goods.

It was intended to help the US recover from the Great Depression. Instead, it caused countries to implement retaliatory tariffs and sunk the US economy deeper as both exports and imports decreased.

Nearly 100 years later, in response to Trump's announcement, Mexican President Claudia Sheinbaum Pardo vowed to retaliate against tariffs, putting "joint ventures at risk."

"I've never actually processed what was being said by the teacher in this scene until this moment," a comment under a post with the scene's audio said. Others said someone should show it to Trump before he's sworn in.

The clip has struck a chord among people on social media worried about the economy under the tariffs Trump has proposed. Economists have said that they would increase prices and inflation and that many companies would pass the costs on to consumers.

• Donald Trump said he'd put in place 25% tariffs on Mexican imports on his first day back in the White House.
• Mexico's president said her country would retaliate, which she said would impact joint ventures.
• In the first quarter of 2024, the US accounted for 82.7% of Mexico's exports.

Mexico's President Claudia Sheinbaum Pardo said her country would go after the US with tariffs of its own if President-elect Donald Trump pushed ahead with new tariffs on goods from the country, which would damage joint venture partnerships.

On Monday, Trump took to his Truth Social platform to announce that he would sign an executive order on his first day back in office to impose a 25% tariff on all goods from Mexico and Canada, and an additional 10% tariff on imports from China.

He said the tariffs would "remain in effect until such time as Drugs, in particular, Fentanyl, and all Illegal Aliens stop this Invasion of our Country!"

During a press conference on Tuesday, Sheinbaum said that "one tariff will be followed by another, and so on, until we put joint ventures at risk."

She pointed to General Motors, Stellantis, and Ford Motor Company as Mexico's main exporters to the US and as businesses that tariffs could endanger.

"Why tax them and put them at risk?" Sheinbaum said, adding that tariffs "would trigger inflation and job losses in the US and Mexico."

About 76% of the vehicles manufactured in Mexico are exported to the US.

On Tuesday, the Mexican peso hit its lowest level against the dollar since March 2022, dropping by more than 2% in one day.

Gabriela Siller, director of economic analysis at the financial group Banco Base, said Trump may have thrown the tariff threat out there in a similar offhand way he has in the past.

"But Mexico's response, that we're going to respond to you with tariffs, that will make Trump really impose them," she told the Associated Press.

Mexico is the world's largest exporter to the US, and its economy is heavily dependent on its northern neighbor.

In the first quarter of 2024, the US accounted for 82.7% of Mexico's exports, and trade between the two countries is expected to increase by 300% over the next 10 years.

As a result, Mexico's "ability to walk away from President-elect Trump's threats remains limited," Wendy Cutler, a vice president at the Asia Society Policy Institute and former US trade official, told AFP.

The past as a guide

During the first Trump presidency, the US imposed 25% tariffs on steel and 10% on aluminum imports from Mexico, before lifting them in 2019.

In 2019, the Trump administration also threatened to impose up to 25% tariffs on all goods coming from Mexico, saying that they would remain in place until Mexico "substantially" stopped the "illegal" inflow of migrants coming through its territory.

Mexico retaliated by imposing tariffs ranging from 7% to 25% on an estimated $3 billion of US goods, including steel, pork, fresh cheese, and apples.

Derek Scissors, a senior fellow at the American Enterprise Institute, a think tank, warned on Monday that targeting Mexico on top of China would "greatly increase" the inflationary risks.

While Trump promised to implement harsh tariffs throughout his presidential campaign, his first term suggests that the sweeping threats — which have reverberated throughout global markets and vulnerable sectors like the auto industry — might be a version of his long-favored "leverage," as BI previously reported.

Scott Bessent, Trump's pick for treasury secretary, has called tariffs a "negotiating tool."

Meanwhile, President Sheinbaum said that "dialogue is the best path to achieve understanding, peace, and prosperity for our two countries."

She added: "I hope our teams can meet soon."

• President-elect Donald Trump on Monday threatened to impose 25% tariffs on goods from Canada.
• In making his statement on Truth Social, Trump criticized Canada over immigration policy and drugs.
• Roughly 77% of Canada's exports go directly to the US, per the Toronto Region Board of Trade.

President-elect Donald Trump has made waves this week with his vow to impose new tariffs on imported goods from Canada, China, and Mexico, which also happen to be the United States' top trading partners.

Trump's hard-line stance against China — a country that conservatives consider to be a threat to the US's economic and national security interests — is not a surprise. Neither are his threats regarding Mexico, whose border with the US has created contentious and high-profile immigration concerns.

But where does Canada, the US's northern neighbor, fit into the equation alongside China and Mexico?

In short, Trump says he has the same concerns over immigration, fentanyl, and crime from the Canadian border as he does Mexico's.

While it's possible the tariff threats are part of Trump's negotiation strategy, there has been a sharp increase in apprehensions at the US-Canada border over the past year. From October 2023 through September 2024, US Border Patrol made 23,721 arrests at the US-Canada border, compared with the 10,021 arrests that were made in the preceding 12-month period, according to Customs and Border Patrol data. The New York Times and NPR reported that Indian nationals in Canada on temporary visas made up a large portion of the surge of illegal border crossings into the US.

Few things animate Trump more than immigration, one of his defining issues and one that he's zeroed in on since his first presidential run in 2016. The president-elect's firm stance on border security has earned him enduring loyalty from the party's base.

Justin Trudeau, Canada's prime minister, immediately addressed the concerns within his country, telling reporters on Tuesday that he had a "good" conversation with Trump following the president-elect's pledge to target his country.

"We talked about how the intense and effective connections between our two countries flow back and forth," Trudeau said. "We talked about some of the challenges that we can work on together."

Trump on Monday criticized both Canada and Mexico over the issue on his Truth Social platform.

"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," Trump wrote on Truth Social. "This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!"

If enacted, the ramifications of such tariffs could be enormous, as about 77% of Canada's exports go directly to the US, according to the Toronto Region Board of Trade.

And some trade experts have warned that if Trump actually imposes the tariffs, he'd be violating the US-Mexico-Canada Agreement, which was brokered during his first term in office to replace the North American Free Trade Agreement — the 1990s-era free-trade pact Trump had long railed against.

Jake Colvin, the president of the National Foreign Trade Council, said Trump's proposed tariffs would trigger a "clear violation of the USMCA," according to Roll Call.

"While we're all familiar with the President-elect's fondness for tariffs as a negotiating tool, it's particularly troubling that he's threatening to aim them at America's closest allies and trading partners on the very first day of his administration," he said.

Chrystia Freeland, the deputy prime minister of Canada, and Dominic LeBlanc, the country's public-safety minister, responded to Trump's remarks in a joint statement on Monday, touting the mutually beneficial alliance between the two countries.

"Canada and the United States have one of the strongest and closest relationships — particularly when it comes to trade and border security," the top officials wrote on X. "Canada places the highest priority on border security and the integrity of our shared border."

"In addition, the CBSA [Canada Border Services Agency] is continually strengthening its ability to detect opioids through enhanced inspections at ports of entry, detector dogs, and emerging technologies, preventing opioids from entering and leaving Canada," they added.

The officials then pledged to work with Trump's second-term administration in tackling the issues he raised.

Business Insider reached out to a representative of Trump for comment.