Donald Trump claims this tariff gut-punch at his three largest trading partners is just a matter of common sense.

They in turn are imploring him to see reason, with Mexico and China calling for dialogue and cooperation.

Follow live updates: Trump ignites trade war

Canada’s prime minister Justin Trudeau said on Saturday night – as he announced a reciprocal 25% tariff on $106bn worth of American goods – that the last time he had spoken directly with the US president was at Mar-a-Lago before the inauguration.

Much good that visit did him.

President Trump is defying the wisdom of decades that free trade encourages growth and prosperity in an interconnected global economy.

He is intent on rebalancing trade deficits, bringing manufacturing home and encouraging foreign investors to set up shop in the US.

His justification for tariffs is that they will force Mexico, China and Canada to halt the influx of fentanyl, its precursor chemicals and illegal migrants into the US.

Mexico is already working hard on both measures.

One of the few areas of diplomatic engagement with China over recent years has been the resumption of cooperation on counter-narcotics.

And as the Canadian prime minister said yesterday, only 1% of illegal fentanyl or illegal immigration crosses into the US via that northern border, and Canada is taking additional measures to reduce that further.

It is surely just a pretext.

Perhaps most alarming to any believer in the sovereignty of nations is the thought that President Trump really means it when he says “Canada should become our cherished 51st state“.

He does not seem to be relenting on his threats against Greenland, after a testy conversation with Denmark’s prime minister where he refused to back down on his demands on the territory.

Read more:
Why has Trump targeted Mexico and Canada?
How Donald Trump’s tariffs could impact consumers

His secretary of state, Marco Rubio, is currently in Panama – where Trump has threatened to take the Panama Canal by force.

Break Canada’s economy and this expansionist US president may believe he can bend their will.

Canada has more than just a trade war on its hands.

President Donald Trump has again threatened Canada in the trade war, repeating that the neighbouring country should become “our cherished 51st state”.

The US leader said this weekend that he is imposing 25% tariffs on imports from Canada and Mexico.

The two countries then hit back with retaliatory tariffs, with their respective leaders announcing the move on Saturday night.

Speaking on his Truth Social platform on Sunday afternoon, Mr Trump said: “We pay hundreds of Billions of Dollars to SUBSIDIZE Canada. Why? There is no reason.

“We don’t need anything they have. We have unlimited Energy, should make our own Cars, and have more Lumber than we can ever use.”

He claimed that without the “massive subsidy” Canada “ceases to exist as a viable country”.

He added: “Therefore, Canada should become our Cherished 51st State. Much lower taxes, and far better military protection for the people of Canada – AND NO TARIFFS!”

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The Trump administration had said that the tariffs aimed to stop the spread and manufacturing of the opioid fentanyl, as well as pressuring America’s neighbours to limit illegal immigration to the US.

But it risks a trade war and higher prices for American consumers. Economists argue supply chains will be disrupted and businesses will suffer increased costs – leading to an overall rise in prices.

Both Mexico and Canada rely heavily on their imports and exports, which make up around 70% of their Gross Domestic Products (GDPs), putting them at even greater risk from the new tariffs.

In his Sunday posts on Truth Social, Mr Trump also took aim at the Wall Street Journal which he said was leading a “Tariff lobby”, after the newspaper ran an opinion piece titled “The Dumbest Trade War in History”.

Read more:
Why has Trump targeted Mexico and Canada?
How Donald Trump’s tariffs could impact consumers

Announcing the retaliatory tariffs on Saturday night, Canadian Prime Minister Justin Trudeau delivered a passionate message to American consumers.

“It will have real consequences for you, the American people,” he said, saying it would result in higher prices on groceries and other goods.

Mr Trudeau reminded Americans that Canadian troops fought alongside them in Afghanistan and helped them respond to domestic crises including the wildfires in California and Hurricane Katrina.

Canada’s ambassador said she hoped the tariffs would not come into effect on Tuesday, but said their government expects to stand firm.

“We’re not at all interested in escalating, but I think that there will be a very strong demand on our government to make sure that we stand up for the deal that we have struck with the United States,” Ambassador Kirsten Hillman told ABC News on Sunday.

Meanwhile in Mexico, President Claudia Sheinbaum said: “We categorically reject the White House’s slander that the Mexican government has alliances with criminal organisations, as well as any intention of meddling in our territory.”

“If the United States government and its agencies wanted to address the serious fentanyl consumption in their country, they could fight the sale of drugs on the streets of their major cities, which they don’t do and the laundering of money that this illegal activity generates that has done so much harm to its population.”

Donald Trump has long threatened increasing tariffs on goods from Mexico, Canada, and China.

The second-time president argues higher levies will help reduce illegal migration and the smuggling of fentanyl to the US.

On Saturday, the president confirmed that he would subject Mexican and Canadian goods to the full 25% tariff – and Chinese imports to 10%.

Although the Trump administration says the changes will boost domestic production, there will likely be wide-ranging negative consequences for the US consumer.

Economists argue supply chains will be disrupted and businesses will suffer increased costs – leading to an overall rise in prices.

Analysis:
Why has Trump targeted Mexico and Canada?

Both Mexico and Canada rely heavily on their imports and exports, which make up around 70% of their Gross Domestic Products (GDPs), putting them at even greater risk from the new tariffs.

China only relies on trade for 37% of its economy, having made a concerted effort to ramp up domestic production, making it relatively less vulnerable.

Here we look at where US consumers will feel the biggest impact.

Avocados – and other fruit and veg

The US imports between half and 60% of its fresh produce from Mexico – and 80% of its avocados, according to figures from the US Department of Agriculture.

Canada also supplies a lot of the US’s fruit and vegetables, which are mainly grown in greenhouses on the other side of the US border.

This means that increased tariffs will quickly be passed on to consumers in the form of higher prices.

The US still grows a considerable amount of its own produce, however, so the changes could boost domestic production.

But economists warn that overreliance on domestic goods will see those suppliers increase their prices too.

Petrol and oil prices

Oil and gas prices are likely to be impacted – as Canada provides around 60% of US crude oil imports and Mexico roughly 10%.

According to the US Energy Information Administration, the US received around 4.6 million barrels of oil a day from Canada last year – and 563,000 from Mexico.

Most US oil refineries are designed specifically to process Canadian products, which would make changing supply sources complex and costly.

There has been some speculation that Mr Trump may exempt oil from the new changes – but if he doesn’t, the US could see an increase in fuel prices of up to 50 cents (40p) a gallon, economists have predicted.

Cars and vehicle parts

The US car industry is a delicate mix of foreign and domestic manufacturers.

The supply chain is so complex, car parts and half-finished vehicles can sometimes cross the US-Mexico border several times before they are ready for the showroom.

If this continues, the parts would be taxed every time they move countries, which would lead to an even bigger increase in prices.

To mitigate this, General Motors has said it will try to rush through Mexican and Canadian exports – while brainstorming on how to relocate manufacturing to the US.

Electronic goods

When Donald Trump imposed a 50% tariff on imported washing machines during his first term in 2018, prices suffered for years afterwards.

China produces a lot of the world’s consumer electronics – and smartphones and computers specifically – so the 10% tariff could have a similar effect on those devices.

The Biden administration tried to legislate to promote domestic production of semiconductors (microchips needed for all smart devices) – but for now, the US is still heavily reliant on China for its personal electronics.

This will mean an increase in prices for consumers unless tech companies can relocate their operations away from Beijing.

Boost for the steel industry

The sector that could feel the most benefit from the Trump tariffs is the steel and aluminium industry.

It has long been lobbying the government to put tariffs on foreign suppliers – claiming they are dominating the market and leaving US factories without enough business and at risk of closure.

Steel imports increasing in price would promote domestic production – and possibly save some of the plants.

But when Mr Trump increased steel tariffs during his first term, prices also increased – which business leaders said forced them to pass on costs and left them struggling to complete construction projects on budget.

Overall inflation

An increase in the prices of all these goods would inevitably lead to widespread overall inflation.

According to analysis by Capital Economics, the Canadian and Mexican tariffs would put inflation above 3% – which is much higher than the Federal Reserve’s target of 2% – and the Chinese levies would see it rise even further.