Trump starts trade wars with China, Mexico, & Canada

by | Feb 3, 2025 | E-commerce News

President Donald Trump announced significant tariff measures affecting imports from Mexico, Canada, and China, with substantial implications for the e-commerce sector. Here's what's changing: 

  • Effective February 4, 2025, the US will implement a 25% tariff on goods from Canada and a 10% tariff on Chinese imports.
  • Canadian energy imports will see a lower duty of just 10%, which would include crude oil, refined products, and electricity.
  • Originally, it was planned that Mexico would also see a 25% tariff starting tomorrow until the country “cooperates with the US in the fight against drugs,” but today it was announced that Trump paused the tariffs for one month after Mexican President Claudia Sheinbaum agreed to immediately send 10,000 soldiers to her country’s border to prevent the trafficking of fentanyl and other drugs.
  • Trump conditioned the tariff on China on the country's full cooperation in the fight against fentanyl.
  • There will be no exceptions to the tariffs, which affect all categories of products. 
  • The “de minimis” loophole, which previously allowed packages valued under $800 to enter the US tariff-free, has been suspended for these countries (paused for Mexico).
  • Canada, Mexico, and China the largest US trading partners. In 2022, the US imported $536B in Chinese goods, $455B from Mexico, and $437B in Canadian products, according to data from the US Trade Representative.

How are these countries responding?

  • Canadian Prime Minister Justin Trudeau plans to impose a 25% tariff on $20B of US goods tomorrow, followed by another $85B of goods three weeks later. Targeted goods include American beer, wine and bourbon, fruits and juices, clothing, sports equipment, and household appliances.
  • Mexican President Claudia Sheinbaum initially said her country would retaliate with tariffs. Now, after the new agreement to send troops to the border was made, Trump said that he will have new negotiations with President Sheinbaum “as we attempt to achieve a ‘deal' between our two Countries.”
  • China’s commerce ministry said it would file a complaint with the World Trade Organization and take “corresponding countermeasures.”
  • The ministry also said, “Fentanyl is America's problem. The Chinese side has carried out extensive anti-narcotics cooperation with the United States and achieved remarkable results.”
  • China hasn’t yet announced retaliatory tariffs, and Josh Lipsky, senior director of the Atlantic Council's GeoEconomics Center and former adviser to the International Monetary Fund, says that Beijing may not have to go that route as it has a “trick up its sleeve” in the form of currency devaluation. Lipsky predicts that most of the increase can be absorbed through exchange rates.

Due to all the negativity surrounding the tariffs, the White House said today that it has noticed that while Mexico is “serious” about President Trump's executive order on tariffs, Canada has “misunderstood” it to be a trade war between the neighboring countries.

The president also said the tariffs against these countries might cause Americans some short-term pain, but “long term, the United States has been ripped off by virtually every country in the world.”

What are the industry impacts and implications for e-commerce?

  • Chinese e-commerce companies like PDD Holdings, JD.com, and Tencent, experienced significant stock declines following the tariff announcements. Conversely, US-based platforms like Etsy saw stock gains, as the new tariffs may reduce competition from low-cost overseas retailers.

  • The fashion and beauty sectors are preparing for increased costs due to the tariffs. Brands are exploring strategies like tariff engineering, AI-driven inventory optimization, and reevaluating supplier relationships to mitigate the impact. Smaller companies, lacking extensive domestic manufacturing options, may face greater challenges.

  • The suspension of the de minimis provision means that many low-cost items previously exempt from tariffs will now incur additional costs, likely leading to higher prices for consumers.
  • E-commerce companies may need to reassess their supply chains, potentially shifting sourcing to countries with more favorable trade terms to mitigate tariff impacts.
  • US-based e-commerce platforms could gain a competitive edge as foreign competitors face increased costs due to the new tariffs.

This story is still developing and updates will follow.

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