Trump threatens steep tariffs on goods from EU and Mexico

BRUSSELS — President Donald Trump announced Saturday that he would place a 30% tariff on goods from the European Union and Mexico, upending months of careful negotiations and threatening a trade war with two of America’s biggest economic partners.

The tariffs, which Trump announced in letters posted to social media, would take effect Aug. 1, like those on many other trading partners.

But the letters to the leaders of Mexico and the EU were especially notable. Mexico is America’s largest source of imports, and the EU, a trading bloc of 27 nations, collectively makes up the world’s third-largest economy. Both governments have been in intense trade negotiations with the United States.

Trump had already imposed a 10% “base line” tariff on most countries, but EU policymakers were hoping to negotiate exceptions for important products. They were eager to end the uncertainty that Trump’s on-and-off trade announcements had unleashed on German carmakers, Italian wine exporters, Irish pharmaceutical companies and other industries that depend heavily on sales to the United States.

But things changed with Trump’s announcement Saturday of a flat 30% tariff, and a threat to make that rate even higher should the bloc retaliate.

The new tariff on Mexico was likely to replace a 25% tariff Trump imposed in April, and which Mexican officials have been trying to decrease through negotiations. In a statement on social media Saturday, Mexico’s economy minister, Marcelo Ebrard, said that a Mexican trade delegation to Washington had been warned Friday that a new tariff announcement was coming.

“We mentioned at the negotiating table that it was an unjust move and that we did not agree with it,” Ebrard wrote.

Trump has long viewed tariffs as a tool to revive American manufacturing, although most economists believe that the more likely effect of higher prices will be to dampen growth. Many countries were expecting that his inauguration would end an era of mostly free trade, but they have been caught off guard by the intensity and unpredictability of Trump’s approach. He has frequently threatened tariffs and then reversed or delayed them to leave space for negotiations.

Investors spooked by his first tariff announcements in the spring sparked a sell-off of stocks. But since then, the markets have recovered their losses and continued rising as the president has repeatedly backed off on some of the harshest tariffs and the overall economy has remained strong.

Lately, Trump has also been wielding tariffs as an instrument of foreign policy. He threatened Brazil with tariffs for, among other reasons, its prosecution of Trump’s ally, former President Jair Bolsonaro, over a plot to overturn the 2022 Brazilian election. And he has promised to use levies to punish Canada and Mexico for what he considers inadequate border policing.

In his letter addressed to Mexico’s president, Claudia Sheinbaum, Trump said, “Mexico has been helping me secure the border, BUT, what Mexico has done, is not enough.” He blamed Mexico for the American fentanyl crisis, saying cartels had flooded his country with the drug and that “Mexico still has not stopped the Cartels who are trying to turn all of North America into a Narco-Trafficking Playground.”

To avoid an earlier threat of tariffs this spring, Sheinbaum deployed 10,000 troops to the U.S.-Mexico border, building on recent efforts to curb migration by intercepting migrant caravans and busing migrants far from the border. Sheinbaum also announced a crackdown that has led to record fentanyl seizures, and agreed to extradite dozens of cartel operatives to the United States, breaking with Mexico’s previous resistance to extraditing the leaders.

One outstanding question Saturday was whether any Mexican products would be exempt from the new tariffs. The existing 25% tariff includes exemptions for goods that trade under the United States-Mexico-Canada Agreement, the trade pact Trump negotiated in his first term. The White House had said that USMCA exemptions would probably continue under new tariffs, though no final decisions had been made.

Those exemptions could make a big difference. Because of that USMCA exemption, about 87% of Mexican exports to the U.S. trade tariff-free, according to the Mexican government.

Ursula von der Leyen, the president of the EU’s executive branch, said in a statement Saturday that Trump’s latest tariffs “would disrupt essential trans-Atlantic supply chains, to the detriment of businesses, consumers and patients on both sides.”

She also threatened to hit back, though she did not make retaliation sound like a foregone conclusion, talking about the “proportionate countermeasures if required.”

The bloc had prepared a retaliatory package in response to earlier tariffs, but had paused them to create leeway for negotiation. That retaliation would apply to some 21 billion euros’ (nearly $25 billion) worth of imports from the United States. The tariffs are scheduled to kick in Tuesday unless EU officials suspend them.

Jacob Funk Kirkegaard, a senior fellow at economic think tank Bruegel in Brussels said he did not think that Trump’s warning against retaliation would have much effect on the EU’s appetite to hit back. He said the best Europe could hope for was for many of America’s global trading partners to retaliate, perhaps in a coordinated way, and Trump was pressured to strike a less extreme stance.

“They have consistently said they would defend themselves under the right circumstances,” he said. “Now those circumstances are here.”

After Trump announced tariffs on dozens of other countries in April, sending stock and bond markets into a tailspin, he paused the tariffs for 90 days, urging countries to strike trade deals with the United States. He gave them until July 8, an almost impossible deadline given the complexity of trade and sheer number of countries.

So far, the administration has announced only two preliminary deals, with Britain and Vietnam, and the status of the Vietnam deal is now in question.

Last week, Trump extended the deadline to Aug. 1, but he also started posting letters to his social media accounts informing countries of the high tariffs that would be charged on their exports if they did not make deals.

Besides the EU and Mexico, Japan, South Korea, Brazil and more than a dozen other nations have since been threatened with tariffs ranging from 20% to 50%.

On Thursday, Trump threatened to impose a 35% tariff on Canadian imports, upending negotiations between the countries that had Canada’s representatives hopeful that a trade deal could be reached in a matter of weeks.

His most aggressive moves have been against China, which at one point faced tariffs of 145% before he reduced them to 30%, with some products taxed at higher rates. China similarly raised and then lowered its rates on American exports.

Trump also has enacted separate tariffs on steel, aluminum and car imports.

His authority to impose tariffs without congressional authorization has been called into question by the courts. But even if the tariffs are overturned, Trump’s advisers have said they can pursue other methods to tax foreign products.

This article originally appeared in The New York Times.

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