Welcome to the 245th edition of Trade War.
Trump announces 25% tariffs on Mexico and Canada and 10% on China, sparking retaliation. Taiwan semiconductors levies of up to 100% won’t bring chip manufacturing back to the US. And American consumers to face inflation from higher import costs and rising wages with new administration’s crackdown on migrants.
Revelations of China’s AI prowess unleash a wave of finger pointing in Washington. US officials begin investigating Nvidia’s role in supplying chips to DeepSeek via transshipment through Singapore. And a former Federal Reserve economist has been arrested for passing economic secrets to Beijing.
Chinese economy surprisingly weak with manufacturing slowing in January and a drop in industrial profits last year. And the IMF warns of “extensive and far-reaching adverse global ramifications” from China’s deceleration.
Notable/In depth
Research shows Chinese Communist Party members gain a wealth premium compared to non-members.
“If a North American trade war persists, it will qualify as one of the dumbest in history,” says the Wall Street Journal editorial board
Xi Jinping’s crackdown on entrepreneurs was more about ending “bad news” tech monopolies, argues Bloomberg Economic’s chief economist Tom Orlik
Mexico, Canada, and China plan tariff retaliation
As promised, U.S. President Trump signed executive orders Saturday imposing tariffs on Mexico, Canada, and China, a move certain to spark new trade wars.
The 25 percent tariffs on all goods from Mexico and Canada and ten percent tariffs on China, as well as ten percent tariffs on Canadian oil and gas, are to take effect Tuesday and will remain until the flow of migrants and fentanyl into the U.S. slows, Trump said.
Canada and Mexico both quickly threatened retaliatory tariffs, with Canadian prime minister Justin Trudeau announcing 25 percent levies on some $20 billion of U.S. goods starting Tuesday, and another $85 billion to follow in the coming weeks.
“We don’t want to be here,” Trudeau said of the tariffs. “We didn’t ask for this.”
Mexico will implement “tariff and non-tariff measures in defense of Mexico’s interests,” said President Claudia Sheinbaum, without specifying more.
China’s commerce ministry had a more subdued response, saying it would file a case against the U.S. at the World Trade Organization and take unspecified “corresponding countermeasures to firmly safeguard its rights and interests.”
“Products from Mexico, China and Canada accounted for more than 40 percent of all goods that come into the United States. The three countries provide cars, medicine, shoes, timber, electronics, steel and many other products to American consumers,” reports the New York Times.
“Canada has indicated it will tax Florida orange juice, Tennessee whiskey and Kentucky peanut butter. The decision to hit those products, at least initially, is strategic: They come from states with Republican senators and with voters who elected Mr. Trump in 2024.”
Wiping out over half America’s 2025 growth
“The tariffs . . . will wipe out more than half of America’s 2025 growth,” writes New York Times economics reporter Lydia DePillis, citing research by EY chief economist Gregory Daco.
A capacitor’s journey through North America
"Why are tariffs on Canada and Mexico different than (some) other tariffs? Consider this graph,” writes the Cato Institute’s Scott Lincicome in a post on X.
Taiwan chips gets 100% tariffs
Trump has announced plans to put tariffs as high as 100 percent on semiconductor chips from Taiwan and other countries in a bid to bring production back to the U.S., while attacking the bipartisan CHIPS Act as a waste of money.
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