Trade Wars: US Tariffs Spark Retaliation

Update: The Trump administration granted automakers a one-month exemption from tariffs on Mexican and Canadian imports March 5. President Trump suspended tariffs on all Mexican imports for one month March 6.

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Newly imposed U.S. tariffs on three of the country’s top trading partners have sparked immediate retaliatory measures, raising renewed uncertainty about inflation and long-term economic growth.

After a last-minute pause averted earlier sanctions last month, the Trump administration moved ahead March 4 with 25% tariffs on all Canadian and Mexican imports and another 10% levy on Chinese goods.

The White House also announced a 10% tariff on Canadian energy products, which could cost New England $165 million annually as the region draws up to 40% of its electricity from Canada.

The Trump administration is also planning to impose 25% tariffs on all steel and aluminum products March 12 and unspecified levies on all agricultural products April 2.

A broad cross-section of businesses—ranging from automakers to aerospace manufacturers to alcohol producers—warned the added costs will have wide-ranging implications for the U.S. economy.

“Tariffs will only raise prices and increase the economic pain being felt by everyday Americans across the country,” the U.S. Chamber of Commerce’s Neil Bradley warned.

“We urge reconsideration of this policy and a swift end to these tariffs.” 

Canada, China Respond

Canada responded immediately to the U.S. sanctions, with Canadian Prime Minister Justin Trudeau announcing 25% tariffs on more than $20 billion worth of U.S. imports.

Trudeau added that levies on an additional $86 billion worth of U.S. products will take effect in 21 days.

“They’ve chosen to launch a trade war that will first and foremost harm American families,” he said. “A fight with Canada will have no winners.”

Some estimates suggest just Tuesday's tariffs alone could cost the average U.S. household $830 a year — and that's before you factor in the cost of anticipated retaliatory tariffs from Canada, China and Mexico. https://t.co/r5OQ7mjprz pic.twitter.com/hu8iRkNPcC

— Axios (@axios) March 4, 2025

China also retaliated swiftly, levying tariffs on $21 billion worth of American agricultural and food products and placing export and investment curbs on 25 U.S. firms.

The 10% tariffs the White House placed this week on Chinese imports follows the 10% penalties levied in early February on goods from China.

China was also hit with sanctions last year by the Biden administration, which doubled duties on semiconductors to 50% and quadrupled electric vehicle tariffs to more than 100%.

Mexican government officials said retaliatory measures on U.S. goods will be announced March 9.

Trade Impact

Canada, Mexico, and China account for more than a third of the products brought into the U.S., supporting tens of millions of American jobs—including hundreds of thousands of Connecticut jobs.

The 25% tariffs on Canadian and Mexican goods will add an estimated $144 billion annually to the cost of manufacturing in the U.S. according to the National Association of Manufacturers.

Trade between the U.S. and Mexico hit $839.9 billion in 2024, including $334 million in U.S. exports.

The 25% tariffs on Canadian and Mexican goods will add an estimated $144 billion annually to U.S. manufacturing costs.

U.S. companies exported $349 billion in goods to Canada last year, with overall trade between the two countries increasing to $762.1 billion.

Trade between the three countries is regulated by the U.S.-Mexico-Canada Agreement, signed by President Donald Trump in 2018 during his first term in office and up for review in 2026.

U.S. companies shipped $143.54 billion in goods to China in 2024 and imported $438.95 billion in products from that country.

China imported $24.7 billion in U.S. farm products, 14% of the total U.S. $176 billion in agricultural exports. Mexico was the largest importer of U.S. farm goods, followed by Canada.

Connecticut Impact

Canada and Mexico are also Connecticut’s largest trading partners, with tariffs and retaliatory sanctions representing a particular threat to the state’s manufacturing sector.

Connecticut commodity sales to Canada increased $189 million to $2.3 billion in 2024, with aerospace components representing about 20% of all shipments.

Canada accounted for $5.74 billion of the $22.74 billion in goods the state imported in 2024.

Connecticut exports to Mexico rose $596 million last year to $1.67 billion, while Connecticut imported $3.6 billion in goods from that country.

China is Connecticut’s fourth leading export destination, with exports jumping $468 million to $1.46 billion last year.

Imports from China have declined $954 million (-41.5%) since the USCMA took effect in 2018, while Canadian imports increased $2.16 billion (60%) and Mexican imports grew $1.11 billion (44%).

Supply Chains Threatened

Transportation equipment, including aerospace components, represented the greatest share of Connecticut’s exports last year at $6.21 billion, up 15.2% from 2023.

Aerospace is also Connecticut’s leading manufacturing sector, with annual output exceeding $13.8 billion in goods—40% of all manufacturing production.

CBIA’s Chris DiPentima said the design of the USMCA, which replaced the 1994 North American Free Trade Agreement, meant manufacturing components cross borders multiple times before final product assembly.

“Trade sanctions will create enormous disruption and upheaval in those integrated supply chains.”

CBIA’s Chris DiPentima

“One-third of all U.S. imported manufacturing inputs come from Mexico and Canada,” he said.

“Those complex supply chains are essential for manufacturers in Connecticut, particularly in the aerospace and defense sectors.

“Unfortunately, trade sanctions will create enormous disruption and upheaval in those integrated supply chains, which have made Connecticut and U.S. manufacturing more competitive.”