Tariff war: Who will win and who will lose? USA vs. China, Canada, and Mexico

As of March 4, new tariffs on goods from Canada, Mexico, and China have come into effect in the United States. Back in early February, President Donald Trump signed an executive order imposing 25% tariffs on imports from neighboring countries. Additionally, tariffs on Chinese goods were raised from 10% to 20%.

Trump explained his decision by stating that China has not taken "adequate steps" to combat synthetic opioids, including fentanyl. Economic sciences candidate Oleg Komolov believes that the tariffs against Canada and especially Mexico are primarily aimed at China. This is because, in response to the protectionist policies of the U.S., China has used Mexico for parallel imports. Over the past five to seven years, Mexican exports to the U.S. have sharply increased, with a significant portion of these products originating from China. Under these conditions, China finds itself more vulnerable and dependent, forcing it to look for new markets.

During the negotiations, Canada and Mexico secured several delays and trade preferences. Specifically, Mexico agreed to deploy 10,000 soldiers on the U.S. border to combat drug trafficking and illegal immigration. Canada, for its part, developed a program to strengthen border control, with a planned allocation of $1.3 billion for its implementation. However, these concessions did not save the countries from American tariff sanctions.

In response to Washington's actions, Canada announced the introduction of 25% tariffs on U.S. goods worth over $100 billion. There is also consideration of restricting the export of energy resources to the U.S., as Ottawa is the largest supplier of oil and electricity to several American states. Mexico is preparing retaliatory tariffs, the details of which will be revealed over the upcoming weekend. The country's president, Claudia Sheinbaum, stated that Mexico is ready for cooperation and coordination, but not submission.

Beijing has taken a firmer stance. China's Ministry of Commerce expressed "strong dissatisfaction and resolute protest" regarding Washington's actions. Chinese authorities stated that the imposition of tariffs contradicts the decisions of the World Trade Organization (WTO) and poses a threat to the global economy. In response, China has already introduced 15% tariffs on U.S. agricultural products and several other goods. According to the BBC, Beijing is deliberately targeting Trump's weak spot — the farmers who voted for him, who will find it harder to compete on the Chinese market with suppliers from other countries.

This experience is repeating in 2025, but under even stricter conditions. The U.S. has once again imposed large-scale tariff restrictions on the same countries as seven years ago, but this time the stakes are higher: Washington is not only trying to limit China’s economic influence but also intensifying pressure on its closest neighbors, forcing them to make political concessions.

This time, Canada and Mexico have been forced to not only impose retaliatory tariffs but also take measures that go beyond economic conflict. The deployment of Mexican troops on the U.S. border and Canada's multibillion-dollar investments to strengthen its borders indicate that the tariff war is transforming into a complex diplomatic and political conflict.

China, learning from the 2018 experience, is adopting a more aggressive stance. Whereas Beijing's response in the past was limited to symmetrical tariffs, this time it is deliberately targeting sectors of the economy that are critically important to U.S. politics. The imposition of tariffs on U.S. agricultural products, aimed at weakening the position of farmers — one of Trump's key electoral groups — demonstrates that China is prepared to conduct economic warfare at a strategic level.

History shows that such tariff wars harm not only the participants but also the global economy. While the consequences in 2018–2019 manifested in a decline in trade volume and increased costs for large industries, the effects in 2025 could be even more destructive. Given the global interconnectedness of supply chains, the new tariff restrictions could lead to higher prices, disruptions in supply chains, and a slowdown in economic growth not only in the U.S., China, Canada, and Mexico but worldwide.

The tariff war that ended in 2020, according to the IMF, resulted in a 0.8% decline in global GDP. Trust in international multilateral organizations was undermined: the World Trade Organization (WTO) failed to resolve the trade dispute, and the U.S. blocked the appointment of judges to its appellate body. As a result, protectionist elements intensified in global trade: U.S. restrictions on Huawei and TikTok provoked retaliatory measures from China, including a cybersecurity law and support for local tech giants. The EU and Japan also began adopting protectionist policies to shield their markets.

The agreement replacing NAFTA, the United States-Mexico-Canada Agreement (USMCA), has tightened rules of origin for goods, requiring, for example, that 75% of automotive parts be produced in the participating countries. In the tariff war of 2018–2020, there were no winners, and virtually all major economies worldwide were among the losers.

Since the new tariffs came into effect, stock markets in the U.S. have responded with declines: the S&P 500 index lost more than 3% in the first week, and other market indicators also show negative trends.

According to Brian Bethune, a professor of economics at Boston College, Trump's tariff policy could become the most significant economic shock for the U.S. since the Smoot-Hawley Tariff Act of 1930. Economists believe this law exacerbated the Great Depression by triggering retaliatory trade barriers and collapsing global trade. Bethune warns that the new tariffs will slow economic growth and accelerate inflation, which could lead to stagflation — a combination of high inflation and economic stagnation, similar to the situation in the U.S. during the 1970s and 1980s.

The problems will not be limited to the U.S. The rise in prices for agricultural goods could strike the economies of importing countries, including Russia. Additionally, tariff wars may lead to a fall in oil and gas prices, which would present a serious challenge for exporting countries. On March 4, the price of Brent crude oil dropped below $70 per barrel, indicating instability in commodity markets.

Thus, by imposing new tariffs, Donald Trump is returning to his previous economic policy, which was interrupted by the COVID-19 pandemic and the change of administration in the White House. Considering the experience of 2018–2020, it can be predicted that the economic confrontation will once again turn into a zero-sum game. In the short term, everyone will suffer, including countries that are not directly affected by the tariff restrictions.