A 30% tax on EU and Mexican imports will take effect on August 1, according to President Trump’s announcement on Saturday; this might lead to a great deal of disruption in U.S.-Mexico relations.
In social media-posted letters, Trump outlined the intended tariffs. These new tariffs are part of Trump’s announcement blitz targeting both allies and enemies. He has promised to use them as a cornerstone of his 2024 campaign, promising to restore American economic might after decades of what he calls economic theft.
Trump thanked Mexico in his letter to President Claudia Sheinbaum for her assistance in stopping the influx of fentanyl and illegal immigrants into the US. A “Narco-Trafficking Playground” is emerging in North America, he claimed, and the United States isn’t doing enough to stop it.
Adding, “What Mexico has done, while helping me secure the border, is not enough,” Trump criticized Mexico’s efforts.
To address the long-term, substantial, and persistent trade deficits caused by the European Union’s tariff and non-tariff policies and trade barriers, Trump said in his letter to the EU, “We have had years to discuss our Trading Relationship with The European Union, and we have concluded we must move away from these”. The nature of our connection has, regrettably, not been mutually beneficial.
These letters arrive as Trump has threatened, on and off, to punish nations for trade imbalances by imposing taxes on their goods. Trump levied tariffs on several nations in April, but he halted them for a period of 90 days to negotiate individual arrangements. Trump started mailing tariff letters to leaders this week, when the three-month grace period ended, but he has again delayed implementation for what he claims will be a few more weeks.
The tariffs, if implemented, may affect almost every sector of the world economy.
Mexican and European Union members react
When asked about the EU’s “commitment to dialogue, stability, and a constructive transatlantic partnership,” President Ursula von der Leyen remarked on all three.
“Concurrently, we will ensure that EU interests are protected by taking all essential actions, such as implementing reasonable countermeasures when needed,” von der Leyen stated.
Furthermore, von der Leyen emphasized that the European Union is still dedicated to finishing up discussions with the United States by August 1st. On Monday, trade ministers from the European Union will gather to review economic ties with China and the United States.
Trump has been warned of the possibility of fresh tariffs on Washington, and European leaders have joined von der Leyen in requesting additional time for discussions.
“Resolutely defending European interests is more important than ever before, especially in light of European unity,” stated French President Emmanuel Macron in a statement shared on X.
“It would make no sense to trigger a trade war between the two sides of the Atlantic,” stated the office of Italian Premier Giorgia Meloni.
“Trump is taking a pointless and very shortsighted approach,” stated Danish Foreign Minister Lars Løkke Rasmussen in an interview with television DR. U.S. consumers would bear the brunt of a worsening trade war, according to Swedish Prime Minister Ulf Kristersson, who made the warning in an interview with SVT.
Just as in his earlier letters, Trump has threatened to impose even higher duties if the European Union tries to impose taxes on the US.
During high-level conversations with U.S. State Department officials on Friday, the Mexican government was warned that the Trump letter was on its way. According to a Mexican government statement, the group expressed its disagreement with the decision and its perception of it as “unfair treatment” during the meeting with Trump officials.
During a public speech on Saturday, Sheinbaum, who has so far avoided criticizing Trump openly, showed some optimism that the United States and Mexico can achieve “better terms.”
“You need to keep your cool to face any problem,” Sheinbaum remarked, echoing what he had previously advised.
By implementing tariffs that are reciprocal, Trump is essentially destroying the regulations that control international commerce. The tariff rates that were established via the Uruguay round of complicated talks were followed for many years by the US and the majority of other countries. While each country has the freedom to determine its own tariff policies, the “most favored nation” principle ensures that no government may charge another more than it does to itself.
The 25% tariffs on Mexican goods that do not conform with the existing U.S.-Mexico-Canada free trade agreement might be replaced, if the Mexico tax goes into force, by them.
As the White House had previously stated, USMCA-compliant items will continue to be excluded from Mexico’s tariffs after August 1st, but Trump’s letter failed to mention this. Earlier this week, Trump threatened a 35% increase in tariffs in a letter he issued to Canada.
Increased tariffs were put on hold.
The 27-member European Union and 24 other nations have now been subject to tariff constraints imposed by Trump through Saturday’s letters.
Two trade agreements have been signed by Trump thus far: one with the UK and one with Vietnam. Even though the specifics of the agreement with China are still up in the air, Trump has already declared its general outline.
On Saturday, Britain’s Treasury Secretary Scott Bessent stated that the country “smartly” moved quickly.
“May this serve as an example to other nations – genuine, sincere discussions can yield substantial outcomes that traverse both parties, all the while addressing the disparities that afflict international trade,” Bessent stated in an X post.
The letters, according to Douglas Holtz-Eakin, a centrist right-winger and former director of the Congressional Budget Office, showed that meaningful trade discussions had not been going on for the last three months. He emphasized that countries were instead coordinating between themselves to lessen their impact on the American economy and Trump.
“They’re occupied with discussing the future, while we remain excluded,” Holtz-Eakin remarked.
There might be a huge
There may be far-reaching consequences for Europe if the tariffs go into force.
Eurostat, the European Union’s statistical office, estimates that commerce between the United States and the European Union was worth 1.7 trillion euros ($2 trillion) in 2024, or about 4.6 billion euros a day.
Medications, vehicles, planes, chemicals, medical equipment, wine, and spirits were among Europe’s most valuable exports to the United States.
President Lamberto Frescobaldi of the Union of Italian Wines warned that Trump’s action may result in “a virtual embargo” on Italian wine.
“The darkest chapter in relations between two historic Western allies” might be written with only one letter, according to Frescobaldi.
The 198 billion euro trade imbalance in products is evidence that the United States purchases more items from European companies than vice versa, and Trump has voiced his displeasure with this fact.
But American businesses make up for it in part by selling more cloud computing, travel reservations, legal, and financial services than their European counterparts.
Reduced to 50 billion euros ($59 billion)—less than 3% of total U.S.-EU trade—the trade gap between the two countries narrowed thanks to the U.S. services surplus.