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Volkswagen export cars are seen at the port of Emden, Germany, beside a VW plant.
Trump hits global auto sector hard with new tariffs
On Wednesday, ahead of what Donald Trump is calling “Liberation Day,” when the administration plans to unveil a series of “reciprocal” tariffs, the president signed an executive order levying 25% tariffs on automobiles and auto parts made outside the United States. The tariffs will come into effect on April 2.
The new tariffs will be applied on top of existing duties on materials such as steel. For Canada and Mexico, which are party to a free trade deal with the US and whose auto manufacturing industries are intimately connected to their American partners, the tariff will only be applied to the non-US content of a vehicle or its parts. Economist Jim Stanfordpoints out, however, that this means every consumer car and truck in the US will be tariffed since no vehicle is uniquely and entirely made in America.
Trump says his goal is to permanently shift auto manufacturing to the US. But countries affected by the tariffs are pushing back. After the announcement, Canada, the European Union, Japan, China, the United Kingdom, and Germany decried the move. Japan says it’s “putting all options on the table” in response, and the German economy minister is promising “a firm response” from the EU.
In Canada, Prime Minister Mark Carney, who is on the campaign trail, called the tariffs a “direct attack” and said the country will defend its workers and industry, which accounts for over 600,000 direct and indirect domestic jobs. Carney canceled a Thursday campaign event to return to Ottawa to convene a meeting of his Cabinet Committee on Canada-US Relations. Earlier in the day, he promised that a reelected Liberal government would create a CA$2 billion fund to protect workers in the industry and to boost domestic manufacturing capacity, creating a “made-in-Canada” supply chain as the future of the continental auto industry remains in doubt.The economic waves of Trump 2.0: Insights from The Economist's Zanny Minton Beddoes
Listen: On the GZERO World Podcast with Ian Bremmer, we ask The Economist's editor-in-chief Zanny Minton Beddoes: Did Wall Street get President Trump wrong?
Candidate Trump promised to lower taxes and drastically reduce government regulation. This message resonated as much with Wall Street as it did with Main Street. After surviving, if not thriving, under President Trump's first term in office, the business community no longer feared Trump's unpredictability. They overlooked his fixation on tariffs and his promises of mass deportations.
However, the first months of Trump 2.0 have been a time of economic warfare and market volatility. President Trump slapped tariffs on America's largest trading partners and closest allies and began to make good on a promise to deport millions of illegal immigrants. So where is this all heading, and what does it mean for the rest of the world?
Canadian Prime Minister Mark Carney holds a press conference at Canada House, in London, Britain, on March 17, 2025.
Canadians to head to the polls
New Prime Minister Mark Carney is expected to call a snap election on Sunday, sending Canadians to the polls on April 28 or May 5. The campaign, taking place against a backdrop of provocations from Donald Trump, is expected to focus on who is best equipped to handle the US president, former central banker Carney or Conservative Leader Pierre Poilievre.
The Liberals are leading in the polls after an unprecedented 25-point surge since Trump was elected. In the tumultuous period since then, Trudeau was forced out, and Carney took his place, swiftly canceling the consumer carbon tax and thereby removing the two issues Conservatives had built their campaign around. But Poilievre is a veteran, Carney is a political rookie with shaky French, and the electorate is volatile, so the results are unpredictable.
Polling shows Carney — who presided over the Bank of Canada and the Bank of England during economic crises — has an advantage over Poilievre as the candidate best suited to respond to Trump’s threats to Canadian sovereignty, but Poilievre will challenge that. He seized, for instance, on a Fox News interview in which Trump said he would rather deal with a Liberal government. Poilievre is already delivering campaign-style announcements highlighting his party’s plans to aggressively exploit natural resources, and will argue that Carney will continue with Trudeau-era climate policies that constrained development.
Carney has the momentum, though, after a successful trip to Europe, and the Liberals are announcing high-profile candidates, including former Quebec finance minister Carlos Leitão and outgoing GZERO Publisher Evan Solomon.
Because of Trump’s rhetoric, Canadians are already intensely engaged, so the campaign ahead is likely to have a different dynamic than most, where part of the challenge is getting tuned-out voters to pay attention. The wildcard will be Trump, who is promising to bring in tariffs on April 2 that could send Canada into a recession as voters are trying to figure out who can best handle him.
Flags of Canada and China.
HARD NUMBERS: China executes Canadians, Tariffs slow economic growth, Canada buys Australian tech, Fed keeps rates steady, Egg seizures escalate while drug busts drop
4: The Canadian government has strongly condemned China’s use of the death penalty, following revelations the country executed four Canadian citizens for drug-related offenses, despite appeals for clemency. China carries out more executions than any other country and has a conviction rate of over 99%.
2.2: US President Donald Trump's tariff tiff with Canada is dampening economic growth on both sides of the border. Canada’s GDP was set to rise by 2% in 2025, and America’s by 2.4%. An OECD analysis has revised those figures to 0.7% and 2.2%, respectively, as a result of the trade war.
6 billion: Canadian Prime Minister Mark Carney announced a CA$6 billion purchase of an Over-the-Horizon Radar system from Australia to enhance Arctic early warning capabilities. Carney’s move both asserted Canada’s northern sovereignty and allowed Australia to find a buyer for its technology after DOGE cuts impacted possible US spending on the project.
4.5: The US Federal Reserve held overnight interest rates steady on Wednesday, in the target range of 4.25 to 4.5 %. But the Fed also signaled a willingness to cut borrowing costs by half a percentage point later this year, anticipating economic growth to slow to 1.7% and inflation to rise to 2.7%.
116: US Customs and Border Protection says it made 3,254 egg-related seizures in January and February 2025, a 116% increase compared to the same period one year ago. US egg prices have ballooned 59% since February 2024 because of the culling of flocks due to bird flu. In comparison, fentanyl seizures at the border dropped by 32% during the same period compared to the previous year.Air Canada and Westjet aircraft parked at Calgary International Airport, in Calgary, Alberta, Canada.
Cross-border travel down as rhetoric gets harsher
The increasingly intense rhetorical combat between Donald Trump and Canada is taking a growing toll on the American tourism industry, as Canadian snowbirds avoid Florida, day trippers do their shopping at home, and others decide to skip trips to the Big Apple.
In his defiant speech promising to stand up to Trump last month, Justin Trudeau said it was time “to choose Canada.” There are indications that Canadians listened, which is hitting US tour operators and exporters in the pocketbook, as planned.
Not everyone has changed their travel plans, of course, but the numbers are down, flights are getting canceled, and there are worrying signs of increased hostility south of the border, which could further depress cross-border trips.
A touring folk music duo was grilled about their loyalties during a traffic stop, a Canadian who appeared in an “American Pie” video was detained by ICE for 12 days, and the Trump administration has imposed new rules requiring some visitors to register.
Trump’s rhetoric — he called Canadians nasty on Fox News on Tuesday -– and a rising tide of Canadian “elbows up” nationalism — can be expected to reduce typically friendly cross-border interactions, which could harden feelings on both sides of the world’s longest undefended border.
People gather for the "Elbows up" rally on Parliament Hill in Ottawa, Ontario, Canada, on March 9, 2025.
China, Mexico, and Canada take different paths to tackle tariffs
On March 4, 2025, US President Donald Trumpincreased tariffs on Chinese imports from 10% to 20%. The same day, the US imposed a 25% tariff on imports from Canada and Mexico. Two days later, Trump announced that goods and services covered by the United States-Mexico-Canada Agreement, aka USMCA, would be exempt until April 2, when reciprocal tariffs are set to take effect against all countries around the globe. Canadian energy and potash remain tariffed at 10%, while its steel and aluminum are tariffed at 25%.
Faced with these realities, Mexico, China, and Canada are pursuing very different strategies. What’s working, what’s not, and what’s next?
Mexico has opted for a “respectful” approach prioritizing dialogue over reprisals. In January, President Claudia Sheinbaum launched “Plan Mexico” to address her country’s $105 billion trade imbalance with China by boosting domestic production and attracting investments. She also aggressively tackled drug cartels and migration, Trump’s two pet peeves at the border. In a phone call on March 5, Trump told her, “You’re tough,” and announced his intent to grant Mexico its USMCA reprieve until April 2.
China has taken decisive retaliatory actions – but also sees an opportunity. Vowing to fight “to the bitter end,” Beijing imposed additional tariffs ranging from 10% to 15% on specific American imports, notably soybeans, pork, beef, chicken, and cotton, which will hurt Trump’s Midwestern voters. But China will also leverage America’s April 2 tariffs to boost trade with other nations, potentially offsetting losses in the US market.
Canada has been the most aggressive, going “elbows up” – a hockey term signaling defiance. Ottawa imposed counter-tariffs that could imperil 3.7 million jobs in red US states, and Ontario Premier Doug Ford threatened to impose a surcharge on electricity exports (which he later withdrew). This week, newly appointed Prime Minister Mark Carney will travel to Europe to shore up trade with the UK and France, rather than engaging first with Washington.
Why the tough stance? For Canada, this isn’t just about tariffs. Trump’s continuous talk of making Canada the 51st US state has enraged Canadians, who are canceling US holidays and boycotting American products. It has also upended the next Canadian election, which Carney is expected to call within days, and which he could now win on the back of anti-Trump sentiment.Graphic Truth: The North American gun divide
Gun ownership rates have been rising in both the US and Canada, despite the two countries having drastically different firearms regulations. In the US, there are some federal protections, such as mandatory background checks for firearm purchases from licensed dealers, and restrictions on machine gun and suppressor ownership, as well as rules barring convicted felons and the mentally ill from owning guns. But the Second Amendment’s right to bear arms, coupled with lax gun laws in some states, and a cultural emphasis on personal protection, has enabled gun ownership to become widespread.
In Canada, however, guns are primarily viewed as tools for hunting or for sport, and ownership is subject to strict regulations, including certified coursework and background checks. Moreover, nearly 200 types of assault-style firearms are banned. As a result, the US far surpasses Canada in personal firearm ownership. There are 120 guns per 100 people in the US – yes, more than one per person – compared to 35 per 100 people in Canada.
But guns in the two countries are also deeply connected. Relaxed restrictions on buying firearms in many states along the US-Canada border have fueled a surge in illegal gun smuggling into Canada. From 2022-24, Canadian border security saw a 44% increase in firearms illegally entering from the US. The issue is under renewed scrutiny as the Trump administration imposes tariffs on Canada, pressuring it to curb fentanyl trafficking. Many Canadians argue that the illegal flow of US firearms poses an equally serious threat to public safety.
Taoiseach Micheal Martin visits President Donald Trump at the White House on March 12, 2025.
Trade war update: Canada and EU hit back at Trump
The tits and tats are getting bigger as the US’s various trade wars escalate.
Canada hits back. Ottawa on Tuesday announced a fresh 25% percent tariff on $20 billion worth of annual imports of US metals, computer monitors and servers, sports equipment, and other items. The move came just hours after Trump imposed a 25% duty on all US steel and aluminum imports.
Canada is the largest foreign steel supplier to the US, sending 99% of its exports to Uncle Sam. The White House has said its tariffs on Canada – and those set to come into effect on Mexico in April – are meant to force the two US neighbors to beef up border security.
The EU cocks the hammer too. In April, the Union will raise tariffs on nearly $30 billion in annual imports of US products, including beef, poultry, bourbon, soybeans, motorcycles, peanut butter, and jeans. That seemingly random list aims primarily at industries in GOP-controlled states.
The EU, which made the move in response to the Trump metals tariffs, said it was “open to compromise.” The $1.5 trillion US-EU trade relationship is the world’s largest.
What does Trump want from Europe? The US runs trade deficits with Europe, which Trump has called an “atrocity.” But European officials say they’ve struggled to learn more.
A White House memo in February highlighted EU restrictions on American shellfish and cars. And on Wednesday, Trump blasted Ireland’s low corporate tax rates, which have lured US firms, particularly in pharma, to register themselves in the country.
“I have great respect for Ireland,” Trump said at an Oval Office meeting Wednesday with Irish Prime Minister Micheál Martin, “but the United States shouldn’t have let it happen.”