EU, Mexico and Canada announce countermeasures to Trump tariffs

The EU updated its trade agreements with Mexico just days before the inauguration of U.S. President-elect Donald Trump, while Canada announced a retaliatory “Trump tax” against potential U.S. tariffs.

The EU revealed on Friday that it had reached an agreement with Mexico to deepen trade relations as a counter to Trump, who has consistently threatened U.S. trade partners, including the EU, Canada, Mexico, and China, with punitive tariffs up to 25%.

European Commission President Ursula von der Leyen heralded the agreement as a testament to the benefits of open, rules-based trade.

“This landmark deal demonstrates that trade can bolster prosperity, economic security, climate action, and sustainable development,” she stated.

Countering global protectionism

The agreement, which builds on eight years of negotiations, eliminates tariffs as high as 100% on key EU exports, such as cheese, poultry, pork, pasta, apples, jams, chocolate, and wine. It also enforces the protection of geographical indications for iconic EU products, such as Champagne, Parma ham and Rioja wine.

The deal includes legally binding commitments on labor rights, environmental protection, climate change, and responsible business practices. It also grants EU companies access to Mexican government contracts, leveling the playing field with local firms.

“This agreement will unlock new commercial opportunities for EU exporters, including farmers and agri-food businesses,” von der Leyen added.

Total trade between the EU and Mexico reached €82 billion ($84 billion) in 2023. With the new deal, EU exports to Mexico could increase by 75%, according to EU lawmakers.

EU officials lauded the agreement as a decisive response to rising global protectionism, particularly under Trump’s “America First” policies. Bernd Lange, chair of the EU Parliament’s trade committee, emphasized the importance of the deal, stating, “Despite tariff threats, the EU and Mexico reaffirm their commitment to open, fair and rules-based trade.”

Spanish EU lawmaker Borja Gimenez Larraz called the agreement a symbol of the EU’s strengthened global role as a defender of free trade.

‘Largest trade war’

Meanwhile, Canada has vowed to counter any U.S. tariff hikes with a robust “Trump tax.” Canadian Foreign Minister Mélanie Joly warned of a significant trade war should Trump follow through with his plans to impose a 25% tariff on Canadian imports.

“This would be the largest trade war between Canada and the U.S. in decades,” Joly said during a press conference in Washington.

She added Canada has prepared a range of retaliatory measures, including increased duties on American goods such as steel, ceramics, glassware and orange juice.

Outgoing Prime Minister Justin Trudeau criticized Trump’s tariff threats, highlighting their potential to jeopardize jobs, inflate costs for consumers, and disrupt the continent’s security.

Economic forecasts paint a grim picture if a trade war materializes. A scenario presented by Scotiabank predicts a more than 5% contraction in Canada’s gross domestic product (GDP), accompanied by rising unemployment and inflation.

As the global trade landscape braces for significant changes under Trump’s presidency, the EU and Canada are making strategic moves to safeguard their economic interests and counter-protectionist policies.