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The US is Mexico’s largest export market including computers, cars and household appliances.
Trump also declared he would impose an “additional” 10 per cent tariff on imports from China because of its failure to stop fentanyl from entering the US. He has previously pledged to slap 60 per cent tariffs on Chinese imports.
Donald Trump’s tariff plan announcement has wiped billions from the Australian sharemarket.
“Representatives of China told me that they would institute their maximum penalty, that of death, for any drug dealers caught doing this but, unfortunately, they never followed through, and drugs are pouring into our country, mostly through Mexico, at levels never seen before,” he said.
“Until such time as they stop, we will be charging China an additional 10 per cent tariff, above any additional tariffs, on all of their many products coming into the United States of America.”
The Australian dollar lost half a cent immediately after Trump’s posts, but gradually recovered through afternoon trade. But the ASX200, which opened around record highs on Tuesday, lost almost half a per cent in value.
ANZ chief economist Richard Yetsenga says Donald Trump’s threats of a tariffs was a sign of Trump presidency 2.0.
Prominent Trump supporter Elon Musk, who has been appointed to co-head a new Department of Government Efficiency, said on his X account that the tariff threat would be “highly effective”, noting that the “price of fentanyl will rise sharply”.
ANZ chief economist Richard Yetsenga said as a small, open economy, Australia had much to lose from a tariff war that would drive up prices and disrupt the free flow of trade across the world.
Yetsenga said the comments, and approach taken by Trump, was “only the beginning” for what could be another four years of economic disruption.
“This is the United States increasing tariffs on its three largest trading partners. That represents a discrete change in global trade policy,” he said.
“He does take a transactional approach to many things, so this may be the first sense of what we will see under Trump 2.0.”
China’s ambassador to Australia, Xiao Qian, said US trade policy was a key part of the relationship between Australia and China.
“US policy on trade with China, with other countries as well will have an impact and that is an important element that we have to consider,” he told reporters.
But some analysts said Trump’s comments were a warning shot rather than a final position.
American economist Betsey Stevenson was one to doubt whether Trump would go through with the tariffs given their inflationary impact.
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“Trump will not do big tariffs, but he definitely will say that he did. Whatever policy passes will have loopholes big enough to push a container ship or a huge fresh vegetable truck from Mexico through,” she posted on X.
Billionaire hedge fund manager Bill Ackman, who endorsed Trump this year, said the tariffs were a threat to force action that benefited Americans.
“(President Trump) is going to use tariffs as a weapon to achieve economic and political outcomes which are in the best interest of America, fulfilling his America first policy,” Ackman posted to social media.