Hefty tariffs will harm all, US trade partners warn

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MEXICO CITY/DETROIT — Officials from Mexico, Canada and China, and major industry groups, referring to US President-elect Donald Trump's threat to impose hefty tariffs on goods, warned that it would harm the economies of all involved, cause inflation to spike and damage job markets.

Trump's announcement on Monday roiled markets on Tuesday. Mexico and Canada are intertwined in US auto production and energy output, thanks to decades of trade agreements between the North American neighbors.

Trump's plan to impose a 25 percent tariff on Canadian and Mexican imports on his first day in office does not exempt crude oil as industry executives had hoped, two sources familiar with the plan told Reuters on Tuesday.

Leaders and other top officials warned a trade war could erupt and economies could be damaged, and sought talks with Trump.

"One tariff will follow another in response and so on, until we put our common businesses at risk," Mexican President Claudia Sheinbaum said during a regular press conference. Sheinbaum said she planned to send a letter to Trump and seek a call with him to discuss the issue.

A Bank of Canada official said any move by Trump to deliver on the threat would reverberate on both sides of the US northern border.

"What happens in the US has a big impact on us, and something like this would clearly have an impact on both economies," Deputy Governor Rhys Mendes said at an event in Charlottetown, Prince Edward Island.

Tariffs are paid by companies that import goods and are often passed on to consumers, even though Trump frequently erroneously states that tariffs would be imposed on the foreign nations in question, he said.

"Such tariffs will, in the end, boomerang on the US in the form of higher inflation and rising interest rates," said Bernard Baumohl, chief global economist for the Economic Outlook Group.

If Trump follows through on the tariff plans, consumers may face higher prices for avocados, strawberries and other fresh produce, as well as meat, agricultural economists and industry executives said.

Mexico and Canada are, by far, the top two suppliers of farm products to the United States, with imports of agricultural goods valued at nearly $86 billion last year, according to US Department of Agriculture and US Customs data.

Agreement violation

The threatened levies would appear to violate the terms of the US-Mexico-Canada Agreement, or USMCA, on trade. Shares of US and European automakers dropped due to increased uncertainty.

"If implemented, this would spell disaster for the US auto industry and Detroit's Big Three manufacturers, all of whom import significant numbers of vehicles from Canada and Mexico, as well as Volkswagen and other European OEMs (original equipment manufacturers)," Bernstein analyst Daniel Roeska said in a note.

Ford and General Motors were among the automakers whose shares fell sharply.

Drilling and refining industry lobby groups also warned of a big impact, including higher import prices and low supplies of oil feed-stocks and products, as well as potential retaliation that could hurt consumers.

Meanwhile, Trump is turning to two officials with experience as he fills out his economic team. On Tuesday, Trump announced he has chosen international trade attorney Jamieson Greer to be his US trade representative and Kevin Hassett as director of the White House National Economic Council.

Agencies Via Xinhua