The threat of a North American trade war intensifies

The new US Administration is already shaking things up for its neighbors weeks before taking office. A set of conflicting declarations and threats by leaders signal a potential trade war in North America.

President-elect Trump vowed to impose a 25% tariff on imports from the US's closest allies, Canada and Mexico, while focusing on the countries' northern and southern borders.

Canada and Mexico have threatened to retaliate with similar tariffs on American products, as the three countries are expected to renegotiate their trade agreement.

Still, Canada went a step further: Ontario Premier Doug Ford, the leader of Canada's most populated province, told international media that comparing his country with Mexico was “the most insulting thing I’ve ever heard.”

For days, Mr. Ford rallied other local leaders to pressure Prime Minister Justin Trudeau to renegotiate a new trade deal with the US that excluded Mexico.

The Ontario Premier accused Mexico of importing "cheap" Chinese auto parts, "slapping Made in Mexico stickers on," and trading them with its North American partners.

Prime Minister Trudeau said his priority is the North American deal. Still, only if Mexico pushes for a more uncompromising commercial stand against China, the Spanish newspaper El País said.

According to the newspaper, Mexico's President Claudia Sheinbaum and Mr. Trudeau discussed China's concerns during the G-20 and agreed to prepare information on how the treaty benefits all three countries ahead of negotiations.

According to CBC, the only Chinese auto plant in Mexico, operated by Giant Motors, assembles JAC brand vehicles. However, there is no evidence that they export to the US or Canada.

Mr. Trudeau said he prefers a three-nation deal. Still, the Canadian government has not ruled out expelling Mexico. Canadian Deputy Prime Minister Chrystia Freeland also signaled concerns about China, AP News said.

Canada’s approach to the threat has been antagonizing Mexico, but also remaining the US how vital their commercial relations are. “The fact is, we need them, and they also need us,” Ms. Freeland said.

Canada is one of the most trade-dependent countries in the world, the AP said. Around 75% of its exports go to the US, so the country is also preparing to preserve that market ahead of USMCA negotiations.

USMCA replaced the previous deal, NAFTA, during President-elect Trump's first term. The deal will expire in 2026, and negotiations will come in 2025, an electoral year in Canada.

Mexico's strategy, on the other hand, is externalizing the threat to China. The Mexican government suggested that a trade war in North America would only benefit the Asian country.

Mexico is also preparing. After the G-20 meeting, the Mexican Finance Minister told the press that the country would announce a plan to reduce Chinese deals and encourage more North American production.

The country is also supporting Mr. Trump in stopping migrants from crossing to the US border, the President-elect said on social media after a phone call with Mexico’s Claudia Sheinbaum two days after announcing the tariffs.