Germany urges EU to prepare for Trump tariffs

Europe must prepare for US President-elect Donald Trump to impose hefty tariffs on its exports and stick together to combat any such measures, Germany's economy minister has said.

Robert Habeck's comments came after Mr Trump said that he intends to slap sweeping duties on goods from Mexico, Canada and China on his first day in office.

In a series of posts to his Truth Social account, Mr Trump vowed to hit some of the United States' largest trading partners with duties on all goods entering the country.

"On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% tariff on ALL products coming into the United States, and its ridiculous Open Borders," he wrote.

In another post, Mr Trump said he would also be slapping China with a 10% tariff, "above any additional Tariffs," on all of its products entering the United States in response to what he said was its failure to tackle fentanyl smuggling.

"We have to be prepared for the fact that something similar could also happen to Europe or Germany," Mr Habeck, who is also Germany's vice chancellor, told a business conference in Berlin.

On the campaign trail, Mr Trump threatened to hit goods from across the world with higher tariffs, rattling nerves in Europe as the United States is a major destination for the continent's exports.

The President-elect's announcement indicates that his threats should be taken seriously, Mr Habeck said.

"The EU must react to this in a united manner (and) speak together as Europe," he said, adding that the continent's leaders should seek dialogue before thinking about retaliatory measures.

"It must be made clear that in the end everyone loses" from tariffs, including the United States, said Mr Habeck.

He noted that by vowing to hit Canada and Mexico with tariffs, Mr Trump was targeting two countries with which the US had a free trade agreement.

"The rules according to which we have aligned our economic, industrial and foreign policies are becoming increasingly fragile or are not being adhered to," Mr Habeck said.

Mr Trump has in the past singled the EU out for criticism as it runs a sizeable trade surplus with the United States.

During his first term, the United States slapped tariffs on European steel and aluminium exports, prompting the EU to retaliate with levies on US goods.

Germany's export-driven economy would be particularly hard hit by new US duties, with the central bank recently warning they could knock 1% off growth.

Paschal Donohoe reacts to news of proposed tariffs

Fine Gael's Paschal Donohoe said tariffs proposed by US President elect Donald Trump were a "matter for him and his Treasury Secretary."

Mr Donohoe was reacting after Mr Trump threatened new levies on imports from Canada, Mexico and China to the US.

Mr Trump has previously threatened tariffs on goods from the EU to US which could affect Ireland.

Paschal Donohoe, who is currently Minister for Public Expenditure, said: "The very reason I have been making the case for years for running large budget surpluses, which we have, is to be in a position to deal with that moment if those tax revenues go down."

He said this was why Ireland ran a surplus of over €8.5bn last year so if there was a change in Ireland's tax revenues "we have a front line of defence".

He said competitiveness of Ireland tax model was always a concern to him.

US trade war with China

Mr Trump's first term in the White House was marked by an aggressive and protectionist trade agenda that also targeted China, Mexico and Canada, as well as Europe.

While in the White House, Mr Trump launched an all-out trade war with China, imposing significant tariffs on hundreds of billions of dollars of Chinese goods.

At the time he cited unfair trade practices, intellectual property theft, and the trade deficit as justifications. China responded with retaliatory tariffs on US products, particularly affecting US farmers.

The US, Mexico and Canada are tied to a three-decade-old free trade agreement, now called the USMCA, that was renegotiated under Mr Trump after he complained that the US businesses, especially carmakers, were losing out.

Canadian Prime Minister Justin Trudeau and President-elect Trump held a "productive" call late yesterday.

A senior government source said that the two leaders had a "productive and constructive conversation focused on trade and border security" and pledged "to stay in touch."

Canada said it was "essential" to US energy supplies, and insisted the relationship between the two North American countries was "balanced and mutually beneficial, particularly for American workers."

"We will of course continue to discuss these issues with the incoming administration," said the joint statement from Deputy Prime Minister Chrystia Freeland and Public Safety Minister Dominic LeBlanc.

"Mexico and Canada remain heavily dependent on the US market so their ability to walk away from President-elect Trump's threats remains limited," Wendy Cutler, vice president at the Asia Society Policy Institute, and former US trade official, said.

Mexican President Claudia Sheinbaum said that import tariffs proposed by Mr Trump will do nothing to stop US-bound undocumented migration or drug trafficking.

"President Trump, it is not with threats or tariffs that the migration phenomenon will be stopped, nor the consumption of drugs in the United States," she told reporters, reading a letter she will send to Mr Trump in which she proposes dialogue.

By citing the fentanyl crisis and illegal immigration, Mr Trump appeared to be using national security concerns to break that deal, something that is usually allowed under the rules set by the World Trade Organization or in trade deals.

However most countries, and the WTO, treat national security exceptions as something to be used sparingly, not as a routine tool of trade policy.

In 2018 Mr Trump cited national security justifications to impose tariffs on steel and aluminum imports that targeted close allies like Canada, Mexico, and the European Union.

This led to retaliatory measures from the trading partners.

China warns 'no one will win a trade war'

Following the posts by Mr Trump, China has warned that "no one will win a trade war".

"China believes that China-US economic and trade cooperation is mutually beneficial in nature," Liu Pengyu, a spokesman for China's embassy in the United States, said in an email to AFP.

The US has long accused China of complicity in the deadly fentanyl trade that has ravaged communities across the country.

Those claims were rebuffed by Mr Liu in his statement, detailing steps that China was taking to help curb the trade.

"All these prove that the idea of China knowingly allowing fentanyl precursors to flow into the United States runs completely counter to facts and reality," he said.

Asked whether China had reached out to Mr Trump's team for talks, foreign ministry spokeswoman Mao Ning said: "As a principle, we are open to maintaining dialogue and communication."

'Bet on China tariffs'

Many economists have warned that tariffs would hurt growth and push up inflation, since they are primarily paid by importers bringing the goods into the US, who often pass those costs on to consumers.

Those in Mr Trump's inner circle have insisted that the tariffs are a useful bargaining chip for the US to push its trading partners to agree to more favourable terms, and to bring back manufacturing jobs from overseas.

Mr Trump has said he will put his commerce secretary designate Howard Lutnick in charge of trade policy.

Mr Lutnick has expressed support for a tariff level of 60% on Chinese goods alongside a 10% tariff on all other imports.

William Reinsch, senior adviser at the Center for Strategic and International Studies, said that that move was classic Mr Trump - "threaten, and then negotiate."

"In terms of what might actually happen, I'd bet on some China tariffs going into effect. That's legally easier and politically more palatable," he said.

"On Canada and Mexico there was going to be a renegotiation of their trade deal (the USMCA) anyway in 2026," he added.

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Additional reporting by David Murphy