Trump Trade War Begins

Tick, tack, tariff

The U.S. has escalated its trade dispute, raising tariffs to 25% on nearly all imports from Canada and Mexico while increasing duties on Chinese goods from 10% to 20%. Canadian energy products were partially exempt, facing a lower 10% rate.

The stakes are significant. Canada, Mexico, and China account for 42% of total U.S. imports, making them integral to American supply chains.

Markets reacted quickly— the Dow dropped 1.48%, and the S&P 500 saw its worst trading day of 2025, declining 1.76%. Yale’s Budget Lab estimates a prolonged trade conflict could shave hundreds of billions off U.S. GDP over the next decade.

Measured Retaliation

Neither Canada nor China has remained idle. Ottawa imposed phased 25% tariffs on $107 billion in U.S. goods, targeting politically visible consumer products like juice, peanut butter, and coffee. Beijing, opting for a calculated response, mirrored Washington’s initial 10% tariff hike with duties of 10–15% on U.S. coal, LNG, crude oil, and pickup trucks.

Now, it has adjusted its strategy, focusing on a politically sensitive sector: American agriculture. New tariffs of 10–15% on U.S. farm exports strike at an industry central to the White House’s electoral base.

Expanding the Trade Front

Agriculture remains the U.S.’s largest export sector to China, worth $33.7 billion in 2023. But Beijing has spent years diversifying its supply chain, increasing reliance on Brazilian suppliers to reduce exposure to U.S. farm goods. Now, it has introduced another tool: corporate restrictions.

In its latest move, China banned imports of genetic sequencers from U.S. medical equipment maker Illumina, minutes after Washington’s additional 10% tariffs on Chinese goods took effect.

The ban follows Illumina’s designation as an “unreliable entity” in February, reinforcing Beijing’s strategy of targeting high-tech industries linked to U.S. policy priorities. While China accounts for only 7% of Illumina’s sales, the decision signals a willingness to disrupt supply chains in sectors beyond traditional manufacturing and commodities.

See more about how geopolitics will impact the multi-billion dollar industry of precision medicine

China has also blacklisted 25 U.S. firms, restricting their access to dual-use technologies and citing their ties to Taiwan. So far, major American corporations have been spared, minimizing immediate economic fallout. But the blacklist remains a flexible instrument that can be expanded if tensions escalate.

Contact Pantheon Insights here if you’re a business or policymaker looking to understand the trajectory of these trends.