Trump Threatens 30% Tariffs on Mexico, European Union

On Saturday, US President Donald Trump threatened to impose a 30% tariff on imports from Mexico and the European Union, effective Aug. 1. This announcement followed weeks of unsuccessful negotiations with US trading partners to reach a comprehensive trade deal.

Last week, Trump sent letters to 25 trading partners, including Mexico, the European Union, Canada, Japan, and Brazil, proposing tariffs ranging from 20% to 50%, as well as a 50% tariff on copper imports. He clarified the 30% tariff rate would be “separate from all sectoral tariffs,” meaning existing levies like 50% on steel and aluminum and 25% on auto imports would remain in place.

Tariffs on Mexico

The letter to Mexico proposes a 30% tariff, which  is lower than Canada’s 35%, despite government data showing fentanyl seizures are significantly higher at the Mexican border compared to the Canadian border. In the letter, President Trump criticized Mexico’s efforts on border security, writing: “Mexico has been helping me secure the border, BUT, what Mexico has done, is not enough. Mexico still has not stopped the Cartels who are trying to turn all of North America into a Narco-Trafficking Playground.”

Mexico’s Ministry of Economy says it was informed of the US letter during a meeting with US officials, and calls the tariff threats unfair. “We mentioned at the roundtable that it was unfair treatment and that we did not agree,” says the ministry.

Mexican President Claudia Sheinbaum adds that Mexican diplomats are expected to continue working toward a resolution before Aug. 1, always respecting Mexico’s national sovereignty. “I have always said that in these cases, what you have to do is keep a cool head to face any problem. We are also clear on what we can work with the United States government on, and we are clear on what we cannot. And there is something that is never negotiable: the sovereignty of our country,” states Sheinbaum.

European Union

Trump’s letter to the European Union demanded that the region drop its own tariffs. “The European Union will allow complete, open Market Access to the United States, with no Tariff being charged to us, in an attempt to reduce the large Trade Deficit.”

European Commission President Ursula von der Leyen says that the 30% tariffs “would disrupt essential transatlantic supply chains, to the detriment of businesses, consumers, and patients on both sides of the Atlantic.” She adds that the European Union “will take all necessary steps to safeguard EU interests, including the adoption of proportionate countermeasures if required.”

Although initial efforts aimed to secure trade agreements as a unified bloc, Germany has advocated for a swift deal to safeguard its industrial interests, while France has urged caution against accepting a one-sided agreement favoring the United States.

Jacob Funk, Senior Fellow, Bruegel, warns that Trump’s tariff letter increases the risk of retaliatory actions by the European Union similar to the US-China trade conflict that unsettled financial markets. “United States and Chinese tariffs went up together and they came back down again. Not all the way down, but still down together,” says Funk.

Broader Context and Outlook

The Aug. 1 deadline gives targeted countries a window to negotiate agreements that could reduce or eliminate the threatened tariffs. While some investors and economists highlight President Trump’s history of backing down from tariff threats, the recent wave of letters signals a renewed aggressive trade stance reminiscent of April, when reciprocal tariffs were announced. Despite record-high stock markets and a resilient US economy, Trump shows no intention of easing his trade war. He had promised to use the 90-day delay announced in April to finalize numerous new trade deals, but so far has only secured framework agreements with the United Kingdom, China, and Vietnam.

Since returning to the White House, Trump’s tariff measures have generated tens of billions of dollars monthly in additional revenue for the US government. According to US Treasury data, customs duties revenue surpassed US$100 billion in the federal fiscal year through June.

Despite generating revenue, the tariffs have strained diplomatic relations with key allies, prompting them to diversify their security and economic partnerships. Japanese Prime Minister Shigeru Ishiba recently emphasized Japan’s need to reduce its reliance on the United States. Meanwhile, tariff disputes have led Canada and some partners in the European Union to reevaluate their security dependence on Washington, with some even exploring options to acquire non-US weapons systems.