IFF Newsletter | Canada to Impose Tariffs on U.S.

TIME：2025-03-07

From the Editor

China has fixed its fiscal deficit target for this year at around 4 percent of gross domestic product, the highest level on record, as part of a “more proactive” fiscal policy aimed at stimulating economic growth.

The GDP growth target is 5%, and CPI target is 2%, according to the government work report delivered by Premier Li Qiang at the National People's Congress, the country’s parliament, which opened in Beijing on March 5.

US President Donald Trump said on March 3 that 25% taxes on imports from Mexico and Canada would start Tuesday, sparking renewed fears of a North American trade war that already showed signs of pushing up inflation and hindering growth.

Trump has said the tariffs are to force the two U.S. neighbors to step up their fight against fentanyl trafficking and stop illegal immigration. But Trump has also indicated that he wants to eliminate the Americas’ trade imbalances as well and push more factories to relocate in the United States.

Newsletter

China News

China Sets 4% Fiscal Deficit Target, Government Work Report

China's Government Work Report, released on March 5 at the opening of the National People's Congress, sets the fiscal deficit target at around 4% of GDP , GDP growth target at around 5% and consumer inflation target at 2% for 2025.

The report outlines plans to develop emerging sectors including embodied AI, 6G, bio-manufacturing, and quantum technology. It also emphasizes the development of smart terminals such as intelligent connected new energy vehicles, AI-powered smartphones, and smart manufacturing equipment.

The government will expand pilot projects for service sector opening-up in internet, cultural, telecommunications, healthcare, and education sectors.

For the property market, the report introduces city-specific policies to ease purchase restrictions and promotes urban village renovation to stimulate housing demand.

On monetary policy, China will adopt a "moderately loose" stance, with plans to cut bank reserve requirement ratios and interest rates when appropriate. The policy aims to maintain ample market liquidity while aligning total social financing and money supply growth with economic targets.

China Slaps Extra Tariffs of up to 15% on Imports of Major US Farm Exports and Adds Trade Limits

China responded to new U.S. tariffs by announcing on March 4 it will impose additional tariffs of up to 15% on imports of key U.S. farm products, including chicken, pork, soy and beef, and expanded controls on doing business with key U.S. companies.

The tariffs announced by the Commerce Ministry will take effect from March 10, though goods already in transit will be exempt until April 12. They follow U.S. President Donald Trump’s order to raise tariffs on imports of Chinese products to 20% across the board. A range of Chinese goods were already subject to 10-25% tariffs levied by Trump during his first term.

Now, imports of U.S.-grown chicken, wheat, corn and cotton will face an extra 15% tariff, the Chinese ministry said. Tariffs on sorghum, soybeans, pork, beef, seafood, fruit, vegetables and dairy products will be increased by 10%.

Chinese Market a Key Engine for U.S. Firms' Global Revenue Growth: Report

The Chinese market is dynamic and serves as a key engine driving global revenue growth for U.S. companies, according to a report from the Hurun Research Institute on February 28.

From the 2020 fiscal year to the 2023 fiscal year, the average compound annual revenue growth rate of 70 sample U.S. enterprises in the Chinese market was 12 percent, approximately 1.3 times their global market average, according to the report, which cites financial information disclosed by the 70 firms.

Driven by advancements in the information technology sector, U.S. companies in the consumer electronics and semiconductor industries, such as Apple, Tesla, Qualcomm and Nvidia, had experienced particularly large revenue growth in China during the period, the report notes.

In the 2023 fiscal year, the Chinese market's median revenue contribution among sample U.S. companies was 15 percent, with approximately 41 percent of these companies explicitly stating in their financial reports that China has become their second-largest source of revenue globally, which further underscores China's pivotal role in the strategic global positioning of businesses.

China to Support EV Charging, Swapping Pilot Projects in 75 Counties This Year

The Chinese central government will support the public electric vehicle charging and swapping pilot projects of 75 counties this year to accelerate the development of such facilities in rural areas，according to three Chinese government departments' announcement on February 27.

The Ministry of Finance, Ministry of Industry and Information Technology, and Ministry of Transport will allocate this year’s quotas to 75 county-level governments based on the current and potential development of their EV battery charging and swapping facilities, location, and financial resources, the ministries announced.

Last year, the State Council issued a document promoting the implementation of pilot projects to improve the deficiencies in county-level EV charging and swapping facilities between 2024 and 2026.

The central government would arrange funds to support the pilots, with the highest annual quotas per county reaching CNY45 million (USD6.2 million), while local authorities would introduce supportive policies in terms of land, electricity prices, and service fees, according to the document.

China's Factory Activity Returns to Growth Zone in February; Non-Manufacturing Sector Rebounds

Activity in China’s manufacturing sector climbed back into expansion territory in February, as businesses were swift to re-open following the eight-day Chinese New Year break and as the economy responds to a slew of stimulus measures. Non-manufacturing sectors, such as the construction industry and services sector, also rebounded, according to data released by the National Bureau of Statistics on March 1.

The manufacturing purchasing managers’ index, which is a gauge of industrial profitability, climbed 1.1 percentage point last month from January to 50.2. A reading above 50 indicates expansion and one below contraction.

The non-manufacturing PMI, which includes the construction industry and the services sector, advanced 0.2 percentage point in February from the previous month to 50.4, the NBS said. While the composite PMI output index, which is the weighted sum of the manufacturing production sub-index and the non-manufacturing PMI, gained 1 percentage point to 51.1.

China Greenlights 13 Foreign Firms For Pilot Value-added Telecom Services

In a significant move to open its telecommunication sector further, China has approved 13 foreign-invested companies for pilot operations in value-added telecom services in Beijing, Shanghai, Hainan and Shenzhen, the Ministry of Industry and Information Technology (MIIT) said on February 28.

The companies are permitted to engage in value-added telecom activities such as internet access and information services in accordance with the approval, according to the MIIT.

Another major step in the opening-up of China's information and communication sector, the approval is an important move for the country to align actively with high-standard international economic and trade rules, the MIIT said.

Among the approved companies are affiliates of well-known multinationals such as T-Systems P.R. China Ltd., which is affiliated with Deutsche Telekom in China, and Siemens Digital Technology (Shenzhen) Co., Ltd.

Newsletter

International News

Canada to Impose Retaliatory Tariffs on U.S. Imports

Canadian Prime Minister Justin Trudeau said on March 4 that Canada would impose 25 - percent tariffs on 155 billion Canadian dollars worth of U.S. goods if the United States proceeded with its proposed tariffs on Canadian products.

Trudeau made the remarks after U.S. President Donald Trump said earlier on March 3 that 25 - percent tariffs on Canadian and Mexican imports would start on March 4.

In a statement, Trudeau said that Canada would begin with a 25 - percent tariff on 30 billion Canadian dollars worth of U.S. goods, with immediate effect on March 4. Tariffs on the remaining 125 billion Canadian dollars of American products would follow in 21 days'time.

Trump Says 25 Pct Tariffs on Mexico, Canada to Take Effect on March 4

U.S. President Donald Trump said on March 3 that 25 percent tariffs on Mexico and Canada will take effect on Tuesday, March 4.

"Very importantly, tomorrow, tariffs, 25 percent on Canada and 25 percent on Mexico, and that'll start," Trump said at the White House.

Trump also reiterated that the reciprocal tariffs will start on April 2.

The US President has for weeks vowed to impose the 25 percent tariffs on all imports from Canada and Mexico, with 10 percent for Canadian energy. He has framed the threats as part of a pressure campaign to force both countries to do more to stem migration and drug trafficking into the US.

US Economic Data Shows Mixed Signals as Manufacturing Metrics Diverge

Recent US economic indicators have painted a complex picture of the nation's economic health. The Institute for Supply Management (ISM) reported on March 3 that its Manufacturing Purchasing Managers' Index (PMI) declined to 50.3 in February from January's 50.9, falling short of market expectations of 50.8.

In contrast, the S&P Global U.S. Manufacturing PMI, released on February 28, presented a more optimistic outlook, reaching 52.7 in February - its highest final reading since June 2022 and exceeding both the forecast and preliminary reading of 51.6. However, analysts caution that this improvement might be temporary, as February's expansion was partly attributed to forward purchasing activities ahead of anticipated price increases and potential tariff-related disruptions in the coming months.

On the inflation front, the Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation gauge, increased by 0.3% month-over-month in January, pushing the annual rate to 2.5%. Similarly, the core PCE, which excludes volatile food and energy prices, rose 0.3% monthly, with the annual rate reaching 2.6%. Despite declining from December's revised 2.9%, these elevated readings indicate that inflation remains persistently above the Federal Reserve's 2% target.

Positive Economic Indicators Highlight Japan's Growth Trajectory

Data released on March 4 shows that Japan's economy is on a positive growth path.

According to the Ministry of Finance, corporate pretax profits in Japan for the fourth quarter of 2024 amounted to 28.69 trillion yen (around 192.5 billion U.S. dollars), registering a 13.5% year-on-year increase. This marks the first positive growth in two quarters.

The ministry's survey also indicated that corporate sales revenue during this period reached 398 trillion yen, the highest since record-keeping began in 1954, demonstrating robust business performance across various sectors.

Data from the Ministry of Internal Affairs and Communications showed that the number of employed individuals hit 67.79 million, a rise of 650,000 compared to the same month last year, signifying 30 consecutive months of growth. The nationwide unemployment rate remained stable at 2.5% in January, unchanged from the previous month, and the total number of unemployed individuals stayed at 1.63 million, the same as in January of the previous year.

Furthermore, separate data from the Ministry of Health, Labour and Welfare indicated that Japan's nationwide job-to-applicant ratio in January stood at 1.26. This means there were 126 job openings for every 100 jobseekers, an increase of 0.01 points from the previous month. These figures paint a picture of a growing and stable economy in Japan.

UK Manufacturing PMI Drops to 14-month Low

Britain's manufacturing sector continued to contract in February amid rising costs and sluggish demand, according to data released by S&P Global on March 3.

The seasonally adjusted UK Manufacturing Purchasing Managers' Index (PMI) fell to a 14-month low of 46.9 in February, down from 48.3 in January, the S&P Global said, noting that the manufacturing PMI has been below the 50 level, meaning contraction, for five months in a row.

Production declined for the fourth consecutive month in February as manufacturers reduced output due to fewer new orders, low client confidence, and supply chain disruptions. Businesses experienced weaker demand from both domestic and international markets.

The domestic market was hampered by rising cost pressures, reduced consumer spending willingness, and the effects of policy changes, it said.

Eurozone Inflation Slows to 2.4 pct in February: Eurostat

The eurozone's annual inflation rate is estimated at 2.4 percent in February, down slightly from 2.5 percent in January, according to a flash estimate released by Eurostat on March 3.

Services are expected to fell to 3.7 percent from 3.9 percent in January. Inflation for food, alcohol, and tobacco rose to 2.7 percent from 2.3 percent, while non-energy industrial goods inflation edged up to 0.6 percent from 0.5 percent. Energy inflation, however, saw a sharp decline from 1.9 percent to 0.2 percent.

Among individual eurozone economies, Estonia recorded the highest inflation rate of 5 percent in February, followed by Croatia at 4.7 percent, Belgium at 4.4 percent, and Slovakia at 4 percent.