The US has implemented 25% tariffs on all goods entering the country from Mexico and Canada, as well as a 20% tariff on Chinese goods to replace its recent 10% rate, sparking retaliation and fears of a trade war.
The rates on Mexican and Canadian goods mean US$918bn in imports to the US will be affected and represents a major hit to the flow of goods from the US’ two largest trading partners.
Canada
Canadian prime minister Justin Trudeau said his country would immediately impose its own 25% tariff rate on US$20.7bn (C$20.7bn) in imports from the US, according to the Guardian. He had previously suggested beer, wine and other goods would be hit in retaliation, should Trump forge ahead with the imposition of tariffs.
Trudeau also said that a further US$86.2bn in US goods would be hit with Canadian tariffs if the US’ own measures were still in place after three weeks, stating that “tariffs will disrupt an incredibly successful trading relationship”. The premier of Ontario, Doug Ford, suggested his province would end nickel shipments and electricity transmission to the US in retaliation.
Canadian Chamber of Commerce CEO Candace Laing said that the confirmation of the tariffs was a “reckless decision” that is “forcing Canada and the US toward recessions, job losses and economic disaster”.
Mexico’s response, meanwhile, is expected to be announced later today.
‘Shifting the blame’
China, meanwhile, has responded with a 10–15% tariff on a range of US food and agricultural products that includes wheat, beef, soybeans and more. The Asian nation has also said it is placing new export restrictions on some US firms, according to reporting by Reuters.
The goods affected by the new US tariffs on China include several that had not been addressed by previous US tariff hikes under the Joe Biden administration, among them consumer electronics such as smartphones, PCs and video game consoles.
Trump’s justification for the measures on Chinese, Mexican and Canadian goods has included accusations that these countries are not doing enough to stem the flow of fentanyl and other drugs into the US. The Chinese commerce ministry has, however, said the US administration was simply seeking to “shift the blame” onto China for the issue.
Taking stock
Stock markets across the world saw drops as the tariffs entered force, the FT reports.
The US S&P 500 index closed at 1.8% lower than it opened yesterday, while the Nasdaq dropped 2.6% following confirmation that the tariffs would enter force.
But the repercussions have gone beyond the US, with Europe’s Stoxx Europe 600 index falling 1.1% and Germany’s Dax, which comprises a host of major exporters, falling 1.9%. German car firm Volkswagen reflects the concerns of the sector, where many vehicles are exported from Canada and Mexico to the US market – its shares fell 3.2%. Automobile multinational Stellantis dropped 5.6%.
Even Asia faced falls, as Japan’s Nikkei 225 dropped 1.2%, Hong Kong’s Hang Seng index closed down 0.3% and China’s CSI 300 dropped 0.1%.
Mohit Kumar, an analyst at investment bank Jefferies, said that global stocks “are taking a leaf from the US moves overnight”.
“If the US slows, it’s obviously not good for the rest of the world.”
