US president Donald Trump has delayed the implementation of fresh tariffs on his country’s neighbours, Mexico and Canada, following political concessions from the allies’ leaders.
Beijing, meanwhile, has announced its own response to new 10% levies imposed by the US on China.
Stocks in the US, EU and UK have all seen falls in value as markets respond to Trump’s plans, including his pledge to hit the EU with tariffs over its trade surplus with the North American nation.
Mexico negotiation
The BBC reports that Trump planned to introduce 25% rates on Mexican and Canadian goods at the start of this month.
Mexico and Canada hit back on these plans, pledging to implement their own tariffs on US goods. The US has since announced that the levies will be delayed after Trump spoke to Claudia Sheinbaum, president of Mexico, and Justin Trudeau, prime minister of Canada.
Sheinbaum has agreed to deploy 10,000 National Guard troops to her country’s border with the US to try and stem the flow of drugs – particularly synthetic opioid fentanyl – across the US-Mexico border. Much of Trump’s language around the tariffs has centred on the fentanyl trade.
Reuters reports that Sheinbaum has also received assurances from the US on preventing the movement of high-powered weaponry into her country.
‘Fentanyl tsar’
Canada, meanwhile, had also promised to put its own 25% tariffs on US goods worth C$155bn. Trudeau also promised coordination with regional Canadian leaders on further retaliatory measures over the weekend, but has since made a raft of announcements concerning the US-Canada border that have fended off the prospect of a trade war.
Trump agreed to delay the tariffs on Canada after Trudeau promised a new ‘fentanyl tsar’ position in government, supported by a C$S200m intelligence drive to limit organised crime and fentanyl trafficking, according to the BBC.
Writing on his Truth Social platform, Trump raised the possibility of a further deal on the countries’ economic relationship more broadly. He said he was “very pleased with this initial outcome”, adding that the tariffs announced over the weekend “will be paused for a 30-day period to see whether or not a final economic deal with Canada can be structured”.
China tariffs go ahead
The implementation of a new 10% tariff on China still went ahead today (4 February), however, at midnight EST.
Trump has described the rate as his government’s “opening salvo” on trade with China, and promised “very, very substantial” measures beyond it should the ruling Chinese Communist Party (CCP) fail to negotiate an accommodation with the US. He was particularly strong on the subject on his Truth Social platform on Sunday, writing:
“Anybody that’s against tariffs, including the Fake News Wall Street Journal, and hedge funds, is only against them because these people or entities are controlled by China, or other foreign or domestic companies. Anybody that loves and believes in the United States of America is in favour of tariffs. They should have never ended, in favour of the Income Tax System, in 1913. The response to Tariffs has been FANTASTIC!”
China has retaliated to the measures, placing a new 10% tariff on US crude oil, agricultural machinery, large-displacement cars and pickup trucks – as well as even higher 15% tariffs on coal and LNG, Sky News reports.
These new rates will be implemented from the start of next week (10 February), while China has also pledged a fresh antitrust investigation into Google.
EU effects
The EU could face a major blow to its economies from a trade war with the US, analysis by Goldman Sachs has suggested.
The investment bank said in the Guardian that “we expect a sizeable hit to activity from the ongoing rise in trade tensions”.
“While the Euro area might benefit slightly from trade diversion associated with any US tariffs on Canada and Mexico, President Trump has reiterated his plan to also raise tariffs on the EU.”
This, Goldman says, will cut investor confidence in the EU and hit growth.
European Commission president Ursula von der Leyen has said that the bloc will respond if “unfairly” treated by the US, while the bloc’s foreign policy commissioner, Kaja Kallas, said there are “no winners in trade wars”.
