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Donald Trump’s recent imposition of tariffs on Canada, Mexico, and China has led to immediate retaliatory measures and has caused global stock markets to decline amidst fears of a potential trade war.
The tariffs, which are the most significant trade actions since Trump’s return to the White House in January, include a 25 percent tariff on imports from Canada and Mexico that took effect on Tuesday.
In addition, the White House imposed an additional 10 percent tariff on Chinese imports, on top of a previous 10 percent levy imposed last month.
Trump has accused these countries of not doing enough to stop the trafficking of the dangerous opioid fentanyl and has also demanded increased border security from Mexico and Canada.
China responded immediately by announcing a 10-15 percent tariff on US agricultural goods, while Canada pledged to retaliate with tariffs on $30 billion worth of US imports.
These actions have raised duties on imports from the US’s largest trading partners to levels not seen in decades. This comes after Trump granted Canada and Mexico a 30-day reprieve from the tariffs last month.
Market experts like Mitul Kotecha from Barclays noted that risk assets are experiencing a downturn as investors assess the potential impact of these retaliatory measures.
Stock markets in Asia, including Hong Kong, mainland China, Japan, and Australia, all saw declines in response to the news. Similarly, European stocks are expected to open lower based on futures trading.
The US dollar has also weakened against major currencies in response to the trade tensions, with both the Mexican peso and the Canadian dollar depreciating against the greenback.
Canada, which is a significant source of US crude imports, is facing tariffs of 25 percent on most goods, with a 10 percent tariff on oil and energy products.
China’s response included targeting US companies, adding 10 companies to a national security blacklist and imposing export controls on 15 others.
Furthermore, China banned US biotech company Illumina from exporting gene-sequencing equipment to China, in retaliation to Trump’s initial tariffs.
The Chinese government criticized the US justification for the tariffs related to fentanyl flows, calling it unilateral and bullying behavior.
China’s foreign ministry also threatened to halt cooperation with the US on drug control efforts if pressure tactics continue.
The ongoing trade tensions between the US and its major trading partners have led to a global economic uncertainty, impacting markets and currencies worldwide.