US stock markets plummet as Canada, Mexico counter Trump's tariffs
What's the story
Wall Street took a massive hit on Tuesday after US President Donald Trump announced 25% tariffs on goods imported from Mexico and Canada. The news sent US stocks plummeting sharply during late afternoon trading, with the Mexican peso and Canadian dollar also taking a hit. The Dow Jones Industrial Average fell 649.67 points or 1.48%, while S&P 500 lost 104.78 points or 1.76%. The Nasdaq Composite dropped 497.09 points or 2.64%.
Tariff rationale
Trump insists on tariffs, cites no deal for fentanyl curbs
"They're going to have to have a tariff," Trump said at the White House. He defended the tariffs by saying they would prompt countries to set up their car plants in the US. He said, "So, what they have to do is build their car plants, frankly, and other things in the US." The President also dismissed any possibility of a deal that could avert these tariffs by curbing fentanyl flows into America.
Trade escalation
Reciprocal tariffs and increased Chinese import duties
Apart from the North American tariffs, Trump announced reciprocal tariffs would be imposed on April 2 on countries levying duties on US products. He also announced plans to double tariffs on all Chinese imports from 10% to 20%, due to China's continued fentanyl shipments to the US. "China has not taken adequate steps to alleviate the illicit drug crisis," Trump stated. Beijing is preparing to retaliate against Trump's new tariffs by imposing duties on US agricultural and food products.
Economic concerns
Economists warn of potential impact on North American economy
Economists and business leaders have raised concerns that Trump's tariffs could hurt the highly integrated North American economy. The tariffs, covering over $900 billion worth of annual US imports, will come into effect at 12:01am EST on Tuesday. Consequently, both Canada and Mexico will be slapped with a 25% tariff, with Canadian energy facing an additional 10% levy.
Canada counters
Canada announces countermeasures
Canadian Prime Minister Justin Trudeau condemned Trump's decision, calling it 'unjustified' and vowed that Canada would not let the tariffs go unanswered. "The first stage will see 25% tariffs placed on approximately $20.6 billion worth of goods from US exporters. These measures will take effect at 12.01 am. New York time unless the US reverses its decision," Trudeau said. He also confirmed that a second round of tariffs— also set at 25%—would be imposed on American automobiles, steel, and aluminum.
Market impact
Automakers face sharp declines in share prices
Automaker shares took a major hit, with General Motors down 4% and Ford falling 1.7%. Gustavo Flores-Macias, a public policy professor at Cornell University, warned consumers could witness price hikes within days due to these tariffs. "The automobile sector, in particular, is likely to see considerable negative consequences," he said.
Mexico's strategy
Mexico prepares response to Trump's tariff announcement
Mexico, which had previously escaped Trump's tariffs by sending thousands of troops to its northern border, has stepped up anti-drug efforts and hinted at new measures on imported Chinese goods. President Claudia Sheinbaum said her government was calm as it awaited Trump's decision but would respond if tariffs were imposed. "We have a plan B, C, D," Sheinbaum said without providing further details.