Trump's tariff war: Levies come into effect today, Canada retaliates
What's the story
United States President Donald Trump has imposed a 25% tariff on goods from Mexico and Canada, effective Tuesday (March 4). The move has escalated global trade tensions and raised fears of a trade war in North America. Trump also announced an increase in tariffs on Chinese imports to 20%, an increase from the previous 10% imposed in February.
Countermeasures
Canada retaliates with tariffs on US imports
In retaliation to Trump's tariff hike, Canada has slapped a 25% tariff on US imports worth 30 billion Canadian dollars (CAD) that come into effect from today. It also plans to extend the tariffs to more US imports worth CAD 125 billion in three weeks. Canadian Foreign Minister Melanie Joly said Ottawa is ready for countermeasures against US-made products.
International reaction
Mexico and China prepare responses to US tariffs
Meanwhile, Mexico's President Claudia Sheinbaum said in a press conference that her administration is prepared with a response plan to Trump's tariffs, though she didn't elaborate. Subsequently, China's commerce ministry voiced strong dissatisfaction and opposition to the US tariffs on products related to fentanyl. The ministry promised to take countermeasures in a bid to protect its rights and interests.
Economic impact
US consumers and industries brace for impact
The new tariffs are likely to hit American consumers as prices of several goods would rise. A study by the Federal Reserve Bank of Atlanta, quoted by Forbes, indicates consumer spending could increase by 0.81% if businesses pass half the costs onto consumers. If passed fully, it could go up to 1.63%. The automotive industry is especially susceptible to price hikes of $3,000 per vehicle as import taxes on steel and aluminum from Canada and Mexico rise.
Market response
Financial markets react to Trump's tariff announcement
Trump's tariff announcement has also sent shockwaves through the financial markets, with the Dow Jones Industrial Average falling 649.67 points and other major indices witnessing a similar plunge. The Mexican peso and Canadian dollar also fell after the news. However, White House trade adviser Peter Navarro played down fears of inflation due to these tariffs, saying any increase would be negligible compared to benefits for American manufacturing jobs.