Unlock the White House Watch newsletter for free
Your guide to what the 2024 US election means for Washington and the world
Donald Trump has imposed a swath of tariffs on Canada, Mexico and China, sparking retaliation from Beijing and sending stock markets lower as fears mount over a trade war.
In the most sweeping trade measures since returning to the White House in January, the US president hit imports from Canada and Mexico with a 25 per cent tariff that went into effect on Tuesday.
The White House also imposed an additional 10 per cent tariff on Chinese imports on top of a 10 per cent levy imposed last month.
Trump has accused the three countries of failing to clamp down on the trafficking of the deadly opioid fentanyl while also demanding that Mexico and Canada tighten their borders.
The moves drew an immediate response from Beijing, which said it would levy a 10 to 15 per cent tariff on US agricultural goods, ranging from soyabeans and beef to corn and wheat, from March 10.
Canada also unveiled tariffs on $107bn of US imports, starting with $21bn of imports immediately. “Canada will not let this unjustified decision go unanswered,” Prime Minister Justin Trudeau said in a statement.
Mexican President Claudia Sheinbaum said on Tuesday that the government would wait until Sunday to unveil countermeasures, which would include both tariffs and other actions.
The tariffs against the US’s three largest trading partners raised duties to some of the highest levels in decades, and come after Trump last month gave Canada and Mexico a 30-day reprieve from the measures.
“Investors have started to really fear Trump’s policies,” said Emmanuel Cau, an analyst at Barclays. “If there is a growth problem in the US that will be hard to ignore . . . People are nervous, with some even starting to fear a recession [in the US].”
US stocks fell on Tuesday, extending the previous day’s heavy declines and wiping out all the gains made since Trump’s election victory in November. The S&P 500 dropped 1.6 per cent, while the Nasdaq Composite lost 1.4 per cent.
In Europe, the benchmark Stoxx Europe 600 dropped 2 per cent. Germany’s exporter-heavy Dax, which on Monday posted its best performance in more than two years, tumbled 3.3 per cent.
Carmakers, which are among the most exposed given several of them export vehicles from Canada and Mexico for sale in the US, were hit, with Volkswagen falling 4.3 per cent and Stellantis dropping 10.6 per cent.
Japan’s exporter-heavy Nikkei 225 slid 1.2 per cent, while Australia’s S&P/ASX 200 retreated 0.6 per cent. Hong Kong’s Hang Seng index, which fell nearly 2 per cent during the session, closed down 0.3 per cent, while mainland China’s CSI 300 benchmark dropped 0.1 per cent.
In foreign exchange markets, the dollar fell 0.5 per cent against a basket of currencies, including the euro, yen and pound, following a 0.8 per cent drop on Monday.
Mexico’s peso weakened 0.7 per cent against the US dollar to 20.85, while the Canadian dollar fell 0.2 per cent to C$1.451 versus the US currency.
The European Commission warned of far-reaching repercussions. “These tariffs threaten deeply integrated supply chains, investment flows, and economic stability across the Atlantic,” it said.
The levies against Ottawa are set at 25 per cent except for Canadian oil and energy products, which face a 10 per cent tariff. Canada accounts for about 60 per cent of US crude imports.
In its response, China also targeted US companies, placing 10 companies on a national security blacklist and slapping export controls on 15 others.
It also banned US biotech company Illumina from exporting its gene-sequencing equipment to China. Beijing had added Illumina to its “unreliable entities” list last month in response to Trump’s initial barrage of tariffs.
China’s commerce ministry earlier hit back at the US justification of the tariffs over fentanyl flows, saying the claim “disregards facts, international trade rules and the voices of all parties, and is a typical act of unilateralism and bullying”.
Lynn Song, greater China economist at ING, said Beijing’s action — together with countermeasures last month — targeted a total of about 25 per cent of US exports to China, amounting to “a relatively muted response compared to the 10 per cent broad-based tariffs implemented by the US”.
Additional reporting by Andy Bounds in Brussels
