Trump's Tariff Barrage: A Storm Brewing for Global Trade

As President Donald Trump moves forward with his campaign promise to impose tariffs on Canada, Mexico, and China, the global trade landscape is bracing for a significant storm. The U.S. President announced a 25% tariff on goods from Mexico and most Canadian imports, with a lower rate of 10% for Canadian oil, and an added 10% on imports from China. These substantial tariffs on the US three biggest trade partners have sparked concerns over inflation and falling stock prices.



Countermeasures
In response to Trump's tariffs, Canada, Mexico, and China have announced countermeasures. Canada's Prime Minister, Justin Trudeau, has announced and partially implemented retaliatory measures of 25% tariffs on over $150 billion of U.S. exports, ranging from alcohol and food to appliances. Mexico has also said it would retaliate, though it hasn't released any official numbers. China has pledged to lodge a complaint with the World Trade Organization and also announced it will implement "corresponding countermeasures."

These countermeasures come despite Trump's warning that he could expand the scope of tariffs imposed on the three countries if they retaliate. The European Commission has expressed regret over Trump's decision and warned of retaliation if the EU is targeted. French President Macron said, "If we are attacked in terms of trade, Europe – as a true power – will have to stand up for itself and therefore react."

Concerns Over Trade War Drives Declining Stocks
Monday morning, the global stock markets opened with considerable losses following the weekend's announcements. Asian and European markets opened to declines between 1 and 2.7 percent while the American S&P 500 futures had declined by 1.5% by the time of writing. Car companies from Asia, Europe, and the U.S. saw their stocks particularly affected, with declines of 5 to 7.5 percent across the three continents. This could be just the beginning.

Market analysts attribute this widespread decline to concerns over the potential escalation of a trade war. Russ Mould, investment director at AJ Bell, told the BBC that there is a "sea of red flashing on the markets." The import taxes could result in "higher inflation and put a stop to further interest rate cuts for the time being – exactly the opposite of what equity investors want to happen," he added.

Trump's Economic Gambit
With the tariffs, Trump has thrown himself into one of the biggest gambits of his political career. The looming import taxes on Mexico, Canada, and China will be a major test of Trump's unorthodox use of tariffs, which he's described as "the greatest thing ever invented." The Wall Street Journal has another view in a stark criticism of the import taxes calling it "The Dumbest Trade War in History." The tariffs are a gamble that could define Trump's presidency and see substantial parts of his political support falter: they will likely drive American inflation and could result in a loss of jobs, in the US as well as in the global economy. Mary Lovely, a fellow at Peterson Institute International Economics, calls the move "a huge gamble. It's a recipe for slowing down the economy and increasing inflation."

As the global economy grapples with the implications of Trump's new tariffs, the coming weeks and months will reveal the true impact of this trade war. The U.S. President's decision to impose tariffs on Canada, Mexico, and China has set the stage for a global trade landscape that is poised to be significantly reshaped. As the dust settles, the world will be watching to see how these tariffs play out and what the long-term effects will be on the global economy.