Donald Trump has imposed tariffs on Canada, Mexico and China, causing retaliation from Beijing, and lowered the stock market as concerns grew over the trade war.
In his most drastic trade measure since returning to the White House in January, the US president attacked imports from Canada and Mexico, earning a 25% tariff that came into effect Tuesday.
The White House also imposed an additional 10% tariff on Chinese imports, in addition to the 10% tax imposed last month.
Trump has accused the three countries of failing to tighten trafficking of the deadly opioid fentanyl, while demanding that Mexico and Canada close their borders.
The move drew immediate response from Beijing, which said it would collect 10-15% tariffs on US agricultural products starting March 10th, ranging from soybeans and beef to corn and wheat.
Canada also soon announced tariffs on US imports of $100 billion, starting with $21 billion in imports. “Canada cannot unanswered this unfair decision,” Prime Minister Justin Trudeau said in a statement.
Mexican President Claudia Sheinbaum said Tuesday that the government will wait until Sunday for measures to be announced, including both tariffs and other actions.
Tariffs on the three largest US trading partners have come after Trump raised mandates to some of the highest levels in decades and gave Canada and Mexico a 30-day reprieve from the measure last month.
“Investors have really started to fear Trump’s policies,” said Emmanuel Cow, a Barclays analyst. “If there’s growth issues in the US, it’s going to be difficult to ignore. People are nervous, and some are beginning to fear a recession (in the US).”
In Europe, the benchmark Stoxx Europe 600 fell by 1.6%. The German exporter, DAX, posted its best performance in over two years on Monday, resulting in a 2.6% fall.
Given that it sells some of its exported vehicles from Canada and Mexico in the US, the most exposed automakers have been hit, with Volkswagen down 4.7% and Stellantis down 8.2%.
The Nikkei 225, which has a large number of Japanese exporters, fell 1.2%, while the Australian S&P/ASX 200 fell 0.6%. Hong Kong’s Hangsen index, which fell nearly 2% during the session, fell by 0.3%, while mainland China’s CSI 300 benchmark fell by 0.1%.
Wall Street Stock Index Futures moved ahead of the US Open, tracking what went down 0.7% on the tech-dominated Nasdaq composite index and 0.6% on the S&P 500.
This follows a Wall Street slump on Monday, with the S&P 500 down 1.8% and the Nasdaq Composite down 2.6%.
“Stocks take leaves from the US overnight,” said Mohit Kumar, Jeffries economist. “We’ve had a pretty sharp move in US stocks, so I think this is a response to that. If the US slows down, it’s clearly not good for the rest of the world.”
In the foreign exchange market, the dollar fell 0.8% against a basket of currencies that includes the euro, yen and pound after a 0.8% decline on Monday.
The Mexican peso weakened 0.4% against the US dollar to 20.76, while the Canadian dollar rose 0.5% against the US currency to cover 1.442.
The European Commission warned of widespread impact. “These tariffs pose a threat to deep integrated supply chains, investment flows and economic stability throughout the Atlantic.”
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The tax on Ottawa is set at 25%, excluding Canadian oil and energy products, facing a 10% tariff. Canada accounts for approximately 60% of US crude oil imports.
In response, China targeted US companies, blacklisted 10 companies in national security and slapped 15 companies in export control.
Additionally, US biotechnology company Illumina has banned exporting gene sequencing devices to China. Beijing added Illumina to its “unreliable entities” list last month in response to the first barrage of Trump’s tariffs.
China’s Commerce Department previously reverted to the US justification of tariffs on the fentanyl flow, saying “it is a typical act of unilateral unilateral conduct and bullying, ignoring the voices of international trade rules, the voices of all parties involved.”
ING’s Chinese economist Lin Song said last month’s Chinese actions targeted about 25% of their exports to the US to China, a “relatively restricted response compared to the widespread 10% tariffs implemented by the US.”
Additional Reports by Andy Bound of Brussels
