President Donald Trump said on Sunday, the 2nd of February, that the tariffs he has imposed on Mexico, Canada and China, which come into force on Tuesday, could cause “short-term pain” for Americans, while global markets reflected concerns that they could undermine growth and reignite inflation, reports Reuters.
Trump said he would speak on Monday with the leaders of Canada and Mexico, which have announced their own retaliatory tariffs, but did not pin much hope on them reversing his decision.
“I don’t expect anything dramatic,” Trump told reporters. “They owe us a lot of money and I’m sure they’ll pay it.”
He also said that tariffs “will certainly be imposed” on the EU, but did not say when.
Economists said the Republican president’s plan to impose 25% tariffs on Canada and Mexico and 10% tariffs on China – the three biggest US trading partners – would slow global growth and raise prices for Americans.
Trump argues that the tariffs are necessary to curb immigration and drug smuggling and to stimulate domestic industry.
“In the short term, we’re probably going to feel some pain, and people understand that. But in the long term, almost every country in the world has ripped off the US,” he said.
On Monday, financial markets slipped on trade war concerns. US stock futures fell by more than 2% and shares in Hong Kong, Tokyo and Seoul also fell by around 2%. The Chinese market was closed for the Luner New Year holiday. The Chinese yuan, the Canadian dollar and the Mexican peso weakened, while the US dollar rose. As Canada and Mexico are the main sources of US crude oil imports, US oil prices rose by more than one US dollar and gasoline futures by 3%.
Trump’s tariffs will apply to almost half of all US imports, and to cover the difference the US will have to double its production, an impossible task in the near term, ING analysts write.
“From an economic perspective, the trade tensions are a damaging situation for all countries involved,” the analysts wrote in a report on Sunday.
Other analysts pointed out that tariffs could trigger recessions in Canada and Mexico and lead to “stagflation” – high inflation, stagnant economic growth and higher unemployment – in the US.
Trump’s tariffs, set out in three executive orders, will take effect on Tuesday at 12:01 a.m. ET.
Some analysts have indicated that there are hopes for negotiations on tariffs, especially with Canada and China, while others believe that the tariffs will only be in place for a while. The White House statement did not explain what the three countries need to do to avoid tariffs.
Trump has promised to maintain them until the end of what he described as a state of national emergency over fentanyl and illegal immigration to the US.
China, Mexico and Canada are planning to fight the US tariffs.
China intends to challenge them at the World Trade Organisation (WTO) and is also open to negotiations but firmly rejects blame for fentanyl and the Chinese Foreign Ministry has stated that “fentanyl is America’s problem”.
Mexican President Claudia Sheinbaum also promised counter-tariff measures.
Canada announced on Sunday that it would go to court to challenge the tariffs, and its Prime Minister Justin Trudeau on Sunday also urged Canadians to boycott their long-time ally after ordering retaliatory tariffs on US goods.
Trump mocked Canada on Sunday, saying it depended on US support.
A Reuters/Ipsos poll published last week showed that Americans are divided on the tariffs, with 54% of respondents opposing them and 43% supporting them. Democrats are largely against them, while Republicans are more supportive.