President Donald Trump's long-awaited tariffs against Canada and Mexico finally went into effect on Tuesday, raising tensions in global markets and prompting costly retaliation from U.S. allies.
Starting at midnight local time, imports from Canada and Mexico will now be taxed at 25%, while Canadian energy products will be subject to a 10% tariff. In addition, the 10% tariff Mr Trump imposed on Chinese imports in February is doubling to 20%.
In response, Canadian Prime Minister Justin Trudeau said his country would impose tariffs on more than $100 billion (£78.7 billion) worth of US goods within 21 days.
China has announced it will impose additional tariffs of up to 15% on imports of key U.S. agricultural products, including chicken, pork, soybeans and beef.
The duties announced by the Commerce Department are set to take effect on March 10, although goods already in transit will be exempt until April 12.
Later on Tuesday, Mexican President Claudia Sheinbaum said Mexico would respond to the 25 percent tariffs imposed by the United States with its own retaliatory tariffs on American goods.
Ms. Sheinbaum said she would announce the goods Mexico would target with sanctions at a public event in Mexico City's central square on Sunday, perhaps signaling that Mexico still hopes for a de-escalation of the trade war unleashed by Mr. Trump.
“There is no motive, no reason or justification to support this decision, which will impact our people and our countries,” she said.
The US president's actions have fuelled fears of rising inflation and the prospect of a devastating trade war, even as he has promised the American public that import taxes are the easiest path to national prosperity.
He has shown a willingness to ignore the warnings of leading economists and put his public approval on the line in the belief that tariffs can fix what ails the country.
“This is a very powerful weapon that politicians have not used because they were either dishonest or stupid or were paid in some other way,” Mr. Trump said at the White House on Monday.
“And now we use them.”
US markets fell sharply on Monday after Mr Trump said there was “no room left” for talks that could reduce the tariffs. Shares in Europe and Asia were mostly lower on Tuesday after they took effect.
Tariffs on Canada and Mexico were originally supposed to go into effect in February, but Mr Trump agreed to a 30-day pause for further talks with the US's two biggest trading partners.
The stated reason for the tariffs is to combat drug trafficking and illegal immigration, and both countries say they have made progress on those issues. But Mr Trump has also said the tariffs will only be reduced if the US trade imbalance is closed, a process that is unlikely to be resolved in a political timeframe.
There is a chance that the tariffs will be short-lived if the US economy suffers, just as there is a chance that additional tariffs will be imposed on goods from the European Union, India, computer chips, cars and pharmaceuticals, as Mr Trump has promised.
Mr Trump has injected disorienting volatility into the global economy, throwing it off balance as people wonder what he will do next.
“It's a chaotic process, especially compared to how tariffs were put in place under the first (Trump) administration,” said Michael House, co-chairman of the international trade practice at law firm Perkins Coie.
“It's unpredictable. We don't really know what the president will do.”
Democratic lawmakers were quick to criticize the tariffs, but even some Republican senators expressed alarm.
Senator Susan Collins said she was “very concerned” about the tariffs coming into effect because of her state's proximity to Canada.
“The Maine and Canadian economies are integrated,” Ms. Collins said, explaining that much of the state's lobster and blueberries are processed in Canada and then shipped back to the U.S.
The global economy is now shrouded in the fog of what looks like a trade war.
Even after Trump announced the tariffs on Monday, Canadian officials continued to communicate with their American counterparts.
“The dialogue will continue, but we are prepared to respond,” Canadian Defence Minister Bill Blair said in Ottawa as he headed into a special cabinet meeting on US-Canada relations.
“Discussions are still ongoing.”
Shortly after Mr Blair's speech, Mr Trudeau said Canada would impose 25% tariffs on C$155 billion (£84 billion) worth of American goods, starting with tariffs on C$30 billion (£16 billion) worth of goods immediately and the remainder on American goods within three weeks.
“Our tariffs will remain in place until U.S. trade sanctions are lifted, and if U.S. tariffs are not lifted, we are in active and ongoing negotiations with the provinces and territories to adopt a range of non-tariff measures,” Mr. Trudeau said.
Damon Pike, head of the customs and trade services technical practice at tax and advisory firm BDO, suggested that the response from other countries could lead to an escalation of trade tensions and possibly increased economic pressure points.
“Canada has already prepared its list,” Mr. Pike said. “The EU has already prepared its list. This will be a retaliatory strike.”
Tim Houston, leader of Canada's Atlantic province of Nova Scotia, said he would order the Nova Scotia Liquor Corporation to remove all American alcohol from store shelves.
Mr Houston also said his government would restrict access for American businesses to provincial procurement and double the cost of driving US commercial vehicles on toll highways.
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To address Tuesday's tariffs, the White House would like to see fentanyl seizures reduced inside the United States, not just at the northern and southern borders.
Administration officials say fentanyl seizures last month from Louisiana to New Jersey are linked to foreign cartels.
The Trump administration has suggested that inflation will not be as severe as economists say, saying tariffs give foreign companies an excuse to set up factories in the United States.
Sourse: breakingnews.ie
