The News
Stock markets around the world tanked after US President Donald Trump ordered tariffs on Canada, China, and Mexico.
The tariffs on foreign trade partners were imposed on Saturday, with Mexico and Canada now forced to pay a 25% duty on most exports to the US, and China 10%.
Canada quickly retaliated with its own 25% tariff on US imports, while Mexico said it would also respond in kind, The New York Times wrote. Trump also vowed that import taxes on EU goods could happen “pretty soon,” the BBC reported.
Investors fled to haven assets, with the dollar surging and gold briefly hitting a record, while Asian and European stocks fell as traders braced for a new global trade war. US markets opened sharply lower on Monday, with the S&P 500 dropping 1.4% minutes into trading on Monday.
SIGNALS
US fires first shots in the ‘dumbest trade war in history’
Donald Trump’s tariffs mark the “opening salvo” of a potentially devastating trade war, the Financial Times wrote. The tit-for-tat borders on “absurdity,” the FT wrote: Canada is responsible for a fraction of annual migration to the US, Trump’s oft-repeated pretext for the levies, and the US itself will be “one of the main victims” of the economic fallout from the move. Instead, the “dumbest trade war in history,” as The Wall Street Journal described it, may signal Trump’s desire for the US to become an autarky — a completely self-sufficient economy with limited trade. But many US businesses owe their competitiveness to the country’s trade ecosystem with Mexico and Canada: “As imports go up, U.S. production goes up,” one analyst told the Journal.
Trump’s tariff moves could see US left out in the cold
Donald Trump’s plans to hike tariffs on both US allies and adversaries alike could see Washington increasingly excluded from global trade agreements, The New York Times wrote, noting the rising number of countries “forging their own economic partnerships without the United States.” The European Union — a longtime US ally — completed a trade deal with Latin America in December linking 850 million people, and moved to boost trade ties with Mexico and Malaysia. The diplomatic fallout from the tariffs could be “just as serious and even longer lasting” than the economic consequences, a Financial Times columnist wrote, arguing that the levies threaten to “destroy the unity of the Western alliance” — a “dream come true” for US adversaries like Russia and China, they argued.
China hedges its bets — for now
Despite the sudden implementation of Donald Trump’s tariffs, a 10% duty is likely “not a big shock” to China’s economy, regardless of its heavy reliance on exports, Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, told Nikkei Asia. China has so far retaliated by suing the US at the World Trade Organization — a deliberately low-key rebuke. The muted response may signal a desire in Beijing to negotiate: “Given [Trump’s] team of hawks on China, the battle is yet to come,” Wu Xinbo, of the Institute of International Studies at Fudan University told The New York Times.