The impact of U.S. President Donald Trump’s weekend tariff announcements was felt in Ottawa, Mexico City, Beijing — and also in New York, Hong Kong, Seoul and Taipei. Around the world, stock markets plunged on Monday after Trump announced tariffs of 25 percent on Mexico and Canada and 10 percent on China.
In Washington, Trump spoke about his deal Monday with Mexico to suspend tariffs for a month in exchange for a range of concessions from Mexico City aimed at stemming the flow of migration and the movement of illegal drugs across the U.S. southern border. Markets quickly recouped some of their losses after the announcement. He also announced a similar pause with Canada on Monday.
“We have to stop the people coming in, and we have to stop the fentanyl, including China. Fentanyl has killed at least 200,000 people this year. Fentanyl is coming in from China through Mexico and Canada. And they have to stop it. And if they don’t stop it, the tariffs are going to get worse. Much worse,” Trump said.
Mexican President Claudia Sheinbaum struck a hopeful tone Monday. “I am confident that this month, we will be able to get a result, a good result for your people, a good result for the Mexican people, and this is the result of an agreement. It is the result of good talks, with respect.”
Economists say consumers will feel the impact immediately and point to historical parallels.
Steve Kamin is a senior fellow at the American Enterprise Institute, a Washington, D.C.-based think tank. “This takes us back to the 1930s when trade wars were one of the factors that exacerbated the Great Depression, as economies around the world built barriers to keep out imports. In the long run, keeping tariffs high will ultimately reduce the total amount of global trade, which will reduce competition and reduce the spread of technological innovation around the world. Over the longer term, that could ultimately slow the growth of the U.S. and global economies,” he said.
China imposed limited tariffs after Trump imposed the 10% tariff.
China imposed tariffs on certain American imports on Tuesday (February 4) and threatened several U.S. companies, including Google, with possible sanctions, in a measured response to the tariffs.
Beijing's limited response to Trump's imposition of 10% tariffs on all Chinese imports underscores Chinese policymakers' efforts to engage Trump in talks to avert an outright trade war between the world's two largest economies.
Capital Economics, a UK-based research firm, estimates that the additional tariffs imposed by China will apply to about $20 billion worth of its annual imports, compared with the $450 billion worth of Chinese goods imported by the US that were subject to tariffs that went into effect at 12:01 a.m. Eastern Time on Tuesday (February 4).
“The measures are mild, at least compared to the US, and have been tailored to send a message to the US,” Julian Evans-Pritchard, head of China Economics at the firm, said in a note.
Additionally, China's Ambassador to the United Nations, Fu Cong, said Monday that Beijing would seek help from the World Trade Organization.
"We believe that this violates WTO rules. That is why China filed a complaint with the WTO. And we also recognize that we may be forced to take retaliatory measures. And let me also emphasize that there are no winners in a trade war," Fu said.
Trump plans to speak with Chinese President Xi Jinping this week, a White House spokesman said.
President Trump acknowledged that his move could raise prices but said higher tariffs would be “worth the price” to strengthen U.S. interests
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