
Over the past 72 hours, significant developments have emerged in global trade, particularly regarding tariffs imposed by the U.S. on imports from Canada, Mexico, and the EU. Here’s a breakdown of the key events and their implications:
1) U.S. Tariff Actions on Canada and Mexico
President Donald Trump has confirmed that the U.S. is implementing a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China.
Trump justified these tariffs by accusing Canada and Mexico of allowing large numbers of people and fentanyl to enter the U.S., calling them "very bad abusers" of trade policies. He also suggested that these tariffs would bring in "massive amounts of money" into the U.S. treasury through the newly established External Revenue Service tasked with collecting these duties.
2) EU Action Looming and UK “out of line”
On the EU, when asked about tariffs Trump said they will “definitely happen” and although he wouldn’t put a timeline on exactly when, he did say “it’s going to be pretty soon”.
The President’s argument for placing tariffs on the EU relates to the trade deficit which he currently puts at over $300 billion.
With regards to the UK, Trump has described us as being “out of line” but believes that it can be “worked out” without tariff measures having to come into force.
3) Rubio’s Meeting in Panama and the Panama Canal Discussions
During his recent trip to Panama, Senator Marco Rubio discussed concerns over China's growing influence in managing parts of the Panama Canal, which remains a crucial trade route. The US Secretary of State demanded that Panama make “immediate changes” to the level of “influence and control” held by China.
The discussions focused on security risks and economic implications for the U.S. and its allies. Sources indicate that Rubio advocated for greater American involvement in ensuring the canal remains free from undue foreign influence (Politico).
4) Canada’s Retaliatory Measures
Canada has responded swiftly to Trump's tariff threats with Prime Minister Justin Trudeau setting out “far-reaching” tariffs of 25% across a variety of goods including sporting goods and alcohol. This new tariff rate, which will impact some goods from as soon as Tuesday, mirrors the rate imposed on Canada by America.
Previous tariff disputes between the U.S. and Canada have resulted in countermeasures on American steel, aluminium, and agricultural products. A similar strategy may be adopted again, with Canada likely targeting industries in swing states that are politically sensitive for Trump’s administration.
Also, over the weekend, we have seen Canadian stores pull US alcohol from their shelves and the booing of the US national anthem during NBA and NHL games featuring a US team.
5) Stock Market Reaction in the UK and Europe
Financial markets in the UK and Europe have reacted negatively to these new tariff policies. Investors fear that escalating trade tensions could slow economic growth and disrupt supply chains. Key impacts include:
The FTSE 100 dropped by nearly 2%, reflecting investor anxiety over potential trade disruptions.
Germany's DAX and France's CAC 40 also experienced declines, particularly in sectors reliant on global trade, such as automotive and manufacturing.
The Euro weakened slightly against the U.S. dollar, as investors weighed the possibility of European retaliatory tariffs.
Car manufacturing saw the greatest drop in their share price. This impacted companies such as Stellantis (whose brands include Chrysler, Citroen, Fiat, Jeep and Peugeot) as well as W, Mercedes and BMW.
Conclusion
Trump’s aggressive tariff policies are already causing ripples in global markets. As trade tensions escalate, businesses engaged in international trade should closely monitor these developments, as they could impact supply chains, costs, and market stability.
The potential impact of trade measures was summed up by Chris Southworth, the Secretary General for the International Chamber of Commerce in the UK, when he spoke to BBC News earlier today:
“Nobody wants a trade war. China, Mexico, Canada, the UK, Europe, no one in the world wants it. Everybody loses from tariffs is the truth of it.”
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