China and Canada Retaliate Against New US Trade Tariffs
Markets Plummet as US Tariffs on Canada, Mexico, and China Take Effect
China and Canada have announced countermeasures in response to the latest trade tariffs imposed by former US President Donald Trump, despite warnings that such actions could escalate into a global trade war.
The new US tariffs, effective immediately, impose a 25% duty on goods imported from Canada and Mexico—its two largest trading partners—while Chinese imports face a 20% tariff, doubling the rate imposed just a month prior.
The tariffs impact over $918 billion (£722 billion) worth of imports from Canada and Mexico. In response, China has announced fresh duties on various US agricultural imports, set to be implemented next week. The Chinese Finance Ministry stated that a 15% tariff will be applied to chicken, wheat, corn, and cotton, while a further 10% tariff will be levied on sorghum, soybeans, pork, beef, seafood, fruits, vegetables, and dairy products. Additionally, China has lodged further complaints against the US with the World Trade Organization.
Canadian Prime Minister Justin Trudeau declared immediate 25% tariffs on C$30 billion (£16.3 billion) worth of US imports, targeting products such as beer, wine, bourbon, home appliances, and Florida orange juice. If Trump’s tariffs remain in place for 21 days, Canada will extend duties to another C$125 billion (£68 billion) worth of American goods. Trudeau warned that the tariffs would severely disrupt trade relations and violate the US-Mexico-Canada free trade agreement, which Trump had signed during his first term.
Mexican President Claudia Sheinbaum criticized the move as unjustified and confirmed that her government would enact both tariff and non-tariff countermeasures in response.
Market Reaction and Economic Impact
Global markets reacted negatively to the escalating trade tensions. Asian markets experienced declines, following sharp drops in US markets on Monday. Japan’s Nikkei fell by 1.2%, Taiwan’s TWII index dropped 0.5%, and Hong Kong’s Hang Seng slipped 0.3%. The Canadian dollar and Mexican peso hit their lowest levels in a month, while the US dollar index fell to a three-month low, declining by 0.75%.
In Europe, the FTSE 100 lost 81 points (0.8%), after recently surpassing 8,900 points for the first time. Germany’s DAX and Spain’s IBEX fell by more than 2%, while France’s CAC 40 dropped nearly 2%.
Trump’s Justification and Business Concerns
Trump and his supporters argue that increasing tariffs on US imports will strengthen America's negotiating position globally and support domestic industries. However, businesses within the US and worldwide have raised concerns over potential economic disruptions. Since his election victory in November, Trump has targeted China, Canada, and Mexico, threatening high tariffs unless they reduce what he calls the "unacceptable" levels of illegal drugs entering the US.
Economic experts warn that these tariffs could have significant financial consequences for US consumers. The Peterson Institute for International Economics estimated that the new tariffs amount to the largest tax hike in a generation, costing the average American household over $1,200 annually.
Trump has pledged to take further action, threatening to impose “reciprocal” tariffs on nations that currently levy duties on US-made goods, with potential new measures set to take effect as early as next month.
US-China Trade Dispute Intensifies
US Treasury Secretary Scott Bessent expressed confidence that Chinese manufacturers would absorb the cost of tariffs, stating, “China’s business model is export, export, export, and that’s unacceptable. I am highly confident that Chinese manufacturers will eat the tariffs; prices won’t go up.”
Trump justified the tariffs on China by citing Beijing’s failure to curb illicit fentanyl shipments into the US, a claim the Chinese government dismisses as a mere pretext for economic pressure.
China remains defiant, with Foreign Ministry spokesperson Lin Jian stating, “China opposes this move and will do what is necessary to firmly safeguard its legitimate interests. If the United States insists on a tariff war, a trade war, or any other form of confrontation, China will fight them to the bitter end.”
China’s Finance Ministry criticized the US’s unilateral tariff hikes, arguing that they undermine the global trading system, increase costs for US businesses and consumers, and erode the foundation of economic cooperation between the two nations. However, China also confirmed that US goods shipped before March 10 and arriving before April 12 would be exempt from the new tariffs.
The latest round of tariffs signals a deepening of global trade tensions, with potential long-term consequences for the world economy.
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