President Donald Trump acknowledged that the sweeping tariffs imposed on Mexico, Canada, and China could result in “short-term” pain for Americans, as global markets expressed concerns over potential growth setbacks and inflation during the trade war.
Trump said he would talk on Monday with the leaders of Canada and Mexico, who have announced retaliatory tariffs of their own, but downplayed expectations that they would change his mind.
“I don’t expect anything dramatic,” Trump told reporters as he returned to Washington from his Mar-a-Lago estate in Florida. “They owe us a lot of money, and I’m sure they’re going to pay.”
Tariffs On EU
He also said tariffs would “definitely happen” with the European Union, but did not say when.
Economists said Republican president Trump’s plan to impose 25% tariffs on Canada and Mexico and 10% tariffs on China – the United States’ three largest trading partners – will slow global growth and drive prices higher for Americans amid the trade war.
Trump says they are needed to curb immigration and narcotics trafficking and spur domestic industries.
“We may have short-term some little pain, and people understand that. But long term, the United States has been ripped off by virtually every country in the world,” he said.
Financial market reaction on Monday reflected concerns about the fallout from a trade war. U.S. stock futures, fell more than 2%. Shares across Asia, including Hong Kong, Tokyo and Seoul also slid around 2%. The mainland China market was shut for the Lunar New Year holidays.
The Chinese yuan, Canadian dollar and Mexican peso all slumped against a soaring dollar. With Canada and Mexico the top sources of U.S. crude oil imports, U.S. oil prices jumped more than $1, while gasoline futures rose 3%.
North America Braces For Duties
North American companies braced for new duties which could upend industries from autos to consumer goods to energy.
Trump’s tariffs will cover almost half of all U.S. imports and would require the United States to more than double its own manufacturing output to cover the gap – an unfeasible task in the near term, ING analysts wrote.
“Economically speaking, escalating trade tensions are a lose-lose situation for all countries involved,” the analysts wrote in a note on Sunday.
Other analysts said the tariffs could throw Canada and Mexico into recession and usher in “stagflation” – high inflation, stagnant economic growth and elevated unemployment – at home.
Trump’s Tuesday Deadline
The Trump tariffs, outlined in three executive orders, are due to take effect 12:01 a.m. ET (0501 GMT) on Tuesday.
Some analysts said there was some hope for negotiations, especially with Canada and China.
Goldman Sachs economists said the levies are likely to be temporary but the outlook is unclear because the White House set very general conditions for their removal.
A White House fact sheet gave no details on what the three countries would need to do to win a reprieve.
Tariffs To Stay
Trump vowed to keep them in place until what he described as a national emergency over fentanyl, a deadly opioid, and illegal immigration to the United States ends.
China has said it will challenge the tariffs at the World Trade Organization and take other countermeasures, but also left the door open for talks with the United States.
Its sharpest pushback was over fentanyl.
“Fentanyl is America’s problem,” China’s foreign ministry said, adding that China has taken extensive measures to combat the problem.
Mexico Vows Resilience
Mexican President Claudia Sheinbaum, raising her fist in the air in a speech outside the capital, vowed resilience. She accused the United States of failing to tackle its fentanyl problem and said it would not be solved by tariffs.
Sheinbaum said she would provide more details on Monday of the retaliatory tariffs she ordered on the weekend.
Canada said on Sunday it will take legal action under the relevant international bodies to challenge the tariffs.
Trudeau Calls For ‘Boycott’
Prime Minister Justin Trudeau also encouraged Canadians on Sunday to boycott their longtime ally after ordering retaliatory tariffs against $155 billion of U.S. goods, from peanut butter, beer and wine to lumber and appliances.
Canadian officials said they were preparing measures to help businesses that might be hurt by the trade war.
Trump has heaped derision on Canada in particular, with calls for the country to become the 51st U.S. state. On Sunday, he said Canada “ceases to exist as a viable country” without its “massive subsidy.”
(With inputs from Reuters)
