President Donald Trump’s sweeping tariffs on major U.S. trading partners have sparked retaliation, sending global markets downward and raising concerns about economic impacts on global consumers.
The new duties, which took effect Tuesday, March 4, impose 25% tariffs on goods from Canada and Mexico and double existing tariffs on Chinese imports to 20%. The measures affect more than $918 billion worth of U.S. imports from Canada and Mexico alone.
China’s finance ministry announced it would impose 15% tariffs on U.S. agricultural products including chicken, wheat, corn, and cotton, with additional 10% tariffs on sorghum, soybeans, pork, beef, and dairy products. These measures will take effect next Monday.
“The US’s unilateral tariff increase damages the multilateral trading system, increases the burden on US companies and consumers, and undermines the foundation of economic and trade cooperation between China and the US,” the Chinese ministry said in a statement.
China has also taken additional steps, blocking U.S. lumber imports and suspending soybean import qualifications from three American exporters, according to Reuters reporting.
Canadian Prime Minister Justin Trudeau announced immediate 25% tariffs on C$30 billion ($20.7 billion) of U.S. imports, with plans to place tariffs on another C$125 billion ($86.2 billion) of U.S. goods if Trump’s measures remain in place after 21 days.
“Tariffs will disrupt an incredibly successful trading relationship,” Trudeau said, and claimed they violate the U.S.-Mexico-Canada free trade agreement signed by Trump during his first term.
Many Canadian businesses have reportedly been preparing for this moment.
“A lot of companies have taken months and months of inventory and they’ve transferred it to the United States already,” said Joy Nott, a partner in KPMG’s customs and international trade practice. “So I’m talking to companies who have maybe moved six to eight months worth of inventory to the United States, which normally that stuff would have been stored in Canada and shipped across as needed.”
Mexico’s President Claudia Sheinbaum said she would announce targeted U.S. products for retaliatory tariffs on Sunday. She rejected White House accusations about Mexico’s mishandling of drug and human trafficking.
“We collaborate to avoid illegal drug trafficking to the United States, but as we have said on multiple occasions, that country’s government must take responsibility too for the crisis of opioid consumption that has caused so many deaths in the United States,” Sheinbaum said.
Financial markets have reacted negatively to the escalating trade tensions. Asian markets fell on Tuesday, with Japan’s Nikkei down 1.6%, and European markets followed suit with the FTSE 100 dropping 0.65%. The Canadian dollar and Mexican peso fell to their lowest levels in a month.
U.S. companies are already warning of impacts. Target issued a profit warning Tuesday, citing “tariff uncertainty and the expected timing of certain costs within the fiscal year.” Walmart previously issued similar guidance.
Economists have warned that American consumers will ultimately bear much of the cost. The Peterson Institute for International Economics estimates the tariffs will amount to “the largest tax increase in at least a generation” and could cost typical U.S. households more than $1,200 annually.
Undaunted, Trump has signaled his tariff plans could expand further. The administration is considering their own “reciprocal” tariffs on countries that have their own duties on U.S. goods, potentially as soon as April, along with new levies on imported automobiles.
Meanwhile, some analysts suggest that the Trump administration and China have left themselves off-ramps to avoid further escalation.
“So far, China has given a measured, proportional response as they do not want to further escalate the situation,” said Henry Gao, a law professor at Singapore Management University, told Yahoo Finance.