Tariff salvos fired in U.S. trade war with Allies
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This weekend, Donald Trump declared economic war against two of America’s closest trading partners and three other allies. Canada and Mexico, two U.S. allies, responded quickly with counterattacks. There will be some economic losses. Mexico was hit with a 25 percent tariff on all its goods. Canada received the same treatment, with the exception that oil and gas exports will be subjected to a 10% tax.
In addition, China was slapped with an additional 10% tariff on top of those already in effect.Allies RespondTrump signed executive orders launching the Tariffs Saturday. Canada and Mexico responded with tariff plans on U. S. products later that day.
Such a economic attack against neighboring countries is unprecedented, including Canada and Mexico who are the United States’ largest trading partners. Many, including Justin Trudeau, Canadian Prime Minister, believe that the tariffs are unnecessary. Trudeau said that the actions of Trump were unnecessary. From the beaches of Normandy to the mountains of the Korean Peninsula, from the fields of Flanders to the streets of Kandahar, we have fought and died alongside you during your darkest hours.”
Mexico’s
President Claudia Sheinbaum said in a video announcement that her country will have further details on its Tariff response today.
China’s response to Trump’s actions follows a precedent it established in response to tariffs set on its electric vehicles by the European Union. China has filed a lawsuit against the tariffs at the World Trade Organization. The country’s commerce ministry said Trump’s move
“seriously violates” international trade rules
.
In addition, China said it would enact “countermeasures”, but offered no specifics.The WTO challenge is only symbolic since Trump blocked the appointment of judges to the organization in 2019.Economic Reaction
“The tariffs on Mexico and Canada is actually the worst possible news for US equities and the US economy
,” Thomas Brenier, head of equities at Lazard Freres Gestion told Barron’s. “It’s bad news for the US industrial complex and will severely raise costs for carmakers and disrupt supply chains.” How Tariffs Drive Up PricesTariffs are a form of trickle-down taxation on consumers. How it works with goods imported into America These companies raise their prices to cover the tariffs.
Those firms raise their prices in order to cover tariffs.
The American businesses buying imported goods increase their prices in order to cover higher import prices caused by tariffs.
You end up paying more.
Trump steadfastly maintained during his campaign that tariffs wouldn’t hurt U. S. consumer. In his campaign, Trump steadfastly maintained that tariffs would not hurt U. S. consumers. Many people say that it is a tax. No, , it’s not a tax on our country.
On Truth Social, the president wrote a retraction Sunday.
“WILL THERE EVEN BE PAIN? But we will make America great again, and it will all be worth the price that must be paid. BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID.”
- Tariffs and Your Taxes
- Trump’s levies on Canada, Mexico, and China
- would add over $830 to the tax bill of the average American household in 2025
- , according to an estimate from the Tax Foundation.
Further, economic output, resulting from the tariffs, would drop by 0.4%.On top of that, Moody’s Chief Economist Mark Zandi said in November that Trump’s tariffs amount to a tax increase on families[…].
“Broad-based tariffs on the scale former President Trump has proposed will act as a massive tax increase on American families as they pay more for all imports, cutting into their purchasing power and thus weighing heavily on their spending and the overall economy,” Zandi told CNBC.
Business Groups on Tariffs
Long before Trump’s action Saturday, economists and business leaders were sounding alarms over launching a trade war. Here are some of their comments:
“Ultimately, manufacturers will bear the brunt of these tariffs, undermining our ability to sell our products at a competitive price and putting American jobs at risk.” –
Jay Timmons, National Association of Manufacturers CEO
“More than 70% of the imports of two essential materials that home builders rely on — softwood lumber and gypsum (used for drywall) — come from Canada and Mexico, respectively.“Tariffs on lumber and other building materials increase the cost of construction and discourage new development, and consumers end up paying for the tariffs in the form of higher home prices.” – Carl Harris, chairman of the National Association of Home Builders
“Tariffs on all imported goods from Mexico and Canada – especially on ingredients and inputs that aren’t available in the U.S. – could lead to higher consumer prices and retaliation against U.S. exporters.” –
Tom Madrecki, Consumer Brands Association’s vice president of supply chain resiliency
A Man Without A Plan?
Researchers and investment professionals have also expressed dismay at Trump’s actions.“Trump is winging it, saying we have a large trade deficit with Canada when we don’t and that Canadians are responsible for fentanyl coming across the border when they aren’t. This lack of policy is inevitably going to lead to some sort of reversal because there’s no overall strategy.” –
Derek Scissors, a senior fellow at the conservative American Enterprise Institute.
“The market has already priced in quite a lot on the US tariffs issue, but there’s always a risk that Trump will go beyond what’s expected. There’s a general feeling of uncertainty that goes beyond the tariff issue: Trump is completely unpredictable
.” – Gilles Guibout, head of European equities at AXA IM.
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