Donald Trump’s expansion of tariffs to cover the top three trading partners of the United States has been met with promises of retaliation and a retreat in stock market values globally.
It was confirmed overnight that tariffs on goods from Mexico, Canada and China had come into effect.
The new tariffs will be felt heavily by all importers but also US companies which have factories in Canada and Mexico, such as carmakers.
Mr Trump said: “They’re going to have a tariff. So what they have to do is build their car plants, frankly, and other things in the United States, in which case they have no tariffs.”
But he added that there was “no room left” for a deal that would see the tariffs shelved. if fentanyl flowing into the US is curbed by its neighbours.
Mexico and Canada face tariffs of 25%, with 10% for Canadian energy, the Trump administration confirmed.
And tariffs on Chinese imports have doubled, raising them from 10% to 20%.
More on Donald Trump Related Topics: Donald TrumpTariffsCanada announced it would retaliate immediately, imposing 25% tariffs on US imports worth C$30bn (£16.3bn). It added the tariffs would be extended in 21 days to cover more US goods entering the country if the US did not lift its sanctions against Canada.
At a news conference, outgoing prime minister Justin Trudeau described the charges as “dumb” and said Canadian companies would be given government support that would even extend to protections against takeover interest caused by the trade war.
Mexico threatened both reciprocal tariffs along with non-tariff measures.
China also vowed to retaliate and reiterated its stance that the Trump administration was trying to “shift the blame” and“bully” Beijing over fentanyl flows.
2:45 What is America’s trade position?Stock markets were down sharply across the world on Tuesday, with US indexes the Dow Jones Industrial Average and the Nasdaq Composite on course for big falls above 1% for a second day.
Share prices for carmakers were among the worst performers.
Companies including General Motors, VW and Mercedes saw sharp falls as each has factories in Mexico which sell into the US.
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European stock markets had achieved record levels on Monday on the back of higher defence spending pledges.
But the German DAX was more than 3% off. Its leading faller was Continental, the car parts manufacturer best known for its tyres, which saw an 11% decline.
The CAC in Paris was down by more than 2% while the FTSE 100 closed 1.3% lower as fears of an expanded trade spat overcame global growth hopes.
The implications were playing out more widely with oil costs down by 1.5% – with Brent crude trading at $70 a barrel.
Cryptocurrencies were hit too amid the flight from risk. Bitcoin was trading at $83,170 – far below the $100k+ witnessed when Mr Trump took office.
There was also evidence that investors saw the tariffs as an own goal as the US dollar – usually a safe haven in times of market woes – also came under pressure.
The main threat to the US is that higher import costs, caused by tariffs, push up inflation as those costs are passed on.
Consumers in the US could see price hikes within days, one expert said.
Gustavo Flores-Macias, a public policy professor at Cornell University, New York, said “the automobile sector, in particular, is likely to see considerable negative consequences”.
This is due to supply chains that “crisscross the three countries in the manufacturing process” and ” because of the expected increase in the price of vehicles, which can dampen demand,” he added.
Read more:The effects of Trump trade tariffs explainedTrump may have talked America into recession before a trade tariff was imposed
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The Trump administration is gearing up to bring in other tariffs in the coming weeks.
On 2 April, reciprocal tariffs will take effect on all countries that impose duties on US products.
He is also considering 25% tariffs on goods from the EU “very soon” after claiming the bloc was created to “screw the United States”.