Economy

US Trade War: Everything You Need to Know About Tariffs on Canada, Mexico, and China

The United States has reignited global trade tensions by imposing new tariffs on imports from China, Canada and Mexico despite the heightened global risk due to the Russia-Ukraine war and the unrest in the Middle East.

The latest round of tariffs announced by President Donald Trump includes a 10% tariff on Chinese goods and a 25% tariff on imports from Canada and Mexico despite existing trade agreements between the three North American nations.

What Led to the New Tariffs?

The tariffs were imposed as part of the U.S. government’s broader strategy to address trade imbalances, combat illegal trade practices and pressure trading partners into new agreements.

Trump cited national security concerns, job protection and a response to ongoing disputes over trade policies as key reasons behind the new measures.

Breakdown of the Tariffs

  • China: A 10% tariff now applies to a wide range of imports, including electronics, machinery, and consumer goods. The White House has warned that further increases up to 100% could follow.
  • Canada and Mexico: 25% tariffs have been imposed on various imports, particularly affecting the automotive, steel, and agricultural sectors. However, these tariffs have been temporarily paused for 30 days while negotiations continue.
  • Other Countries: While the immediate focus is on North America and China, analysts warn that other trading partners could also be impacted as the U.S. reevaluates its trade agreements.

China’s Response and Retaliation

In response to the tariffs, China has launched an antitrust investigation into Alphabet’s Google and introduced tariffs of up to 15% on U.S. coal, liquefied natural gas, agricultural equipment and oil.

Effective February 10, 2025, these measures are expected to impact American exporters.

Analysts predict these tariffs may reduce Chinese GDP growth by 0.5 percentage points and increase global uncertainty.

China has also hinted at revisiting the 2020 trade deal, which included a commitment to purchase $200 billion worth of American goods, a target it has not fully met.

Global Market Reaction

The announcement triggered a sharp decline in global stock markets as investors reacted to fears of supply chain disruptions and inflationary pressure.

  • In the U.S.: The Dow Jones Industrial Average fell over 500 points while S&P 500 futures declined by 1.9% and Nasdaq futures tumbled by 2.8%.
  • In Europe: The FTSE 100 dropped 1.4% while Germany’s DAX and France’s CAC declined by 1.6% and 1.5%, respectively.
  • Asian Markets: The Nikkei fell by 2.9%, Hong Kong stocks lost 1.1%, and Australia’s benchmark dropped by 1.8%.

Hedge funds and institutional investors have started divesting from equities, shifting capital to real estate stocks and commodities as a hedge against inflation.

Impact on the Global Economy

1. Supply Chain Disruptions

The tariffs are expected to cause delays in manufacturing and distribution, particularly in the automotive and semiconductor industries, which rely heavily on global supply chains.

2. Increased Consumer Prices

Businesses will likely pass on the additional costs to consumers, leading to higher prices for goods, especially electronics, vehicles, and industrial equipment.

3. Oil Price Volatility

With China imposing tariffs on U.S. oil and energy exports, global oil prices could become increasingly unstable, affecting major oil-exporting nations, including Nigeria.

4. Pressure on Emerging Markets

Emerging markets, including Nigeria and other African economies, could face reduced foreign investments as investors retreat to safer assets amid heightened trade uncertainties.

What’s Next?

The trade war is expected to intensify in the coming weeks with further developments anticipated at the upcoming Beijing political summit in April 2025.

Meanwhile, analysts warn that prolonged trade disputes could lead to a slowdown in global growth with major economies like the U.S. and China facing recessionary risks if tariffs continue to escalate.

For businesses and investors, navigating this evolving landscape will require careful monitoring of trade policies, strategic supply chain adjustments and investment diversification.

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