President Donald Trump’s recent tariffs on imports from Canada, Mexico, and China have sent US stock markets tumbling amid fears of a wider trade war that could hurt the economy. The S&P 500 index fell for a second day to its lowest level since November when Trump won the election. The president followed through on his threat to impose 25% tariffs on Canada and Mexico and a 20% levy on China.
The move drew swift retaliation, including from Canadian Prime Minister Justin Trudeau, who warned that targeting the US neighbor and close trade partner was a “very dumb thing to do.”
Trump responded on social media, saying, “Please explain to Governor Trudeau, of Canada, that when he puts on a Retaliatory Tariff on the U.S., our Reciprocal Tariff will immediately increase by a like amount!”
US Commerce Secretary Howard Lutnick suggested that Trump could be ready to negotiate with Canada and Mexico. “I think he’s going to work something out with them,” he told Fox News. “I think he’s going to figure out, ‘You do more, and I’ll meet you in the middle some way’, and we’re probably going to be announcing that tomorrow.”
Goods worth billions of dollars cross the borders of the US, Canada, and Mexico each day, and their economies are deeply integrated.
Stock markets in the US and globally have fallen since Trump announced on Monday that the tariffs would go ahead. Canada and China have already announced retaliatory import taxes on US goods. Mexico’s President Claudia Sheinbaum said the country would announce a response on Sunday that would include “tariff and non-tariff measures.”
American retailers and carmakers were among the hardest hit, with electronics chain Best Buy’s share price closing more than 13% lower.
The company had warned earlier that the tariffs would lead to higher prices for its shoppers.
trump’s tariffs impact global markets
“The giant wildcard obviously is how the consumers are going to react to the price increases in light of a lot of price increases potentially throughout the year,” said Best Buy’s chief financial officer Matt Bilunas.
Trump said he was imposing the tariffs in response to what he called the unacceptable flow of illegal drugs and immigrants into the US. Trudeau called that justification “completely bogus” and warned that Canada’s retaliatory measures would hurt. China also swiftly announced counter-measures, which include 10-15% tariffs on some US agricultural goods like wheat, corn, beef, and soybeans.
China is the US’s biggest buyer of these goods. “If the United States persists in waging a tariff war, a trade war, or any other kind of war, the Chinese side will fight them to the bitter end,” foreign ministry spokesman Lin Jian said. Trump has also threatened to impose 25% tariffs on the EU, recently claiming that the bloc had been “formed to screw the United States.” Europe has pledged to hit back, but no tariffs have been implemented yet.
Analysts have warned that tariffs could lead to economic recessions, push up prices for US households, and have a knock-on effect on consumers across the world, including in the UK. Chancellor Rachel Reeves said, “I don’t think it serves anyone well. And it’s absolutely the case that even if tariffs aren’t applied to the UK, we will be affected by slowing global trade, by slower economic growth, and by higher inflation than otherwise would be the case.”