The US economy is set to experience some “disturbance” from tariffs, President Donald Trump said Tuesday, as trade tensions flare after he imposed sweeping levies on Mexico, Canada and China.
Trump’s address to a joint session of Congress came after he pushed forth with tariff hikes on the three countries over illegal immigration and drug trafficking.
This drew a sharp rebuke from Canadian Prime Minister Justin Trudeau and retaliatory levies. China responded too with countermeasures, while Mexican President Claudia Sheinbaum similarly promised pushback.
“Tariffs are not just about protecting American jobs. They’re about protecting the soul of our country,” Trump said Tuesday.
“There’ll be a little disturbance, but we’re okay with that. It won’t be much,” he added.
Earlier Tuesday, a furious Trudeau accused Trump of trying to cause the collapse of Canada’s economy to make it easier for the US to annex his country, and blasted Washington for targeting a close ally while “appeasing” Russia over Ukraine.
Fears that the tariff spat is devolving into a brutal trade war sent global markets lower, with major Wall Street indexes tumbling.
Trump’s 25 percent duties on Mexican and Canadian imports affect everything from avocados to the lumber crucial for building US homes, snarling supply chains for key sectors like automobiles. Canadian energy resources face a lower rate.
Multiple Canadian provinces have since banned the sale of US alcohol products, as part of a broad national retaliation.
Trump also inked an order Monday to increase a previously imposed 10 percent tariff on China to 20 percent – piling atop existing levies on various Chinese goods.
Beijing condemned Washington’s “unilateral imposition of tariffs,” filing a complaint with the World Trade Organization and unveiling 10-15 percent levies on a range of agricultural imports from the US.
Tariff Relief?
Commerce Secretary Howard Lutnick however said Tuesday that Trump could dial down hefty levies on Canada and Mexico this week, while maintaining pressure on China.
“I think he’s going to work something out with them,” Lutnick told Fox Business, adding the announcement would probably come on Wednesday.
“Somewhere in the middle will likely be the outcome, the president moving with the Canadians and Mexicans, but not all the way,” he said.
On Tuesday, Trump also took aim in his speech at the European Union and countries including Brazil, India and South Korea over what he called “unfair” practices.
He said reciprocal tariffs tailored to US trading partners would “kick in” on April 2.
Analysts and businesses have warned that higher import costs could raise prices for consumers, and this may complicate efforts to bring down inflation – one of the issues that got Trump elected.
Mexico supplied 63 percent of US vegetable imports and nearly half of fruit and nut imports in 2023, according to the US Department of Agriculture.
Brian Cornell, chief executive of US retail giant Target, said Tuesday the company could be forced to raise the cost of some fruits and vegetables over the coming days.
“The short-term effect of any tariff clearly is inflation,” Charles van der Steene, the North America president for shipping giant Maersk, told CNBC. “It’s inflationary in its essence.”
Housing costs could also be hit. More than 70 percent of imports of two key building materials – softwood lumber and gypsum – come from Canada and Mexico, according to the National Association of Home Builders.
Fight to ‘Bitter End’
Ottawa’s retaliatory 25 percent tariffs on 30 billion Canadian dollars ($20.8 billion) of goods took effect early Tuesday.
Trudeau said tariffs on an additional 125 billion Canadian dollars ($86 billion) of US goods will come into force in 21 days.
Addressing the US president, Trudeau said that while he thinks Trump is a “smart guy,” the tariffs are a “very dumb thing to do.”
China said its tariffs against the US will come into effect next week and will impact tens of billions of dollars in imports, from soybeans to chicken.
Beijing also announced that imports of US lumber have been suspended, and that soybean shipments from three American exporters have been halted. China’s foreign ministry vowed to fight the US trade war to the “bitter end.”
