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Donald Trump has imposed a swath of tariffs on Canada, Mexico and China, sparking immediate retaliation from Beijing and sending global stock markets lower as fears mount over a full-blown trade war.
In the most sweeping trade measures since returning to the White House in January, the US president hit imports from Canada and Mexico with a 25 per cent tariff that went into effect on Tuesday.
The White House also imposed an additional 10 per cent tariff on Chinese imports on top of a 10 per cent levy imposed last month.
Trump has accused the three countries of failing to clamp down on the trafficking of the deadly opioid fentanyl while also demanding that Mexico and Canada tighten their borders.
The moves drew an instant response from Beijing, which said it would levy a 10-15 per cent tariff on US agricultural goods, ranging from soyabeans and beef to corn and wheat, from March 10. Canada earlier vowed retaliation with a tariff against $30bn of US imports.
The tariffs against the US’s three largest trading partners raised duties to some of the highest levels in decades, and come after Trump last month gave Canada and Mexico a 30-day reprieve from the measures.
Mitul Kotecha, head of emerging markets macro and FX strategy at Barclays, said risk assets “are taking a bit of a beating” as investors raced to assess risks of a series of retaliatory measures.
Hong Kong’s Hang Seng index and mainland China’s CSI 300 benchmark fell as much as 2 per cent and 0.8 per cent respectively before recouping their losses to trade flat. Japan’s exporter-heavy Nikkei 225 slid 1.2 per cent, while Australia’s S&P/ASX 200 retreated 0.6 per cent.
The declines across Asia follow steep falls on Wall Street, where the S&P 500 closed almost 2 per cent lower and the Nasdaq Composite fell 2.6 per after Trump confirmed late on Monday that the tariffs would go into effect.
Futures indicate that European stocks will drop at the open, with contracts tracking the Euro Stoxx 50 index down 0.8 per cent and those for the FTSE 100 0.5 per cent weaker.
“Equities are taking a leaf from the US moves overnight,” said Kotecha. “We had some pretty sharp moves in US stocks, so I think this is a reaction to that. If the US slows it’s obviously not good for the rest of the world.”
In foreign exchange markets, the dollar fell 0.2 per cent against a basket of currencies, including the euro, yen and pound, following a 0.8 per cent drop on Monday.
Mexico’s peso weakened 0.3 per cent against the US dollar to 20.8 while the Canadian dollar dropped 0.3 per cent to C$1.45 versus the US currency before recovering.
The levies against Ottawa are set at 25 per cent except for Canadian oil and energy products, which face a 10 per cent tariff. Canada accounts for about 60 per cent of US crude imports.
In its response, China also targeted US companies, placing 10 companies on a national security blacklist and slapping export controls on 15 others.
It also banned US biotech company Illumina from exporting its gene-sequencing equipment to China. Beijing had added Illumina to its “unreliable entities” list last month in response to Trump’s initial barrage of tariffs.
China’s commerce ministry earlier hit back at the US justification of the tariffs over fentanyl flows, saying the claim “disregards facts, international trade rules and the voices of all parties, and is a typical act of unilateralism and bullying”.
China’s foreign ministry also threatened to withdraw co-operation with the US on drug controls, which resumed under Joe Biden’s administration.
“If the US continues to use the fentanyl issue to pressure, blackmail, coerce and threaten China, it will only be counter-productive and deal a blow to the dialogue and co-operation between China and the US in the field of drug control,” the ministry said.
