US President Donald Trump says sweeping tariffs that he has imposed on products from Mexico, Canada and China may cause “some pain” for people in the United States as Wall Street and the largest US trading partners signalled hope that the trade war would not last long.
Trump, who began his second term as president on January 20, defended the tariffs that he announced on Saturday.
Canada and Mexico said they were working together to face the 25 per cent US duties on imports, which promise to jolt the integrated economies of three North American countries that have had free trade agreements for decades.
Canada and Mexico immediately vowed retaliatory measures after Trump’s announcement on Saturday.
China said it would challenge Trump’s 10 per cent tariffs at the World Trade Organisation and take unspecified countermeasures.
Critics said that the moves against the three largest trading partners will hurt people in the US by driving prices higher and slowing global growth.
Trump defended his decision on social media on Sunday.
“The USA has major deficits with Canada, Mexico, and China (and almost all countries!), owes 36 Trillion Dollars, and we’re not going to be the ‘Stupid Country’ any longer,” the Republican president wrote.
Writing in capital letters, Trump added, “This will be the golden age of America! Will there be some pain? Yes, maybe (and maybe not!).”
A model gauging the economic effect of Trump’s tariff plan from EY chief economist Greg Daco suggests it would reduce US economic growth by 1.5 percentage points this year, throw Canada and Mexico into recession and usher in “stagflation” – high inflation, stagnant economic growth and elevated unemployment – at home.
Financial markets were closed over the weekend but the measures will initially be seen when US stock futures start trading at 6pm ET on Sunday.
Markets were awaiting developments with anxiety but some analysts said there had been some hope for negotiations, especially with Canada and China.
“With only two days before implementation, the tariffs look likely to take effect, though a last-minute compromise cannot be completely ruled out,” Goldman Sachs economists said in a note on Sunday.
They added that since the White House set very general conditions for their removal, the levies are likely to be temporary “but the outlook is unclear.”
The US tariffs, outlined in three executive orders, are due to take effect on at 12.01am ET on Tuesday.
Trump vowed to keep them in place until what he described as a national emergency over fentanyl, a deadly opioid, and illegal immigration to the United States ends.
China left the door open for talks with the United States.
The tariff announcement made good on Trump’s repeated vows during the 2024 presidential campaign and since taking office, defying warnings from top economists that a new trade war with the top US trade partners would erode local and global growth while raising prices for consumers and companies.
Trump declared the national emergency under laws called the International Emergency Economic Powers Act and the National Emergencies Act to back the tariffs.
Investors were considering the effects of additional tariffs promised by Trump, including those related to oil and gas as well as steel, aluminium, semiconductor chips and pharmaceuticals.
Car makers would be particularly hard hit, with new steep tariffs on vehicles built in Canada and Mexico burdening a vast regional supply chain where parts can cross borders several times before final assembly.
In a message aimed at the US public, Canadian Prime Minister Justin Trudeau said US citizens would be hurt by rising grocery and petrol prices as well as the possible shuttering of car assembly plants and limited supplies of metals and minerals.
Trudeau urged Canadians to boycott the United States and its goods.
Trudeau said on Saturday evening that Canada would respond with 25 per cent tariffs against $US155 billion ($A249 billion) of US goods including beer, wine, lumber and appliances, beginning with $US30 billion taking effect on Tuesday and $US125 billion 21 days later.
Mexican President Claudia Sheinbaum did not provide details on planned retaliatory tariffs.
A White House fact sheet said the tariffs would stay in place “until the crisis alleviated” but gave no details on what the three countries would need to do to win a reprieve.
Trump imposed only a 10 per cent duty on energy products from Canada after concerns raised by oil refiners and midwestern states.
At nearly $US100 billion in 2023, imports of crude oil accounted for roughly a quarter of all US imports from Canada, according to US Census Bureau data.
The White House officials said that Canada specifically would no longer be allowed the “de minimis” US duty exemption for shipments under $US800.
The officials said Canada, along with Mexico, has become a conduit for shipments of fentanyl and its precursor chemicals into the US via small packages that are not often inspected by customs agents.
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