Home Economy US people may feel ‘pain’ in the trade war with Mexico, Canada, and China

US people may feel ‘pain’ in the trade war with Mexico, Canada, and China

Reuters

by Akash Biswas
trade war

Donald Trump, the 47th president since taking office, has said the massive tariffs he has imposed on Mexico, Canada, and China could cause “short-term” pain for the people of the United States. When European Union leaders meet on Monday, brace for the possibility that they too will face US trade tariffs. Reuters reported.

Economic concerns over a trade war sent global stock markets and currencies lower, resulting in the pan-European STOXX 600 index falling 1.3% in morning trade and Wall Street’s S&P 500 futures down 1.4%.

Trump said he would speak on Monday (February 3) with the leaders of Canada and Mexico, who have both announced their own retaliatory tariffs on the US, but played down expectations that they would reverse the announcement.

“I don’t expect anything dramatic; they owe us a lot of money, and I’m sure they’re going to pay,” Trump told reporters in Washington.

“They don’t take our cars; they don’t take our (US) farm products. They take almost nothing, and we (the US) take everything from them,” the president told reporters on Sunday (February 2).

Due to Trump’s comments, EU leaders were expected to discuss the tariffs in Brussels on Monday, according to Reuters.

Olaf Scholz, Germany’s chancellor, said the bloc could respond with its own tariffs against US tariffs if necessary but stressed that a deal solution on trade would be better for both.

Luxembourg’s Prime Minister Luc Frieden said at Monday’s meeting that, “I think tariffs are always bad, tariffs are bad for trade, tariffs are bad for the United States.”

EU foreign policy chief Kaja Kallas believes that there is no winner in a trade war, if one starts between Europe and the US, so the side that is laughing because of it is China.

On the other hand, Trump indicated that Britain leaving the EU in 2020 would be exempt from any tariffs, according to Reuters.

Tariff imposed on Tuesday

The tariffs of 25% on Canada and Mexico and 10% on China will take effect at 12:01 ET (0501 GMT) on Tuesday, as outlined in Donald Trump’s executive order. That would slow global growth and raise prices for Americans, the three largest trading partners of the United States.

“We may have short term some little pain, and people understand that. But long term, the United States has been ripped off by virtually every country in the world,” Trump said.

Financial market reactions on Monday reflected concerns about the fallout from a trade war, with the Chinese yuan, Canadian dollar, and Mexican peso all falling against a rising dollar and US oil prices jumping more than $1, while gasoline futures rose nearly 3%.

ING (Internationale Nederlanden Groep) analysts wrote that Trump’s tariffs would cover about half of all US imports and require the US to more than double its own manufacturing output to fill an unlikely jobs gap in the near term.

According to Reuters, other analysts said the tariffs could plunge Canada and Mexico into recession and trigger a new wave of high inflation, stagnant economic growth, and elevated unemployment.

Also Read: US crude oil inventories rose and prices fell

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