Trump’s Trade War Escalates: Will It Crash the Global Economy?

Trump’s Tariffs Trigger Retaliation – What’s Next for Global Trade?

Trump Tariffs: All You Need To Know About The US Trade War

The tariff-related trade war started by Donald Trump does not seem to be ending. The tariffs imposed on countries by the US President are now facing serious retaliations. Trump announced increased tariff imposition on Canada, China, and Mexico. In return, all three countries, which are also the biggest importers of US goods, responded with tariff imposition on the US goods.

From Tuesday midnight, a 25% US tariff was imposed on all goods imported from Canada and Mexico, along with a 10% tariff on goods from China. As a result, China has now announced imposing up to 15% tariffs on several US goods. Canada vowed up to 25% tariffs while the Mexican President also promised countermeasure enactment the coming Sunday.

The new Chinese levies include a 15% tariff on wheat, corn, chicken and cotton, and a 10% tariff on soybeans, sorghum, fruits, vegetables, dairy and fish products, pork and beef. These will take effect on March 10. The Chinese state media has earlier reported targeting US agricultural products. It blamed the US for undermining cooperation between the two countries and hurting the American businesses and consumers along with international trade.

How Does the Fentanyl Crisis Influence US Trade Policies?

Fentanyl is a potent synthetic opioid drug. Trump had been threatening tariffs against Mexico and Canada since November. However, he had blamed the two countries for failing to stem the international flow of fentanyl and other illicit drugs too. Precursor chemicals for fentanyl are known to be shipped from China to Mexico for processing into the deadly opioid, and then they are smuggled to the US and Canada, however, they denied any role in the international flow of the drug.

As per Chinese Foreign Affairs Ministry Spokesperson, Donald Trump has justified his tariffs on the three countries, giving the fentanyl issue as an excuse to wage the ongoing trade war.

China will now add 10 US companies to its ‘unreliable entity’ list and also 15 to the export control list. Beijing will also file a lawsuit with the WTO over the new 10% tariff, which it also did for the earlier 10% tariff imposition on Chinese goods starting Feb 4. The combined 20% tariffs on Chinese goods by the United States are on top of those imposed during Trump’s first term. Some of those were even sharply increased by Joe Biden.

US vs Canada

Canadian President Justin Trudeau blames Trump for making gas, cars, and groceries costlier for the Americans. He also blames him for disrupting the trading relationship. In Canada, Ontario Premier Doug Ford said they're ready to cut off electricity transmission from his province to the US along with the shipment of nickel. The latter would shut down manufacturing as 50% nickel used in the US comes from Ontario.

Trump’s raising tariffs as he believes that the idea of high taxes on foreign products will push companies to manufacture their goods in the U.S. instead of outsourcing to other countries. His argument is that this move will create more jobs for American workers and strengthen the country’s economy.

National People’s Congress

The biggest political event of the year is to be held in China this week. There will be discussions on the ruling Chinese Communist Party’s priorities and goals along with the approach it will be taking toward the Trump administration.

China had spared US agriculture post the first 10% tariff imposition. However, it does not seem to remain patient anymore. Notably, the senior economist at the Economist Intelligence Unit, Beijing, has said in an email, “Sounds like it’s telling the U.S. that ‘we’re going to hit you hard if you don’t stop.’” 

What Next? Impact on Crypto Market

The tariff imposition by the United States has already resulted in a crypto market crash. There was a sharp crypto market decline, with the total market cap dropping to $2.77 trillion, reflecting an 8.64% decrease in just 24 hours. Now that the countries are retaliating, the impact on the market is something to keep an eye on. It will be interesting to see which direction the trade war goes.

“Bitcoin and Ethereum holding steady while stocks slide suggests that crypto traders already priced in macro risks before traditional markets fully reacted,” Ben Kurland, CEO at crypto research platform DYOR.com. “The tariff war, inflation concerns and broader economic uncertainty have been weighing on equities, but crypto had its major sell-off earlier, which likely flushed out excess leverage.”