US President Donald Trump said he will discuss the tariffs he has levied on Canada and Mexico with both countries, as markets sank on fears over the impact on the global economy.
However, he downplayed expectations that they would change his mind.
“I don’t expect anything dramatic,” Mr Trump told reporters as he returned to Washington from his Mar-a-Lago estate in Florida.
“They owe us a lot of money, and I’m sure they’re going to pay.”
The 25% duties – footed by American companies importing from Mexico and Canada – sent European and Asian stocks slumping at the open this morning.
The Mexican peso and Canadian dollar also sank against the US dollar, while oil jumped despite Mr Trump placing the levy on Canada’s energy imports at 10% to limit a spike in fuel prices.
Besides the US neighbours, Mr Trump also hit China with a 10% tariff in addition to existing levies.
China, Mexico and Canada are the top three US trade partners and have all vowed to retaliate when the tariffs take effect.
Mr Trump, a fervent supporter of tariffs, had always maintained that their impact would be borne by foreign exporters without being passed on to US consumers, contradicting the opinion of a broad range of experts.
However, the Republican acknowledged that Americans might feel economic “pain”.
“But we will Make America Great Again, and it will all be worth the price that must be paid,” Mr Trump wrote in all-caps on his Truth Social media platform.
Analysts expect the trade war to slow US growth and increase prices – at least in the short term – something the president had resisted acknowledging, with frustration over rising costs seen as a major factor in his 2024 election win.
The tariffs “will immediately weigh on the US growth outlook… and prevent the US dollar from fully benefiting from Trump’s America First Policies,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“Instead, the US could end up in a less appetising America Alone setting.”
John Plassard, investment specialist at Swiss asset manager Mirabaud, said: “Investors fear that this trade war will result in a significant deterioration in the global economy.”
Mr Trump has cited illegal immigration and the trafficking of the deadly opioid fentanyl as reasons for the “emergency” measures.
But he also expressed general outrage at trade deficits, which he has long viewed as signs of unfair treatment against the United States.
“We’re not going to be the ‘Stupid Country’ any longer,” he said.
Mr Trump took particular aim at Canada in a separate social media post, repeating his call for America’s northern neighbour to become a US state.
Claiming the United States pays “hundreds of billions of dollars to SUBSIDIZE Canada,” Mr Trump said that “without this massive subsidy, Canada ceases to exist as a viable Country.”
“Therefore, Canada should become our Cherished 51st State,” he said, reiterating the expansionist threat against one of the United States’s closest allies.
The US Census Bureau said the 2024 trade deficit in goods with Canada was $55 billion.
Canadian backlash was swift, with video posted to social media showing fans booing when the US national anthem was sung during a basketball game between the Toronto Raptors and the Los Angeles Clippers.
Prime Minister Justin Trudeau has vowed to hit back with 25% levies on select US goods worth Can$155bn ($106.6bn), with a first round tomorrow followed by a second in three weeks.
The White House has not publicly announced what actions could end the tariffs.
“We’re obviously open to any other suggestions that come our way,” Canada’s ambassador to the United States Kirsten Hillman told ABC News yesterday.
Mexican President Claudia Sheinbaum said she was also awaiting Mr Trump’s response to her proposal for dialogue. She said she had directed her economy minister to “implement Plan B,” which includes unspecified “tariff and non-tariff measures.”
Mr Trump also indicated that while he would not immediately impose tariffs on Britain, it would “definitely happen with the European Union” – a threat to which the bloc said it would “respond firmly.”
There are “no winners in trade wars,” Kaja Kallas, the EU’s top diplomat in Brussels, warned this morning. “We need America, and America needs us as well.”
Taoiseach Micheal Martin said the EU and the US need to work together constructively on trade, as protectionism would hurt citizens “wherever they reside”.
Mr Trump’s tariffs will cover almost half of all US imports and would require the United States to more than double its own manufacturing output to cover the gap – an infeasible task in the near term, ING analysts wrote.
“Economically speaking, escalating trade tensions are a lose-lose situation for all countries involved,” the analysts wrote in a note.
Other analysts said the tariffs could throw Canada and Mexico into recession and usher in “stagflation” – high inflation, stagnant economic growth and elevated unemployment – at home.
Deadline
The tariffs, outlined in three executive orders, are due to take effect at 5am Irish time on Wednesday.
Markets were awaiting developments with anxiety, but some analysts said there was some hope for negotiations, especially with Canada and China.
“The tariffs look likely to take effect, though a last-minute compromise cannot be completely ruled out,” Goldman Sachs economists said in a note.
They said the levies are likely to be temporary but the outlook is unclear because the White House set very general conditions for their removal.
China left the door open for talks with the United States.
The sharpest pushback is over fentanyl.
“Fentanyl is America’s problem,” China’s foreign ministry said, adding that China has taken extensive measures to combat the problem.
