Trump started trade wars and imposed sanctions against allies and neighbors, but for some reason they did not affect Russia.
President Trump, as promised, has imposed a 25% tariff on imports from Canada and Mexico starting February 1 and raised the tariff on goods from China from 25% to 35%. At the same time, to reduce the jump in gasoline prices in the United States, which receives 17% of its oil and petroleum products from Canada, the tariff on these products will be only 10%. Trump explains this step as a fight against illegal migration and drug smuggling from the mentioned countries.
Mexico, Canada, and China are the U.S.'s top trading partners. Last year, the U.S. imported $466.6 billion in goods from Mexico, $377.3 billion from Canada, and $401.4 billion from China.
Canada, which imports $106 billion worth of goods from the United States, responded by imposing a 25% tariff on American goods, and Prime Minister Trudeau urged fellow citizens to buy goods from local producers and vacation in Canada, not the United States.
Mexican President Sheinbaum said that problems should be resolved through negotiations, not tariffs, but instructed the government to take retaliatory measures, which will include a 25% tariff on goods from the United States.
By imposing tariffs, Trump violated the free trade agreement concluded during his first term with three neighboring North American countries, the MEA. Although Canada is not only a friendly neighbor to the United States, but also its closest NATO ally.
China said the tariff hikes violated World Trade Organization rules and vowed to file a lawsuit against the US at the WTO for "unfair practices" and to take measures to protect its interests, stressing that "there are no winners in tariff wars."
Trump is convinced that the new tariffs will be paid by Canada, Mexico and China, but in fact, American consumers will pay for them. Inflation in the US will increase sharply in 2-3 months, as the price of essential goods will increase by 25%, because 70% of vegetables and fruits are imported from Mexico, cheap clothes, shoes, household goods, computers and other electronics - from China, cars and spare parts - from Canada. Giants General Motors and Ford Motor produce 88% of pickup trucks sold in the US at factories in Mexico. Almost 60% of the oil imported into the US comes from Canada, and most factories in the north of the US work on it.
A jump in inflation will negatively affect the economy and could lead to a recession. To curb inflation, the Fed will be forced to raise the discount rate, which will make loans more expensive and slow down business development.
Agricultural commodity prices in Chicago fell on Friday as the market did not believe in the introduction of tariffs. Therefore, this week, quotes will react to new tariffs in the United States and measures taken by other countries. However, any changes in trade chains will lead to the cancellation of supplies, a slowdown in the economies of all countries involved in the disputes, and a drop in prices.
In addition, Trump promises to impose tariffs against another ally, the EU, but there is not even a hint of a possible restriction on the supply of goods from the Russian Federation, one of the main opponents of the United States.
