Donald Trump’s tariff threats have spooked foreign companies and governments, and many fear it could signal the beginning of an all-out trade war when he returns to the White House next year.
The president-elect issued a warning to allies and rivals alike on Monday, vowing to immediately impose flat 25% tariffs on Canada and Mexico and an additional 10% tariff on China.
Analysts believe this threat, fulfilling his campaign promise to impose 10% tariffs on all U.S. imports, would trigger retaliation and have ripple effects across the global economy.
“We assume that all other countries, especially other developed countries in Asia, will retaliate in kind,” Bernard Jarosz, an economist at Oxford Economics, told AFP.
He said U.S. tariffs and retaliation from Europe, Asia and other countries would “depress growth” and hinder trade flows, estimating that global growth would fall by 0.1 to 0.9 percentage points in 2026. .
ING economists Ruben DeWitt and Inga Fechner warned in a note that even before the tariffs go into effect, the threat could weigh on sentiment and slow investment and hiring.
President Trump has long viewed tariffs as a negotiating tool, or, as a recent Wall Street Journal editorial put it, “an all-purpose cudgel.”
President Trump said Monday that tariffs on Mexico and Canada will only be lifted if illegal immigration and drug trafficking into the United States is stopped.
Petros Mavroidis, a professor at Columbia University Law School, said that while he was seeking to increase U.S. influence, there was also a risk of long-term consequences, with some suggesting it would push countries closer to China. .
“What he is definitely doing is alienating all of our allies,” he told AFP.
Erin Murphy, a senior fellow at the Center for Strategic and International Studies, said Trump’s threats “make no difference” to countries’ economic development or affinity with the United States.
European backlash
DeWitt and Fechner said Europe could be particularly affected, warning that “a new trade war is looming and the eurozone economy could slide from low growth to recession.”
EU car import tariffs were a particular target of President Trump during the campaign.
However, the US’ dependence on the EU for strategically important products, particularly in the chemical and pharmaceutical sectors, could give the EU some leverage in negotiations, ING said.
“European countries would be less likely to do any kind of deal with President Trump than Canada or Mexico,” said Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics.
He expects the EU may be able to offer lower auto tariffs and buy more U.S. agricultural products such as soybeans, but that may not be enough for an administration seeking greater market access and exemptions from rules. There is sex.
If the U.S. imposes tariffs, the EU would likely retaliate on iconic U.S. products such as iPhones and whiskey, he said.
European countries may turn to the World Trade Organization (WTO), but even a favorable ruling from the international body may not significantly change U.S. practices.
EU Prime Minister Ursula von der Leyen said she would strive for “constructive cooperation” with U.S. authorities.
Meanwhile, the EU’s ambassador to the US, Jovita Neliupcien, said the EU was ready to respond to new trade tensions.
Avoiding escalation
In Asia, economies such as Japan and South Korea could be targeted over exports of metals and cars, while Vietnam could also come under U.S. scrutiny over solar panels, Yaros said.
The US trade deficit with Vietnam has widened in recent years due to a rapid increase in product imports.
Jarosz said countries targeted by President Trump’s tariffs “will retaliate in ways that match, if not exceed, the actions of the United States” in an effort to avoid escalation.
It added that China may avoid equal retaliation for measures such as export controls based on precedent.
Daniel Russell of the Asia Society Policy Institute said both Tokyo and South Korea are very focused on preparing for potential tariffs.
He expects partner countries like South Korea may seek exemption from U.S. blanket tariffs, for example because of their high-tech investments in the United States.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
