Impact of US tariffs: shaking markets and assets

• Trump confirms the continuation of tariffs on Canada and Mexico and doubles the tariffs against China.
• China responds with counter-tariffs on U.S. imports and other tough measures.
• Canada retaliates with tariffs, vows more if Trump doesn't back down.

US President Donald Trump confirmed that tariffs on Mexico, Canada and China would go into effect on Tuesday, raising fears of new trade conflicts that could have negative economic impacts, particularly in terms of rising prices.

Global Response to Trump’s Tariff Hike

Trump confirmed that the tariffs would affect imports from Mexico and Canada, while doubling tariffs on Chinese goods to 20%, which could affect $2.2 trillion in US trade with these parties.

Canada and China responded quickly to the decision, with China announcing additional tariffs of 10-15% on US imports starting March 10 and a series of new measures against specific US entities.

Canada responded through its Prime Minister Justin Trudeau, who said that Canada would respond with immediate retaliatory tariffs of 25% on US imports worth $20 billion.

Trudeau also said that another $86 billion in tariffs would go into effect within 21 days if the U.S. tariffs remain in place.

Canada and Mexico have enjoyed tariff-free trade with the U.S. for the past three decades, making them the U.S. economy’s top trading partners alongside China.

The premier of Ontario, Canada, said he was prepared to cut off nickel shipments and electricity from his province to the United States in response to Trump’s tariffs.

Mexican economy minister said the country’s president is expected to announce her response to Trump’s tariffs at a news conference on Tuesday.

Impact of U.S.-China Tariffs on the Economy and Inflation

As for trade tensions between the U.S. and China, the new tariffs, which add to previous tariffs imposed by Trump since taking office in his second term, join the 25 percent tariffs he imposed during his first term in 2018, worth $370 billion.

These tensions come amid mixed and somewhat negative economic indicators, especially considering the decline in manufacturing indicators, and the confirmation of a decline in the US GDP to 2.3%, down from 3.1% recorded in the third quarter of last year.

In fact, these tariffs come about a week before the announcement of US inflation figures, which increases fears that it will continue to rise and increase the suffering of American consumers and push them to question Trump's policies in supporting the economy as he promised in his election campaign.

Tomorrow, Wednesday, China will hold its annual parliamentary meeting, which increases the state of anticipation for what may come out of this meeting, especially the possibility of imposing additional tariffs targeting American agricultural and food products, which incurred losses of about $27 billion for American farmers in his first term.

All these tensions are pushing the markets significantly towards fears that the impact of US tariffs will cause an economic recession, especially in North American economies that rely heavily on cross-border trade in various goods.

This may even increase fears of deeper economic problems on the US side, given the trade deficit in goods, which exceeded $153 billion in the latest reading.

Market Reactions to the Impact of US Tariffs on Global Markets

This news has had a negative impact on financial market indicators, after the three US market indicators closed sharply lower. Japan's Nikkei 225 closed down 1.34%.

While the Taiwanese benchmark index lost 0.5%, the Hang Seng index in Hong Kong fell by 0.4%, and shares of major companies in mainland China fell by 0.2%.

In addition, yields on US two-year and ten-year bonds fell, and crude oil prices continued to decline, especially considering reports indicating that OPEC+ will move forward with increasing oil production next April.