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Will US Tariffs By Donald Trump Start International Trade Wars?

Ankur Sachdev

President Donald Trump was vocal about imposing US tariffs on goods coming from other countries. A core reason given by him was to correct the wrong wherein the US has been treated unfairly and countries have taken advantage of it. The fundamental ground of his campaign was that he would impose US tariffs on countries like Canada, Mexico, and China.


Donald Trump implements US tariffs on Canada and Mexico.
Source: Unsplash; The US President Donald Trump

However, this has brought out the possibility of international trade war as several countries have started mentioning retaliatory tariffs.


Donald Trump Pushes for Higher US Tariffs

Donald Trump is now the President of the United States, and he is starting to make stronger statements to impose US tariffs on other countries. Some countries that have come under his radar at the moment are Canada, Mexico, and possibly China. Reports resurfacing mention that Donald Trump is imposing a new 25% tariff on imports from Canada and Mexico.


A higher US tariff on Canada and Mexico will be effective earlier this week but that could change or see a few exemptions. Donald Trump has reportedly announced that he will hold discussions with Mexican President Claudia Shienbam and Canadian Prime Minister Justin Trudeau. If talks turn out to be favorable, then he could offer relaxation.

Donald Trump has also mentioned a 10% tariff on Canadian energy and a 10% tariff on China via the International Emergency Economic Powers Act (IEEPA). The US President has justified this move by saying that there was a major threat of illegal aliens and deadly drugs that were killing US citizens.


Is an International Trade War Possible?

There is a possibility that a higher US tariff will trigger an international trade war. Canada, for one, has announced 25% retaliatory tariffs on goods that are imported from the US. These Canadian tariffs will be effective from February 04, 2025, on goods that originate from the US as per the Determination of Country of Origin for Marking Goods (CUSMA Countries) Regulation. Canadian tariffs will be on the import of goods worth approximately $30 billion.


Mexican President Claudia Shienbam has stated that Mexico was exploring two options to safeguard its relations with the US. These two measures are tariff and non-tariff countermeasures. China is also exploring its options and appears committed to re-work ties with the neighboring nation India, that is Bharat.


What’s Next in US Tariffs?

The US FOMC concluded its 2-day meeting last week and didn’t change interest rates. A popular belief is that the US Federal Reserve wants to control inflation further to achieve the milestone of 2%, and is unaware about how the US tariff policy will work out. It could make goods expensive for the US citizens.

Donald Trump may have briefly acknowledged this aspect, and has reportedly said that a higher US tariff on imports may hurt in the short term but long-term gains will outweigh all of it.

 
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