Trump’s Tariffs Hit and Other Headlines of the Day
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Top of the Agenda
The threat of trade wars looms after Trump moved forward with tariffs on Canada, China, and Mexico overnight. Just after midnight, the United States imposed new 25 percent tariffs on Canadian and Mexican goods and 10 percent tariffs on Chinese goods. Canadian energy products were hit with a separate rate of 10 percent. Envoys from the targeted countries have in recent days highlighted efforts to addressTrump’s concerns over fentanyl and border control—and today began to announce retaliation.
The details. The tariffs on the top three U.S. trade partners are due to affect some $1.5 trillion in annual imports, Bloomberg reported. In response,
- Canada announced immediate tariffs on more than $20 billion worth of U.S. goods, with levies on an additional roughly $85 billion of goods due to take effect in three weeks. The second tranche of tariffs will hit items such as aluminum, cars, steel, and trucks. The premier of Ontario yesterday also threatened to cut off nickel shipments and cross-border energy transmission to the United States.
- China announced tariffs of up to 15 percent on major U.S. farm products, added several U.S. firms to an export control list, and announced a World Trade Organization lawsuit. Bloomberg estimated that China’s retaliatory tariffs would affect around $22 billion worth of U.S. exports; analysts said China’s moves appeared calibrated to avoid escalation.
- Mexican President Claudia Sheinbaum is expected to announce her response at a press conference this morning.
Economic clouds. U.S. stocks tumbled late yesterday after Trump said he would move forward with the duties, and stock indexes in Asia and Europe fell today. Potential supply chain interruptions—especially to the highly integrated North American car market—would come as some commonly watched statistics already suggest strains on the U.S. economy.
- Last month, U.S. consumer sentiment saw its biggest monthly drop in more than three years, with many Americans citing concerns over tariffs. Yesterday, the Federal Reserve Bank of Atlanta projected the U.S. economy is on track to shrink in the first quarter of 2025, though some private banks have more positive estimates.
- Immediate selloffs of the Canadian dollar and Mexican peso following the new U.S. tariffs “have been relatively modest,” an analyst from Japanese bank MUFG wrote, suggesting “market participants remain hopeful that the tariff hikes won’t remain in place for long.”
While Trump has repeatedly said these tariffs are a response to uncontrolled migration and synthetic drug flows, he appeared yesterday to introduce a new off-ramp, saying that if Canada and Mexico move car and other manufacturing plants to the United States, “they [will] have no tariffs.”
“The 25% tariffs on Mexico and Canada [are] a move that is likely to be considered one of the most self-destructive economic policy steps in recent history,” CFR expert Brad Setser posts.“Tariffing the U.S. auto supply chain—and imports of autos from Canada and Mexico that have a ton of embedded U.S. content—while leaving the market for imports from [South] Korea and Japan open is a bit mad… Tariffing Mexico but not Southeast Asia is equally crazy—it is a massive gift to all the Chinese firms using Chinese parts to supply the U.S. consumer market from [Southeast] Asia.”
Across the Globe
Trump freezes aid to Ukraine. Trump ordered a temporary halt to U.S. military assistance to Ukraine until he determines that Ukrainian President Volodymyr Zelenskyy is making sufficient efforts toward peace with Russia, an unnamed White House official told reporters. Trump’s decision affects more than $1 billion worth of aid that is in the pipeline for delivery, the New York Times reported. Ukrainian Prime Minister Denys Shmyhal said Kyiv will “will continue to work with the U.S. through all available channels,” while the European Union (EU) today proposed nearly $160 billion in new loans to European countries for defense procurement, including aid to Ukraine.
Egypt’s conference on Gaza. Arab leaders are meeting in Cairo today to discuss a plan for rebuilding postwar Gaza that poses an alternative to Trump’s suggestion to displace Palestinians. One proposal would sideline Hamas and rely on administrative bodies run by Arab, Muslim-majority, and Western countries, Reuters reported. A senior Hamas official said the group rejects the imposition of a non-Palestinian administration but that “we are keen for the success of the summit.”
TSMC’s U.S. production pledge. Top global chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) announced at least $100 billion in investments to build plants in the United States. Trump said that the firm’s CEO would face “no tariffs” thanks to the decision, despite threatening duties of up to 100 percent on Taiwanese chips since taking office. TMSC’s CEO said it will produce its artificial intelligence and smartphone chips in Arizona.
OPEC+ to up oil production. The Russia- and Saudi Arabia-led alliance of oil-producing countries will increase their daily output in April for the first time since 2022, with the aim of adding 2.2 million barrels per day to the market by 2026. The group has been holding off on such a move in an effort to prop up oil prices. A surplus of oil on global markets this year is expected even without an OPEC+ production increase.
EU relaxes car emissions rule. The EU will give carmakers three years to hit a carbon dioxide emissions target originally set for this year, European Commission President Ursula von der Leyen said. The move, which will require approval from member states and the European Parliament, is meant to give industry “more breathing space,” she said.
Namibia eases visitation requirements. The country will distribute visas on arrivalto tourists and international investors, an official announced. The decision aims to make Namibia more business friendly and boost sectors including renewable energy, oil and gas, and tourism. South Africa similarly eased visa rules for Chinese and Indian travelers and added skilled worker visas last year.
Afghanistan-Pakistan border clash. Security forces at a closed border crossing traded fire in an incident that killed at least one person, officials said. The crossing had been closed for ten days amid broader bilateral tensions, stranding thousands of trucks carrying essential goods. Pakistan accuses Afghanistan of harboring militant groups, which Afghanistan’s Taliban government denies. Pakistan’s military carried out strikes in Afghanistan in December.
WFP’s South Africa office closes. The UN World Food Program (WFP) is closing its office in Johannesburg following U.S. foreign aid cuts. It did not specify how much funding was lost, but the WFP received $4.4 billion from Washington last year—roughly half of its annual budget. A spokesperson for the program said it would consolidate its southern and eastern Africa operations into one office in Nairobi, Kenya.
The Day Ahead
- Parties to the Treaty on the Prohibition of Nuclear Weapons begin a weeklong meeting in New York.
- The European Union and Central Asian countries hold a ministerial meeting in Turkmenistan in preparation for their first joint summit.
- Mobile telecoms conference MWC kicks off in Barcelona with U.S. Federal Communications Chair Brendan Carr among the speakers.