Market News

BY Callum Jones in New York and Helen Davidson in Taipei

China and Canada unveiled retaliatory measures against the US after Donald Trump imposed his sweeping tariffs plan at midnight US time, despite warnings it could spark an escalating trade war.

US tariffs have come into force of 25% against goods from Canada and Mexico, the US’s two biggest trading partners, and 20% tariffs against China – doubling the levy on China from last month.

The duties will affect more than $918bn-worth (£722bn) of US imports from Canada and Mexico.

China on Tuesday said it would impose fresh tariffs on a range of agricultural imports from the US next week. Its finance ministry said additional 15% tariffs would be imposed on chicken, wheat, corn and cotton, with further 10% tariffs on sorghum, soya beans, pork, beef, aquatic products, fruits, vegetables and dairy products.

The Canadian prime minister, Justin Trudeau, said Ottawa would respond with immediate 25% tariffs on C$30bn-worth ($20.7bn) of US imports. He said previously that Canada would target US beer, wine, bourbon, home appliances and Florida orange juice.

Tariffs will be placed on another C$125bn ($86.2bn) of US goods if Trump’s tariffs were still in place in 21 days.

“Tariffs will disrupt an incredibly successful trading relationship,” Trudeau said, adding that they would violate the US-Mexico-Canada free trade agreement signed by Trump during his first term.

Mexico’s president, Claudia Sheinbaum, was expected to announce her response on Tuesday morning, the country’s economy ministry said.

Asian markets were down – after sharp falls in US markets on Monday – as Japan’s Nikkei fell 1.6%, Taiwan’s benchmark TWII index was off 0.5% and Hong Kong’s Hang Seng was down 0.$%.

The Canadian dollar and the Mexican peso fell to their lowest levels in a month on Tuesday.

In Europe, the FTSE 100 dropped by 57 points, or 0.65%, at the start of trading to 8,813 points, a day after rising more than 8,900 points for the first time. France’s CAC 40 fell 0.9% and Spain’s Ibex was down 0.8%.

Trump and his allies claim that higher tariffs on US imports from across the world will help make America great again by enabling it to obtain political and economic concessions from allies and rivals on the global stage.

Businesses, inside the US and worldwide, have warned of widespread disruption if the Trump administration pushes ahead with this strategy.

Since winning November’s presidential election, the president has focused on China, Canada and Mexico, threatening the three markets with steep duties on their exports unless they reduced the “unacceptable” levels of illegal drugs crossing into the US.

While he slapped a 10% tariff on China last month, Trump has repeatedly delayed the imposition of tariffs on Canada and Mexico. The president has pledged to bring down prices in the US, but economists have warned that consumers in the country could be aversely affected by his trade plans.

A 25% tariff on Canada and Mexico and a 10% levy on China would amount to “the largest tax increase in at least a generation”, according to the Peterson Institute for International Economics, a thinktank, which estimated such a move would cost the typical US household more than $1,200 each year.

Trump has vowed to go further, threatening to introduce “reciprocal” tariffs on countries that have their own duties on goods made in the US. He has said these will come into effect as soon as next month.

China’s finance ministry said in a statement: “The US’s unilateral tariff increase damages the multilateral trading system, increases the burden on US companies and consumers, and undermines the foundation of economic and trade cooperation between China and the US.”

The ministry said products shipped from the US to China that departed before 10 March and arrived before 12 April would not be subject to the tariffs.

Trump has said the tariffs on China are because the government has failed to stop illicit fentanyl entering the US, which Beijing says is a “pretext” to threaten China.

“China opposes this move and will do what is necessary to firmly safeguard its legitimate interests,” a foreign ministry spokesperson, Lin Jian, said.

Chris Weston, an analyst at the brokerage Pepperstone, said: “Market anxiety levels have been dialled up, and we see traders having to react aggressively and dynamically to the deluge of headlines and social posts confirming that tariffs on China, Mexico and Canada are to be implemented in full and as threatened.”