Americans may feel ‘pain’ in trade war with Mexico, Canada, China: Trump

President Donald Trump said the sweeping tariffs that he has imposed on Mexico, Canada and China may cause “short term” pain for Americans as global stock markets tumbled on concerns the levies will spark an economically damaging trade war.

Trump said he would talk on Monday with the leaders of Canada and Mexico, which have announced retaliatory tariffs of their own, but downplayed expectations that they would change his mind.

“I don’t expect anything dramatic,” Trump told reporters as he returned to Washington from his Mar-a-Lago estate in Florida. “They owe us a lot of money, and I’m sure they’re going to pay.”

He also said tariffs on the European Union would go ahead, but did not say when. European leaders meet in Brussels on Monday and are expected to discuss tariffs in the wake of Trump’s comments.

“It will definitely happen with the European Union. I can tell you that because they’ve really taken advantage of us,” Trump told reporters on Sunday.

“They don’t take our cars, they don’t take our farm products. They take almost nothing and we take everything from them.”

The tariffs on Canada, Mexico and China, outlined in three executive orders, are due to take effect 12:01 a.m. ET (0501 GMT) on Tuesday.

Economists said the Republican president’s plan to impose 25 percent tariffs on Canada and Mexico and 10 percent tariffs on China – the United States’ three largest trading partners – will slow global growth and drive prices higher for Americans.

Trump says they are needed to curb immigration and narcotics trafficking and spur domestic industries.

“We may have short term some little pain, and people understand that. But long term, the United States has been ripped off by virtually every country in the world,” he said.

Financial market reaction on Monday reflected concerns about the fallout from a trade war. US stock futures fell around 2 percent. Shares across Asia, including Tokyo, Seoul and Sydney also slid around 2 percent. Chinese stocks listed in Hong Kong fell 0.8 percent , while the mainland China market was shut for Lunar New Year holidays.

The Chinese yuan, Canadian dollar and Mexican peso all slumped against a soaring dollar. With Canada and Mexico the top sources of US crude oil imports, US oil prices jumped more than $1, while gasoline futures rose nearly 3 percent.

North American companies braced for new duties which could upend industries from autos to consumer goods to energy.

Trump’s tariffs will cover almost half of all US imports and would require the United States to more than double its own manufacturing output to cover the gap – an unfeasible task in the near term, ING analysts wrote.

“Economically speaking, escalating trade tensions are a lose-lose situation for all countries involved,” the analysts wrote in a note on Sunday.

Other analysts said the tariffs could throw Canada and Mexico into recession and usher in “stagflation” – high inflation, stagnant economic growth and elevated unemployment – at home.

Tuesday deadline

Some analysts said there was some hope for negotiations, especially with Canada and China.

Goldman Sachs economists said the levies are likely to be temporary but the outlook is unclear because the White House set very general conditions for their removal.

A White House fact sheet gave no details on what the three countries would need to do to win a reprieve.

Trump vowed to keep them in place until what he described as a national emergency over fentanyl, a deadly opioid, and illegal immigration to the United States ends.

China has said it will challenge the tariffs at the World Trade Organization and take other countermeasures, but also left the door open for talks with the United States.

Its sharpest pushback was over fentanyl.

“Fentanyl is America’s problem,” China’s foreign ministry said, adding that China has taken extensive measures to combat the problem.

Mexican President Claudia Sheinbaum, raising her fist in the air in a speech outside the capital, vowed resilience. She accused the United States of failing to tackle its fentanyl problem and said it would not be solved by tariffs.

Sheinbaum said she would provide more details on Monday of the retaliatory tariffs she ordered on the weekend.

Canada said on Sunday it will take legal action under the relevant international bodies to challenge the tariffs.

Prime Minister Justin Trudeau also encouraged Canadians on Sunday to boycott their longtime ally after ordering retaliatory tariffs against $155 billion of US goods, from peanut butter, beer and wine to lumber and appliances.

Canadian officials said they were preparing measures to help business who might be hurt by the trade war.

Trump has heaped derision on Canada in particular, with calls for the country to become the 51st US state. On Sunday, he said Canada “ceases to exist as a viable country” without its “massive subsidy.”

National emergency?

Trade lawyers said Trump could face legal challenges for testing the limits of US laws. Some Democratic lawmakers decried what they called a blatant abuse of executive power, while others warned about rising prices.

Even some Republicans criticized Trump’s action.

“It will be paid for by American consumers. I mean, why would you want to get in a fight with your allies over this?” Republican Senator Mitch McConnell said in an interview on CBS’s “60 Minutes.”

A Reuters/Ipsos poll released last week showed Americans were divided on tariffs, with 54 percent opposing new duties on imported goods and 43 percent in support, with Democrats more opposed and Republicans more supportive.

Investors look ahead

Investors were considering the effects of additional tariffs promised by Trump, including those related to oil and gas, as well as steel, aluminum, semiconductor chips and pharmaceuticals.

A European Commission spokesperson said the EU “would respond firmly to any trading partner that unfairly or arbitrarily imposes tariffs on EU goods.”

Europe’s biggest carmaker, Volkswagen, said it was counting on talks to avoid trade conflict.

Automakers would be particularly hard hit, with new tariffs on vehicles built in Canada and Mexico burdening a vast regional supply chain where parts can cross borders several times before final assembly.

Trump imposed only a 10 percent duty on energy products from Canada after oil refiners and Midwestern states raised concerns. At nearly $100 billion in 2023, imports of crude oil accounted for roughly a quarter of all US imports from Canada, according to US Census Bureau data.

White House officials said Canada would no longer be allowed the “de minimis” US duty exemption for shipments under $800.

Canada and Mexico have become conduits for shipments of fentanyl and its precursor chemicals into the US in small packages that are not often inspected by customs agents, they said.