February 3, 2025
Trump’s Trade War: The U.S. Escalates Tariff Pressure on Global Markets

U.S. President Donald Trump has launched a full-scale trade offensive against America’s leading trading partners, causing sharp fluctuations in global financial markets. After imposing 25% tariffs on goods from Canada and Mexico, as well as 10% tariffs on Chinese and Canadian energy products, Trump not only increased pressure on the European Union but also put global economic stability at risk.

First Wave: The U.S. and Its Neighbors

Trump began his offensive with America’s closest trading partners – Canada and Mexico. The 25% tariffs on most goods are set to take effect on February 4, unless a last-minute deal is reached. Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum have pledged to retaliate: Canada has already announced equivalent tariffs on $106 billion worth of U.S. goods, while Mexico plans to reveal details in the coming days.

In response, the Canadian dollar dropped to its lowest level since 2003, and the Mexican peso depreciated by more than 2% against the U.S. dollar. Trump’s comments – “They owe us a lot of money, and I’m sure they’re going to pay” – further heightened market tensions.

Trump Threatens Europe and China

Trump didn’t stop with North America. He declared that tariffs on the European Union are inevitable, citing the trade imbalance. “They don’t take our cars or farm products, but we take everything,” he said, accusing the EU of unfair trade practices.

China also came under fire. In addition to the 10% tariffs, Beijing faced the closure of loopholes used by e-commerce giants like Alibaba. Chinese President Xi Jinping threatened to take the matter to the World Trade Organization (WTO) to protect the country’s interests.

South Africa and Other Emerging Markets

South Africa was also targeted. Trump announced a freeze on aid to the country, citing its land reform policies. This led to a nearly 2% drop in the rand. 

In Asia, currencies also felt the impact of tariff threats. The South Korean won and Taiwanese dollar saw significant declines due to their close trade ties with China, while the offshore yuan slipped by 0.4%.

Impact on Consumers and Global Markets

These tariff measures are bound to affect American consumers. Prices on food, fuel, cars, and alcohol are expected to rise, with the worst-case scenario costing approximately $835 per person. Ontario has already responded by removing American products from government-run liquor stores.

U.S. stock futures and Asian markets are showing declines, while investors increasingly view the dollar as a safe haven. As the dollar strengthens, the euro and other currencies are falling. It is expected that Trump’s tariffs will fuel inflation and keep U.S. interest rates high, while weakening the economies of other countries.

Global Reaction and Outlook

Canada, Mexico, China, and the EU have all pledged to retaliate if Trump follows through on his threats. However, Trump remains steadfast. He has stated that he may escalate tariffs in response to any retaliatory measures from partners. “They have to balance their trade, number one,” he said. “They’ve got to stop people from pouring into our country. We have to stop fentanyl, and that includes China.”

Interestingly, the only country Trump spared from immediate economic threats was the United Kingdom. He noted that trade relations with London could be worked out, highlighting his good relationship with Prime Minister Keir Starmer.