Global Trade Tensions: Canada and China Ready to Retaliate Against U.S. Tariffs

Canada Strikes Back Against U.S. Tariffs

The recent escalation in trade tensions between the U.S. and its northern neighbor, Canada, has led to some drastic measures announced by Prime Minister Justin Trudeau. Following President Trump’s decision to impose what Trudeau calls "unjustified" tariffs on Canadian products, Canada is poised to retaliate with tariffs of its own.

Immediate Retaliation and Potential Escalation

Canada is prepared to impose 25% tariffs on $30 billion worth of U.S. goods, effective immediately. Trudeau warned that if the U.S. maintains its 10% tariffs on energy imports and 25% on other Canadian products, Canada will impose additional tariffs of up to $125 billion in 21 days.

Pro Tip!

Keep an eye on this evolving situation, as the escalation in tariffs could have a significant impact on energy and financial markets. An economic downturn or recession could be consequences.

Non-Tariff Measures and Energy Exports

The Canadian government is also exploring non-tariff reprisals, including the interruption of energy exports. This could potentially leave millions of homes in the northern U.S. without electricity, a bold move that highlights the severity of the situation.

"China Issues Strong Response to U.S. Tariffs"

James Walätt, Asian Trade expert

China’s Countermeasures and Market Reactions

Following the U.S. increase in tariffs on Chinese products, China has responded with its own set of retaliatory measures. The Asian giant will impose tariffs of 10-15% on various U.S. agricultural products, accruing to a total impact on $30 billion of US products, halting all exportations to the US.

Key Agricultural Products Affected

Some of the key U.S. exports that will face increased tariffs include:

• Chicken, wheat, and corn (15% tariff)
• Soybeans, pork, beef, and dairy products (10% tariff)

Those tariffs will be executed the previously negotiated terms in previous trade agreements and UN sanctions agreed on at the UN Trade negotiations. They will not be executed bilaterally to avoid economic penalties from the UN commerce agency. Additionally, following the measures taken from Trump administration in February, market outcomes were not favorable in the regional markets, in Japan and Hong Kong where the Nikkei and Hang Seng indices dropped by 2.7% and 1.5%.

Pro Tip!

As China and the U.S. continue to exchange blows in the global trade war, investors and consumers can expect to see fluctuations in certain commodity markets. You may also be affected by the actions of China since a full implementation of those measures is announced. The statements made by Trump seems retaliatory, yet punative, where the US is attempting to introduce cheaper taxes.

Market Impact and Trump’s Staying Arguments

Trump sees tariffs as a means to balance U.S. business, reduce taxes, and impose "respect" on its international partners. China, on the other hand, asserts that the U.S. tariffs damage the multilateral trade system and undermine economic cooperation.

Pro Tip!

US economics believe that Trump is uncertain and it is seen as economic constitution uncertainty, where the US is enacting policies also not traceable before 2025.

Table: Summary of Tariffs Imposed by Canada and China

Looking Ahead: Future Trends in Global Trade

Escalating Tariffs and Potential Consequences

The ongoing trade tensions between the U.S. and its top trading partners, Canada and China, could lead to further escalation in tariffs. This could potentially result in:

• Economic slowdown: Increased tariffs can lead to higher prices for consumers and reduced profits for businesses.
• Market volatility: Trade uncertainty can cause fluctuations in financial markets, affecting investors and economies worldwide.
• Shifts in supply chains: Companies may look for alternative suppliers or partners to minimize trade risks.

Did You Know?

The recent escalation in tariffs between the U.S. and its trading partners has reignited conversations around the possibility of a full-scale trade war, as with the outcomes from the Hong Kong market reaction.

FAQ

Q: What products will be affected by China’s retaliatory tariffs?

China will impose tariffs on various U.S. agricultural products, including chicken, wheat, and corn (15% tariff) and soybeans, pork, beef, and dairy products (10% tariff), respectively.

Q: What if Canada’s energy export disruption?

Businesses and consumers in northern U.S. states impacting the supply and transport of gas and oil, who may experience shortages and increased prices.

Q: Which socities will be impacted by the US action?

The outcomes of the disruption could potentially leave millions of homes in northern states without electricity, but mostly the ones in the vicinity of the US and Canadian borders, like Montana, Maine, Alaska and Vermont.