Trump’s tariffs provoke trade war threats, fears of pricier iPhones
[WASHINGTON] US trading partners threatened to ratchet up a trade war with the United States on Thursday as President Donald Trump’s sweeping tariffs ignited fears of steep price hikes in the world’s largest consumer market.
The penalties announced by Trump on Wednesday triggered a plunge in world markets and drew condemnation from other leaders reckoning with the end of a decades-long era of trade liberalisation.
But there were conflicting messages from the White House about whether the tariffs were meant to be permanent or were a tactic to win concessions, with Trump saying they “give us great power to negotiate.”
The US tariffs would amount to the highest trade barriers in more than a century: a 10 per cent baseline tariff on all imports and higher targeted duties on some of the country’s biggest trading partners.
That could jack up the price of everything from cannabis to running shoes to Apple’s iPhone for US shoppers.
Businesses raced to adjust. Automaker Stellantis said it would temporarily lay off US workers and close plants in Canada and Mexico, while General Motors said it would increase US production.
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Canadian Prime Minister Mark Carney said the United States had abandoned its historic role as a champion of international economic cooperation.
“The global economy is fundamentally different today than it was yesterday,” he said as he announced a limited set of countermeasures.
Elsewhere, China vowed retaliation for Trump’s 54 per cent tariffs on imports from the world’s No. 2 economy, as did the European Union, which faces a 20 per cent duty.
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French President Emmanuel Macron called for European countries to suspend investment in the United States.
Other trading partners, including South Korea, Mexico and India, said they would hold off for now as they seek concessions.
Washington’s allies and rivals alike warned of a devastating blow to global trade. The burden could fall heaviest on poor countries like Madagascar, which would face a 47 per cent tariff on vanilla exports.
“The consequences will be dire for millions of people around the globe,” EU chief Ursula von der Leyen said.
US Commerce Secretary Howard Lutnick and senior trade adviser Peter Navarro both told cable news programmes on Thursday the president would not back off, and that the tariff increases were not a negotiation.
Trump then appeared to contradict them, telling reporters, “The tariffs give us great power to negotiate. Always have. I used it very well in the first administration, as you saw, but now we’re taking it to a whole new level, because it’s a worldwide situation, and it’s very exciting to see.”
Stocks suffered a global meltdown, as analysts warned the tariffs could upend global supply chains and hurt corporate profits.
The Dow fell nearly 4 per cent, its biggest one-day loss in percentage terms since June 2020. The S&P 500 lost nearly 5 per cent and the tech-heavy Nasdaq declined nearly 6 per cent, its worst day in percentage terms since the pandemic era of March 2020.
American companies with significant overseas production took a hit. Nike shares lost 14 per cent and Apple fell 9 per cent.
Imports to the United States now face an average duty of 22.5 per cent, up from 2.5 per cent last year, according to Fitch Ratings.
Trump says the “reciprocal” tariffs are a response to barriers put on US goods, though his list of targets includes uninhabited Antarctic islands and some of the world’s poorest countries, which now face tariffs approaching 50 per cent.
Administration officials said the tariffs would create manufacturing jobs at home and open up export markets abroad, though they cautioned it would take time to see results.
Since returning to the White House in January, Trump’s on-again, off-again tariff threats have rattled consumer and business confidence. Trump could step back again, as the reciprocal tariffs are not due to take effect until April 9.
“The tariff plan does not appear to be well thought-out. Trade negotiations are a highly technical discipline, and in our view these proposals do not offer a serious basis for negotiations with any country,” said James Lucier, founding partner at Capital Alpha.
Economists say the tariffs could reignite inflation, raise the risk of a US recession and boost costs for the average US family by thousands of dollars - a potential liability for a president who campaigned on a promise to bring down the cost of living.
Trump predicted financial markets would recover with a “boom.”
Some White House officials on Thursday appeared resigned to the stock market drop - one official called it a “temper tantrum” - while another said the administration was looking at the medium- and long-term, not daily market moves.
Analysts said the tariffs could also alienate allies in Asia and undercut strategic efforts to contain China.
Trump has slapped a 24 per cent tariff on Japan and a 25 per cent tariff on South Korea, both home to major US military bases. He also hit Taiwan with a 32 per cent tariff as the island faces increased military pressure from China.
In Europe, Trump has already upset Nato allies with demands for higher defence spending and potential concessions to Russia in its war in Ukraine.
Canada and Mexico, the largest US trading partners, were not hit with targeted tariffs on Wednesday, but they already face 25 per cent tariffs on many goods and now face a separate set of tariffs on auto imports. REUTERS
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