Trump threatens trade war with EU
Donald Trump will “absolutely” impose tariffs on the European Union, he announced on Friday as he introduced sweeping taxes on goods from China, Mexico and Canada.
The president imposed a 25 per cent tariff on goods coming into the US from its neighbours and 10 per cent on China, prompting fears of a global trade war and inflation crisis.
Mr Trump was expected to impose tariffs on day one of his presidency but gave Canada, Mexico and China a limited window for negotiation.
Speaking from the Oval Office on Friday, Mr Trump said: “Am I going to impose tariffs on the European Union? You want the truthful answer or shall I give you a political answer? Absolutely. The European Union has treated us so terribly.”
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The US is the UK’s largest individual trading partner, although most of Britain’s trade is in services, which would not be affected by higher goods tariffs. The UK accounts for 2 per cent of US goods imports.
However, Britain’s tax on tech giants may yet draw the ire of Mr Trump as Sir Keir Starmer steps up efforts to secure a trade deal.
Karoline Leavitt, the White House press secretary, denied “false” reports that Mr Trump was considering a further delay on the China, Mexico and Canada tariffs. The president is demanding that the countries stem the flow of illegal migrants and drugs into the US.
“The Feb 1 deadline that president Trump put into place in a statement several weeks ago continues,” she said.
“The president has made it very clear: those tariffs are going to be implemented and in effect,” she said, adding that Mr Trump may decide to roll back on the move.
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Stock markets fell following the announcement, but the value of the dollar jumped and gold prices hit a new record as investors reacted to Mr Trump’s decision. The reaction was muted, given the president’s intentions had been clear for months.
Gold, which has been rallying since the start of the year, touched a new high above $2,800 an ounce for the first time in history on Friday.
Justin Trudeau, the Canadian prime minister, pledged a “forceful” and “immediate” retaliation to the tariffs. Ms Leavitt said Mr Trudeau “would be wise to talk to President Trump directly before pushing outlandish comments like that to the media”.
Chrystia Freeland, Mr Trudeau’s former finance minister, who is running to replace him, said Canada should retaliate by slapping massive levies on Tesla vehicles, a move that would rile Elon Musk, Mr Trump’s close ally.
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Imports from China, Mexico and Canada account for almost half of US goods trade, and analysts have warned that tariffs will be passed on to consumers in the form of higher prices.
Mr Trump said he expects his administration to impose tariffs related to oil and gas around Feb 18 but did not name a specific country to which the tariffs would apply or specify any more details about the plans.
Trade barriers could also keep interest rates higher for longer, challenging Mr Trump’s vow to bring down prices “rapidly”.
Goldman Sachs has predicted that blanket tariffs on Canada and Mexico will result in a 0.4 percentage point hit to growth. Any slowdown in the world’s biggest economy would have implications for global growth, given the importance and strength of the US.
The Mexican and Toronto stock exchanges both fell by half a per cent in response to the White House announcement. The peso fell by 1 per cent against the dollar, while the Canadian dollar was down about a tenth against its counterpart shortly after the statement.
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More than 75 per cent of Canada’s exports go to the US, according to government data. In comparison, 17 per cent of US exports go to Canada.
Mr Trump has claimed that imposing duties on goods from overseas would force the countries to bend to his demands.
He blames Canada and Mexico for the flow of drugs and migrants over the US border while he has pointed the finger at China for the country’s fentanyl crisis.
Mexico has co-operated with recent migrant deportation flights but it does not appear to have done enough to convince Mr Trump it is undeserving of tariffs.
Claudia Sheinbaum, the Mexican president, said she would “wait with a cool head” for Mr Trump’s tariff decision and was prepared to continue a dialogue. “We will always defend the dignity of our people, respect for our sovereignty and a dialogue as equals without subordination,” she said.
China ‘facilitates poisoning of Americans’
John P Walters, a former official in the Bush administration, said: “China has consistently promised to assist in stopping the fentanyl shipments into Mexico that have been coming into the US and killing tens of thousands of Americans. They’ve never kept that promise.
“There’s a facilitation of the mass poisoning of Americans that must be stopped, beginning with the supply of the poison in China.”
Last Sunday, Mr Trump waged a 10-hour trade war with Gustavo Petro, the Colombian president, threatening the South American country with 25 per cent tariffs over its refusal of a migrant deportation flight. The crisis ended when Mr Petro agreed to accept the flights.
Decisions on the tariffs were being managed by a core White House team, not the incoming trade team to be led by Howard Lutnick, the commerce department nominee, and Jamieson Greer, the US trade representative nominee, a source familiar with the matter said. Neither has been confirmed by the US Senate, but the senate finance committee has scheduled a Feb 6 confirmation for Mr Greer.
The tariffs come after a break-neck first two weeks in office for Mr Trump, who has signed a record number of executive orders, including eradicating diversity and inclusion programmes in government agencies and declassifying JFK assassination files.