Global trade war threats grow after Trump’s tariff shock

Washington/Ottawa — President Donald Trump’s sweeping tariffs on US imports sparked threats of retaliation on Thursday, as companies and governments rushed to count the costs from an escalating trade war that threatens to shake up global alliances.

The penalties announced on Wednesday unleashed turbulence across world markets and drew condemnation from other leaders facing the end of an era of trade liberalisation that has shaped the global order for decades.

Trump said he would impose a 10% baseline tariff on all imports to the US and higher targeted duties on some of the country’s biggest trading partners, hammering goods from Italian coffee and Japanese whisky to sportswear made in Asia.

Automaker Stellantis said it would temporarily lay off US workers and close plants in Canada and Mexico.

Canadian Prime Minister Mark Carney said the US had abandoned its historic role as a champion of international economic co-operation.

“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% tariffs on imports from the world’s No 2 economy, as did the EU, which faces a 20% duty.

French President Emmanuel Macron called for European countries to suspend investment in the US. “Investments to come or investments announced in recent weeks should be suspended until things are clarified with the US,” Macron said during a meeting with French industry representatives.

His comments come weeks after French shipping firm CMA CGM announced plans to invest $20bn in the US to build shipping logistics and terminals and electrical equipment supplier Schneider Electric said late last month it would invest $700m in  the US.

Macron also said no response to Trump’s “brutal and unfounded” tariffs had been ruled out.

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 consequences will be dire for millions of people around the globe,” EU chief Ursula von der Leyen said.

Stocks suffered a global meltdown, as analysts warned the tariffs could upend global supply chains and hurt corporate profits. Tech and retail stocks were especially hard hit.

Imports to the world’s largest consumer market now face an average duty of 22.5%, up from 2.5% last year, according to Fitch Ratings — the highest barriers in more than a century.

Trump says the “reciprocal” tariffs are a response to barriers put on US goods, though his list of targets includes uninhabited Antarctic islands.

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.

“We know a lot of Americans are worried,” vice-president JD Vance told Fox News. “What I’d ask folks to appreciate here is that we are not going to fix things overnight.”

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. Regions that backed Trump in the last election could be among the most exposed, according to the Federal Reserve.

Uncertainty in recent weeks about the tariffs may have already damaged the US economy. The US services sector slowed to a nine-month low in March, backing expectations that economic growth is likely to have stalled in the first quarter as tariffs loomed.

Trump himself has no public events scheduled before he departs Washington for a golf tournament at one of his Florida resorts.

“THE OPERATION IS OVER! THE PATIENT LIVED, AND IS HEALING,” he wrote on social media.

Since returning to the White House in January, Trump has issued a string of on-again, off-again tariff threats, which have rattled consumer and business confidence. Trump could step back again, as the reciprocal tariffs are not due to take effect until April 9. US commerce secretary Howard Lutnick said that would not happen. “The president is not going to back off what he announced yesterday,” he said on CNN.

But questions about the permanence of the tariffs will persist, making it difficult for businesses to forecast demand, analysts said. “Uncertainty just went up,” said Eric Johnson, a strategist at Cantor Fitzgerald.

Trump’s new economic barriers come as he has likewise pulled the US out of global bodies like the World Health Organisation and cut off billions of dollars in foreign aid. Some of his highest tariff increases will fall on impoverished countries in Africa that are already struggling with a loss of US funding to fight HIV, malaria and other diseases.

Trump’s tariffs also single out some of the US’s most important geopolitical allies.

In Asia, Trump slapped a 24% tariff on Japan and a 25% tariff on South Korea, both home to major US military bases. He also hit Taiwan with a 32% 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.

Germany’s economy minister Robert Habeck said the region should look to bolster economic ties elsewhere. “Opportunities for new alliances are emerging that we should use determinedly and decisively,” he said.

Canada’s Carney said he had spoken to German Chancellor Olaf Scholz about strengthening trade. Canada and Mexico, the largest US trading partners, were not hit with targeted tariffs on Wednesday. However, they already face 25% tariffs on many goods and now face a separate set of tariffs on auto imports.

Reuters