Trump said the tariffs against the three largest U.S. trading partners, which take effect on Tuesday, might cause Americans some short-term pain, but “long term, the United States has been ripped off by virtually every country in the world”.
Speaking at his Mar-a-Lago estate in Florida on Sunday, Trump indicated that the 27-nation European Union would be next in the firing line, but did not say when.
EU leaders meeting at an informal summit in Brussels on Monday said Europe would be prepared to fight back if the U.S. imposes tariffs, but also called for reason and negotiation.
Chancellor Olaf Scholz of Germany, the EU’s largest economy which is highly dependent on exports, also said the bloc could respond if necessary with its own tariffs against the U.S. but stressed it was better for the two to find agreement on trade.
Trump hinted that Britain, which left the EU in 2020, might be spared tariffs, saying: “I think that one can be worked out”.
However, in services, the U.S. had a surplus of exports over imports with the EU of 104 billion euros.
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Trump said he would speak on Monday with the leaders of Canada and Mexico, which have both announced retaliatory tariffs of their own, but downplayed expectations that they would change his mind.
Economists said the Republican president’s plan to impose 25% tariffs on Canada and Mexico and 10% tariffs on China would slow global growth and drive prices higher for Americans.
Financial market reaction on Monday reflected concerns about the fallout from a trade war. Shares in Tokyo ended the day down almost 3% and Australia’s benchmark - often a proxy trade for Chinese markets - dropped 1.8%. The mainland China market was shut for Lunar New Year holidays.
Trump’s tariffs will cover almost half of all U.S. imports and would require the United States to more than double its own manufacturing output to cover the gap - an unfeasible task in the near term, ING analysts wrote.
In Europe, economists at Deutsche Bank said they were currently factoring in a 0.5% hit to gross domestic product (GDP) should Trump impose 10% tariffs on the bloc.
A White House fact sheet gave no details on what Canada, Mexico and China would need to do to win a reprieve.
China called fentanyl America’s problem and said it would challenge the tariffs at the World Trade Organization and take other countermeasures, but also left the door open for talks.
Automakers would be particularly hard hit, with new tariffs on vehicles built in Canada and Mexico, burdening a vast regional supply chain where parts can cross borders several times before final assembly.
Analysts at investment bank Stifel estimated that 8 billion euros of VW’s revenues would be impacted by tariffs and 16 billion euros of Stellantis.
Trump imposed only a 10% duty on energy products.
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