US’s new tariffs risk global trade war

(VOVWORLD) -US President Donald Trump is increasing tariffs on imported goods from major trading partners, sparking global concerns about the potential for large-scale trade conflicts.
US’s new tariffs risk global trade war - ảnh 1President Donald Trump holds a press conference at the White House on Jan 31, 2025. (Photo: AFP)

US President Donald Trump last Saturday announced a 25% tariff on goods from Canada and Mexico, as well as a 10% tariff on Chinese exports to the US, citing the need to combat illegal immigration and fentanyl trafficking. On Monday the Trump administration said the tariffs would be delayed for one month after reaching border security agreements with Canada and Mexico.

Rising economic instability

The US agreement with Canada and Mexico, US neighbors and major trade partners, has temporarily stabilized global financial markets, which saw fluctuations on Monday amid concerns about a potential outbreak of global trade conflicts. However, there remains a high risk that the US will impose tariffs, even on close allies.

After Mexico, Canada, and China, the EU is seen as the next target. Trump said on January 31 that it will “definitely happen” with the European Union. European leaders, including French President Emmanuel Macron and German Chancellor Olaf Scholz, said on Monday that the EU has sufficient resources and will respond strongly if the US imposes tariffs on the bloc.

Mexico, Canada and China responded to the US’s announced tariffs. Canada said it would impose tariffs on goods coming from the US equivalent to about 105 billion USD. Mexican President Claudia Sheinbaum directed the Minister of Economy to implement "Plan B", including tariff and non-tariff measures. China said it will file a lawsuit against the US at the World Trade Organization.

Qiu Buhui, Professor of Business and Finance at the University of Sydney Business School, said, “This action taken by the US government will increase the overall economic uncertainty in the world. There will be market volatility coming in because the US threatens the trading partners that if they retaliate the US will impose higher tariffs on these countries. We may see a series of trade wars and conflicts and economic and trade protectionism coming.”

Gregory Daco, chief economist at Ernst & Young, said retaliatory measures from Mexico, Canada, and China could take 1.5 percentage points off the US’s GDP growth this year and 2.1 percentage points next year, while Canada and Mexico could fall into recession this year.

President Trump said Sunday that Americans could feel “some pain” from the emerging trade war triggered by his tariffs. Ryan Sweet, chief economist on the US at Oxford Economics, said US inflation last December was 2.8% and could increase to 3% by the end of this year if the US imposes tariffs on major trading partners, instead of decreasing to 2.2% as previously calculated by the US Federal Reserve.

US’s new tariffs risk global trade war - ảnh 2The port of Long Beach, California (Photo: Xinhua/VNA)

Is it an effective tactic?

Experts say Trump will likely continue to use tariffs as a “weapon”. He said during the election campaign that tariffs are a “magic negotiating tool” to gain concessions.

Kevin Merritt, Director of Capital Research for Wedbush Securities Company, said, “I think it’s an effective tactic on President Trump's part. We've seen already with Columbia last week and Mexico. A concrete threat generated action very quickly and brought them to the table to make concessions. Now how effective will it be with larger nations. I think that could be a different story.”

Cameron Johnson, an expert on supply chains at India’s Tidalwave Solutions Company, said the US will use tariffs to put pressure on the economies with which the US has a large trade deficit. Other countries should not underestimate the US government's determination to prevent fentanyl trafficking, a major social issue in the US. However, many experts warned that this could be a big risk for the US itself.

Mary Lovely, a researcher at Peterson Institute for International Economics, said the US’s new tariff policies will slow its economic growth and increase inflation. Christine McDaniel, a former trade official under President George Bush, warned that imposing a 25% tariff on Canada and Mexico, the US's closest trading partners, could devastate the powerful North American economy that the US has relied on for many years.

Yael Selfin, Vice Chair and Chief Economist at KPMG, said it's very hard to tell at the moment what the next impact is going to be. “Some economies will benefit as a result of that trade being diverted or they're having an advantage, because their products will be comparatively cheaper as a result. But it's very hard to tell at the moment what the next impact is going to be until you know what the full scale of the tariffs war is going to shape up.”

UN spokesman Stephane Dujarric said on Monday that the UN is obviously concerned about the impact growing trade restrictions will have on the global economy, particularly in developing countries and in places with a vulnerable population.

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