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Donald Trump has imposed a swath of tariffs on Canada, Mexico and China, sparking an immediate retaliation from Beijing and sending stocks lower as fear mount over a global trade war.
A 25 per cent tariff on imports from Canada and Mexico went into effect on Tuesday alongside an additional 10 per cent levy on Chinese imports.
The tariffs on China come on top of a previous 10 per cent levy that Trump imposed on Chinese imports last month.
The US president has said the moves are a response to the countries’ failure to clamp down on the trafficking of the deadly opioid fentanyl.
On Tuesday, China said it would hit back with a 10-15 per cent tariff on US agricultural goods ranging from soyabeans and beef to corn and wheat. Canada earlier vowed retaliation with a similar tariff against $30bn of US imports.
The tariffs against America’s three largest trading partners raised duties to some of the highest levels in decades.
Hong Kong’s Hang Seng index and mainland China’s CSI 300 benchmark fell as much as 2 per cent and 0.8 per cent respectively before recovering to trade flat. Japan’s exporter-heavy Nikkei 225 slid 1.2 per cent, while Australia’s S&P/ASX 200 retreated 0.6 per cent.
Overnight on Wall Street, the S&P 500 closed almost 2 per cent lower and the Nasdaq Composite fell 2.6 per cent after Trump said the tariffs would go into effect.
“Equities are taking a leaf from the US moves overnight” on Monday, said Mitul Kotecha, head of emerging markets macro and FX strategy at Barclays. “We had some pretty sharp moves in US stocks, so I think this is a reaction to that. If the US slows it’s obviously not good for the rest of the world.”
The dollar fell 0.2 per cent against a basket of currencies including the euro, yen and pound on Tuesday, after falling 0.8 per cent on Monday.
“I think the message generally is that risk assets are taking a bit of a beating,” said Kotecha, adding that weak US economic data was leading to concerns about a slowdown in the world’s largest economy.
Trump said at the White House on Monday afternoon that there was “no room” for last-minute negotiation with Canada and Mexico. “The tariffs, you know, they’re all set. They go into effect tomorrow,” he said.
The North American levies are set at 25 per cent except for Canadian oil and energy products, which will face a 10 per cent tariff. Canada accounts for about 60 per cent of US crude imports.
China’s response also targeted US companies, with Beijing on Tuesday placing 10 American companies on a national security blacklist and slapping export controls on 15 others.
It also banned US biotech company Illumina from exporting its gene-sequencing equipment to China. Beijing had added Illumina to its “unreliable entities” list last month in response to Trump’s initial barrage of tariffs.
China’s commerce ministry earlier hit back at the US justification of the tariffs over fentanyl flows, saying that the claim “disregards facts, international trade rules and the voices of all parties, and is a typical act of unilateralism and bullying”.
China’s foreign ministry also threatened to withdraw co-operation with the US on drug controls, which resumed under Joe Biden’s administration.
“If the US continues to use the fentanyl issue to pressure, blackmail, coerce and threaten China, it will only be counter-productive and deal a blow to the dialogue and co-operation between China and the US in the field of drug control,” the foreign ministry said.
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