Trump's Tariffs Cause Decline in US Stock Market
President Donald Trump's decision to increase tariffs on Canada and Mexico has led to a significant drop in the US stock market. The S&P 500 index fell by up to 2%. On March 4, Trump announced that a 25% tariff would be imposed on both countries starting from March 4, alongside a 10% tariff increase on China, which was raised to 20% in February.
In retaliation, Canada and China have also implemented their own tariffs on the United States. Canada has decided to impose a 25% tariff on $155 billion worth of US imports, beginning with a 30 billion dollar import. China will impose a 10% and 15% tariff on US agricultural products, such as soybeans, wheat, corn, cotton, pork, beef, seafood, fruits, vegetables, and dairy products, starting from March 10.
Trump's Reason for the Tariffs
Trump stated that the tariffs on these two neighboring countries aim to put pressure on them to take action against fentanyl drug trafficking and illegal immigration. The tariffs on Canada and Mexico’s oil and electricity have been reduced to only 10%, with an exception for imports from Canada. The US has been importing 4.6 million barrels of oil per day from Canada and 5.63 million barrels from Mexico.
Canada and China Respond to US Tariffs
Canada has also responded by imposing tariffs on a range of US products, while China has followed suit with tariffs aimed at US agriculture. This trade dispute has further escalated the US-China trade war. China and Canada are imposing tariffs as a countermeasure to the US’s actions in order to protect their own economies.
Impact on US Families and Businesses
According to the Peterson Institute for International Economics and the Yale University Budget Lab, American families will bear the brunt of the tariff hikes, with an additional annual expenditure of $1,000 (approximately 90,000 INR). Companies like Ford and Walmart have already warned about the negative impact these tariffs will have on their businesses. Economists like Eswar Prasad from Cornell University predict that the tariffs will lead to inflation and disruption in trade.
Free Trade Agreement with Canada and Mexico
The United States has a free trade agreement with Canada and Mexico, where no tariffs are applied to trade between these nations. However, Trump’s administration renegotiated this agreement under the North American Free Trade Agreement (NAFTA). In 2023, these three countries together purchased goods worth over $1 trillion from the United States. Trump's tariffs on these countries, especially in industries like automotive, agriculture, and technology, are expected to drive up the prices of these goods.