Americans have been warned to brace for higher prices within days of Donald Trump pulling the trigger on Monday, imposing US tariffs on goods from Canada and Mexico and hiking tariffs on China.
Global stock markets came under pressure again on Tuesday, with leading indices falling sharply – and the benchmark S&P 500 losing all its post-election gains – as Canada, Mexico and China vowed to retaliate, and investors balked at the prospect of an acrimonious trade war.
US retail giants predicted that prices were “highly likely” to start rising on shelves almost immediately after a 25% duty came into effect on exports from Mexico to the US.
Most Canadian exports to the US also now face a 25% duty, with a 10% rate for energy products. The Trump administration imposed a 10% levy on all Chinese exports to the US last month, which has now been doubled to 20%.
Trump, who won back the White House after pledging repeatedly to bring prices down, has acknowledged that his controversial trade strategy could lead them to rise. Consumers could face “some short-term disturbance”, the president conceded last month.
With US retailers relying heavily on imports from Mexico and Canada to stock their shelves, top executives claimed they would have no choice but to increase prices.
Target, for example, relies heavily on Mexican produce during the winter months, and fruit and vegetable prices in its stores could rise as soon as this week, according to Brian Cornell, its CEO.
“Those are categories where we’ll try to protect pricing, but the consumer will likely see price increases over the next couple of days,” Cornell told the news network CNBC, pointing to produce including strawberries, avocados and bananas. “If there’s a 25% tariff, those prices will go up.”
The consumer electronics retailer Best Buy said it expected the new tariffs to make their way along its supply chain. “We expect our vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely,” CEO Corie Barry told investors.
The Trump administration defended its moves. “There may well be short-term price movements,” the commerce secretary, Howard Lutnick, told CNBC. “But in the long term, it’s going to be completely different.”
Trump, meanwhile, wrote on Truth Social, his social network: “IF COMPANIES MOVE TO THE UNITED STATES, THERE ARE NO TARIFFS!!!”
The US’s largest trading partners have already hit back. Canada retaliated overnight with its own tariffs on US exports worth C$30bn ($20.71bn), from orange juice to motorcycles, and threatened to impose tariffs on a further C$125bn ($86.29bn) wave of US goods later this month.
China plans to hit US farm products including chicken, beef, wheat and corn with 15% tariffs from next week. Mexico pledged to lay out its response on Sunday.
Trump threatened to hit back against Canada’s retaliation, suggesting the US will match any Canadian tariffs on US products with US tariffs on Canadian products.
On Wall Street, the S&P 500 fell 1.22% and the Dow Jones industrial average fell 1.55%. The FTSE 100 retreated 1.27% in London.
Justin Trudeau, the Canadian prime minister, said: “Because of the tariffs imposed by the US, Americans will pay more for groceries, gas and cars, and potentially lose thousands of jobs.”
Claudia Sheinbaum, the Mexican president, argued there was “no reason, rationale or justification” for tariffs to be imposed.
The Nova Scotia premier, Tim Houston, called Trump a “shortsighted man” who “wields his power just for the sake of it”. In a statement soon after the tariffs went into effect, Houston said it was “impossible to properly describe the uncertainty and chaos” that the trade war was causing for Canadians.
In neighbouring Newfoundland and Labrador, staff at the province’s liquor stores were ordered to pull all American products. “Now, more than ever, we should be supporting local and Canadian-made products where possible,” the outgoing premier, Andrew Furey, said.
The Bloc Québécois leader, Yves-François Blanchet, called the United States an “economic predator” and warned the province’s vast resources of timber and metals were at risk. “Americans will suffer inflation, isolation, distrust and lies,” he said.
