Donald Trump’s tariff threats have rattled foreign businesses and governments, with many fearing it could signal the beginning of an all-out trade war when he returns to the White House next year.
The president-elect put both allies and rivals on notice on Monday, vowing to soon impose 25 percent tariffs on Canada and Mexico and add a 10 percent tariff on China.
Analysts say following through on that threat — or his campaign promise to impose a 10 percent levy on all U.S. imports — would prompt retaliation and have a knock-on effect on the global economy.
“Our assumption is that all these other countries, all these other advanced economies, especially in Asia, they will retaliate,” Bernard Yaros, an economist at Oxford Economics, told AFP.
He said US tariffs and retaliation would lead to a “deceleration in growth” and trade flows, including in Europe and Asia, estimating a 0.1 to 0.9 percentage point cut in global growth in 2026.
ING economists Ruben Davitte and Inga Fechner warned in a note that even before the tariffs take effect, threats could weigh on sentiment and delay investment and hiring.
Trump has long viewed tariffs as a negotiating tool — or as a recent Wall Street Journal editorial put it, an “all-purpose barrier.”
On Monday, Trump said tariffs on Mexico and Canada would be lifted only if illegal immigration and drug trafficking into the United States were stopped.
Columbia Law School professor Petros Mavroidis said that while trying to build American leverage, he also risks long-term effects, with some suggesting he will push countries toward China.
“He certainly alienates all his colleagues,” he told AFP.
Erin Murphy, senior fellow at the Center for Strategic and International Studies, said Trump’s threats “make no discrimination” regarding countries’ economic development status or relationship with Washington.
Europe pushback
Europe could be particularly affected, with Devitt and Fechner warning that “an imminent new trade war could push the eurozone economy from sluggish growth to recession.”
EU tariffs on car imports were a particular target of Trump during his campaign.
But America’s reliance on the bloc for strategically important products, mainly in the chemical and pharmaceutical sectors, could give the EU some leverage in negotiations, ING said.
“European countries would be less likely to make any kind of deal with Trump than Canada or Mexico,” said Gary Hufbauer, a non-resident senior fellow at the Peterson Institute for International Economics.
He hopes the EU could offer to reduce auto tariffs and buy more U.S. agricultural products like soybeans, but that might not be enough for an administration seeking greater market access or relaxation of rules.
Should the US impose tariffs, he said, the EU would likely retaliate on coveted American goods like iPhones or whiskey.
European countries may turn to the World Trade Organization (WTO), although even favorable decisions from the international body may not lead to significant changes in American practices.
EU chief Ursula von der Leyen has said she will work toward “constructive cooperation” with US officials.
Meanwhile, EU Ambassador to the United States Jovita Neliupsiné said the bloc was ready to respond to new trade frictions.
avoid increasing stress
In Asia, economies such as Japan and South Korea could be targeted over metals and auto exports, while Vietnam also could face U.S. scrutiny over solar panels, Yaros said.
The US trade deficit with Vietnam has increased in recent years due to increased goods imports.
Yaros said that countries targeted by Trump’s tariffs, to avoid an escalation, would “take retaliatory measures commensurate with the action taken by the US, but not more.”
China, for example, could avoid similar retaliation for tools like export controls, he said.
Daniel Russell of the Asia Society Policy Institute said both Tokyo and Seoul are focusing heavily on preparing for potential tariffs.
He expects partners such as South Korea to seek exemptions from sweeping US tariffs, for example, citing their high-tech investments in the US.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
