Trump’s Tariff Effect: What It Means For The US Economy- wna24

US President Donald Trump ‘s decision to impose tariffs on Canada, Mexico, and China have triggered concerns about a trade war in the world, with big economic consequences for people of these countries including Americans. Trump also warned of “some pain” for the Americans from the tariffs, which are set to launch on Tuesday. He claimed that Canada would “cease to exist” without its trade surplus with the United States.

As per reports, the trade penalties that Trump signed on Saturday at his Florida resort caused a mix of panic, anger and uncertainty, and threatened to rupture a decades-old partnership on trade in North America while further straining relations with China.

Trump said on his social media post, “WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!). BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID.” However, Trump’s administration has not said how high that price could be or what improvements would need to be seen in stopping illegal immigration and the smuggling of fentanyl to merit the removal of the tariffs that he imposed under the legal justification of an economic emergency.

The tariffs, imposed under the guise of an economic emergency, have been met with swift retaliation from Canada and Mexico. Canada’s ambassador to Washington Kirsten Hillman expressed confusion and hurt over the tariffs, stating, “Canadians are perplexed. We view ourselves as your neighbour, your closest friend, your ally.”

Meanwhile, Trump’s tariff decision has also raised eyebrows due to his previous promises to reduce inflation. Earlier, as a US Presidential candidate ahead of the 2024 general elections, Trump criticised Democrats over inflation, but his tariffs may ultimately exacerbate the issue.

The economic impact of the tariffs is still uncertain, but experts warn of potential losses. An analysis by the Budget Lab at Yale suggests that American households could lose around USD 1,245 billion in income this year, equivalent to a USD 1.4 trillion tax increase over the next decade.

In social media posts, Trump took particular aim at Canada, which responded with retaliatory measures. Trump is placing a 25 per cent tariff on Canadian goods, with a 10 per cent tax on oil, natural gas and electricity, while Canada is imposing 25 per cent tariffs on more than USD 155 billion on US products, including alcohol and fruit.

Trump railed against Canada’s trade surplus with the United States, saying, “We don’t need anything they have. We have unlimited Energy, should make our own Cars, and have more Lumber than we can ever use.”

Reportedly, despite Trump’s claim that the US does not need Canada, one-quarter of the oil that America consumes per day is from its ally to the north.

Trump contended that without that surplus, “Canada ceases to exist as a viable Country. Harsh but true! Therefore, Canada should become our Cherished 51st State. Much lower taxes, and far better military protection for the people of Canada — AND NO TARIFFS!”

Canada’s ambassador to Washington has said the US had a USD 75 billion trade deficit with Canada last year but noted that one-third of what Canada sells to the US is energy exports and that there is a deficit when oil prices are high. About 60 per cent of US crude oil imports are from Canada.

Canada and Mexico have announced retaliatory measures against the US. The Canadian administration has also decided to impose 25 per cent tariffs on over USD 155 billion worth of US products, including alcohol and fruit.

On the other hand, Mexico’s President Claudia Sheinbaum, also announced new tariffs and suggested the US should do more to address drug addiction.

Meanwhile, the tariffs are expected to have a significant economic impact. An analysis by the Budget Lab at Yale shows that if the tariffs continue, the average US household would lose around USD 1,245 billion in income this year, equivalent to a USD 1.4 trillion tax increase over the next decade.

Experts stated that the tariffs could have far-reaching consequences, including higher inflation, lower economic output, and lost jobs. Goldman Sachs has warned that the tariffs could lead to economic damage and has suggested that they may be temporary.

The Canadian administration has also decided to impose tariffs on US goods. Justin Trudeau, additionally, encouraged Canadians to buy more domestic goods, stating that Trump’s moves will “only cause pain across North America”.

Mexican President Claudia Sheinbaum announced new tariffs and suggested the US should address drug addiction within its own borders.

On the other hand, the Chinese government vowed to defend its economic interests and file a lawsuit with the World Trade Organization (WTO).

The economists have criticised Donald Trump’s tariffs, calling them “a self-inflicted wound to the American economy.” Former Treasury Secretary Larry Summers, said, “Inflation might go up over the next nine months by as much as 1 per cent, just at a moment when we were trying to bring it down.”