And finally....
With European stock markets closed, and Wall Street off its earlier lows, we’ll give the final word today to ABN Amro.
They have told clients that the “Year of the tariff” has kicked off with a bang. And even though Mexico has won a (temporary?) reprieve from new tariffs today, the threat of tariff s will linger.
As ABN AMRO’s analysts put it:
US tariff threats against Mexico and Canada raises risk of massive trade war – President Trump’s ‘will he, won’t he’ threats of a 25% tariff on goods from Mexico and Canada (alongside a 10% additional tariff on Chinese goods) have significantly raised the probability of a more economically damaging trade war between the US and its main trade partners.
The situation remains fluid, with the latest word from Mexican president Sheinbaum suggesting a one month delay to tariff rises (previously scheduled for tomorrow) – at least for Mexico. But Trump himself has taken a hard line, saying “they owe us a lot of money, and I’m sure they’re going to pay.” Even if tariffs don’t go ahead in the near term, the risk will probably remain.
Trump has also sought to prepare the public for the massive disruption that is likely to result from tariffs, acknowledging that “we may have short term some little pain.” This would come from three main channels: 1) Canada and Mexico have vowed a massive retaliation, with Canada announcing a 25% tariff on $155bn of US goods, 2) higher US inflation (see below), 3) US companies with complex cross-border supply chains, such as auto makers, which may see a compounding effect of tariffs where goods cross borders multiple times.As ‘painful’ as all of this may be, Trump’s comments suggest a high bar for him to permanently climb down from tariffs. If anything, as we describe below, there might be a lower bar for him to expand his trade war.
I guess we’ll find out in the weeks, days, and hours ahead.
And to keep track of developments in the short-term, our US Politics Live blog has all the action:
Goodnight. GW
The detente between the US and Mexico is also calming fears on Wall Street.
The Dow Jones industrial average is now down just 0.1%, while the broader S&P 500 share index is 0.5% lower today.
