President Donald Trump has made good on his threat to hammer Canada and Mexico with hefty import tariffs while doubling down on China, effectively dragging the global economy into an even deeper trade war. In what can only be described as a high-stakes economic gamble, the US has slapped 25% tariffs on most Canadian and Mexican imports while raising duties on Chinese goods to 20%, affecting a staggering $1.5 trillion in annual trade. The message to markets? Trump is doubling down on his signature economic doctrine—tax imports, raising revenue, and somehow bringing back manufacturing jobs.

Canada swiftly retaliated with targeted tariffs on $107 billion worth of American goods in a move that could have been scripted for maximum disruption. At the same time, China and Mexico imposed levies of up to 15%, with a particular focus on US agricultural exports—hitting Trump’s core voter base where it hurts. Meanwhile, Mexico’s President Claudia Sheinbaum has adopted a wait-and-see approach, preparing to address the media on Tuesday after gauging Trump’s next move.

This latest tariff offensive marks a dramatic escalation of Trump’s so-called “diplomatic reset,” quashing any lingering doubts about whether the US president would follow through on his repeated threats to upend global trade in pursuit of what he perceives as economic justice.
We are in a new era where protectionism is the mantra, and the US is leading the charge.

According to Yale’s Budget Lab, these tariffs have pushed US import taxes to their highest average level since 1943, adding up to $2,000 in extra costs per household. The potential knock-on effect? A significant slowdown in US economic growth—especially if further retaliation follows.
And there’s more. Trump has hinted that April will bring even more tariffs, including reciprocal levies on all US trading partners with existing duties on American goods, plus a 25% sector-wide tax on automobiles, semiconductors, and pharmaceuticals. Europe, brace yourselves: a 25% tariff on EU imports is also in the works, along with potential taxes on copper, timber, steel, and aluminium.

The new tariffs will hit every Canadian and Mexican import into the US at 25%, except for Canadian energy, which gets a “modest” 10% tax. The North American auto sector—a deeply integrated industry dependent on smooth cross-border supply chains—now faces significant disruption as automakers scramble to adjust to the added costs.
Adding to the confusion, Trump has delayed the removal of the “de minimis” exemption for low-value goods until the administration figures out how to collect revenue from these imports. This means, for now, low-cost products can continue crossing borders tariff-free—a reprieve for consumers, if not for businesses caught in the policy crossfire.

So far, Beijing’s retaliation has been measured. It has imposed 10–15% tariffs on US goods and blocked certain American defence firms. Soybeans, beef, and fruit are among the targeted products, a calculated strike at Trump’s key electoral base.
It shows that China is exercising patience and avoiding a ‘scorched earth’ strategy despite the escalating tension.
Despite his economic offensive, Trump still appears eager to speak with Chinese President Xi Jinping. Yet, a month after first mentioning the idea of a phone call, the two leaders remain silent.

Trump’s aggressive trade policy is a risky move for a president who campaigned on undoing his predecessor’s economic policies. With inflation still a top concern for American voters, recent polls suggest the public wants the administration to do more to control rising prices—not engage in trade wars that could make everyday goods even more expensive.
Yet, the US president has dismissed warnings from economists that tariffs could backfire, insisting that they will generate the revenue needed to fund a multi-trillion-dollar tax cut package currently under discussion in Congress. The timing is deliberate—Trump is set to outline his vision for a second term in a prime-time address to Congress on Tuesday.

If Trump’s trade war escalates further, with full retaliation from Canada, Mexico, China, and the EU, global interest rates will face a significant shock in 2025. Higher tariffs will fuel inflationary pressures as supply chains are disrupted, increasing the costs of imported goods. The Federal Reserve, despite its reluctance to tighten monetary policy further, could be forced to maintain higher interest rates to combat these price increases. This would push borrowing costs up, hitting businesses, consumers, and even government debt refinancing. Meanwhile, emerging markets reliant on dollar-denominated borrowing would struggle to service their debts, leading to capital outflows, currency devaluations, and a possible wave of sovereign downgrades.
The situation would be even worse in Europe, where inflation remains stubbornly high due to energy market volatility and fiscal imbalances. The European Central Bank may find itself in a no-win situation: raising rates to curb inflation would exacerbate the slowdown in an already fragile European economy. Keeping rates low would risk further currency depreciation and capital flight. If tariffs persist, the global economy could see a sharp divergence: a strong US dollar attracting capital inflows while other economies suffer higher costs, stagnation, and deteriorating investor confidence.