Trump’s US government officially decided to impose tariffs on some countries.
2025-02-04
■ The Trump administration has officially decided to impose tariffs on Canada, Mexico, and China, but the original intention is limited
■ The focus is on (1) retaliatory tariffs and room for negotiation, and (2) expansion of the scope of tariff application. In the short term, financial market instability will increase.
On February 1 (local time), the Trump administration officially decided to impose tariffs on Canada, Mexico, and China. President Trump has signed an executive order, that imposes a 25% tariff on goods imported from Canada and Mexico (except for Canada's energy resources, which are taxed at 10%), and a 10% tariff on Chinese imports. The measure will take effect on February 4. Although tariffs are seen as a "negotiation tool" during Trump's second term, the purpose is to prevent the influx of illegal immigration and drug smuggling, not to reduce the US trade deficit, according to the currently available information.
The main focus in the future includes: (1) retaliatory tariffs and room for negotiation by various countries; and (2) whether the scope of tariff application will be expanded. (1) Canadian Prime Minister Trudeau announced that he would impose a 25% retaliatory tariff on US imports worth C$155 billion, but initially only C$30 billion would be applied, and the remaining C$125 billion would be implemented 21 days later. Mexico plans to announce specific retaliatory measures on February 3. On the other hand, China has not yet taken specific retaliatory measures, probably because the tariff rate previously promised by the Trump administration was as high as 60%, currently, it is only 10%, and the current tariff measures are not for trade-related purposes, so there is still room for negotiation. In addition, President Trump plans to speak with the leaders of Canada and Mexico on February 3 before the tariffs take effect. (2) At present, the tariff measures against Canada, Mexico, and China are not intended to reduce the trade deficit, so if the scope of tariff application is to be expanded, the purpose of the tariff policy needs to be adjusted. Among the countries with large trade surpluses with the United States, senior diplomatic officials from the United States and Vietnam are in negotiations. Japan will also hold a Japan-US summit on February 7. At the same time, the European Union (EU) has clearly expressed its confrontational stance against the US government, and future consultations with these countries and regions are worth paying attention to.
Overall, this decision has increased the sense of urgency in financial markets regarding the US government's imposition of tariffs. If new countries are included in the tariff scope in the future, their background needs to be further analyzed, but the market's risk aversion may be stronger than before. In addition, the International Emergency Economic Powers Act (IEEPA), which gives the US president broad powers, can be implemented without a vote of Congress, so news of tariff measures may come out suddenly. At the same time, some analysts believe that legal proceedings may be launched in the United States over its legal basis. The tariff measures may still be suspended before further negotiations between Canada, Mexico, and China and the introduction of domestic response plans in the United States. In the short term, the instability of financial markets will inevitably increase.
■ The focus is on (1) retaliatory tariffs and room for negotiation, and (2) expansion of the scope of tariff application. In the short term, financial market instability will increase.
On February 1 (local time), the Trump administration officially decided to impose tariffs on Canada, Mexico, and China. President Trump has signed an executive order, that imposes a 25% tariff on goods imported from Canada and Mexico (except for Canada's energy resources, which are taxed at 10%), and a 10% tariff on Chinese imports. The measure will take effect on February 4. Although tariffs are seen as a "negotiation tool" during Trump's second term, the purpose is to prevent the influx of illegal immigration and drug smuggling, not to reduce the US trade deficit, according to the currently available information.
The main focus in the future includes: (1) retaliatory tariffs and room for negotiation by various countries; and (2) whether the scope of tariff application will be expanded. (1) Canadian Prime Minister Trudeau announced that he would impose a 25% retaliatory tariff on US imports worth C$155 billion, but initially only C$30 billion would be applied, and the remaining C$125 billion would be implemented 21 days later. Mexico plans to announce specific retaliatory measures on February 3. On the other hand, China has not yet taken specific retaliatory measures, probably because the tariff rate previously promised by the Trump administration was as high as 60%, currently, it is only 10%, and the current tariff measures are not for trade-related purposes, so there is still room for negotiation. In addition, President Trump plans to speak with the leaders of Canada and Mexico on February 3 before the tariffs take effect. (2) At present, the tariff measures against Canada, Mexico, and China are not intended to reduce the trade deficit, so if the scope of tariff application is to be expanded, the purpose of the tariff policy needs to be adjusted. Among the countries with large trade surpluses with the United States, senior diplomatic officials from the United States and Vietnam are in negotiations. Japan will also hold a Japan-US summit on February 7. At the same time, the European Union (EU) has clearly expressed its confrontational stance against the US government, and future consultations with these countries and regions are worth paying attention to.
Overall, this decision has increased the sense of urgency in financial markets regarding the US government's imposition of tariffs. If new countries are included in the tariff scope in the future, their background needs to be further analyzed, but the market's risk aversion may be stronger than before. In addition, the International Emergency Economic Powers Act (IEEPA), which gives the US president broad powers, can be implemented without a vote of Congress, so news of tariff measures may come out suddenly. At the same time, some analysts believe that legal proceedings may be launched in the United States over its legal basis. The tariff measures may still be suspended before further negotiations between Canada, Mexico, and China and the introduction of domestic response plans in the United States. In the short term, the instability of financial markets will inevitably increase.