Trump Tariffs Spark Fears of Global Trade War as Markets Brace for Fall

Canada, Mexico and China Ready to Retaliate Over New Import Taxes

- Ed Pilkington & Graeme Wearden

Donald Trump's plans to impose sweeping tariffs on America's neighbours and allies provoked alarm yesterday over the prospect of a global trade war, as Democrats warned that working families in the US would be hit hard and the affected countries prepared retaliatory moves.

Trump signed three executive orders on Saturday night imposing tariffs of 25% on all goods from Mexico and Canada apart from Canadian energy, which will be subject to a 10% tariff, as well as a 10% tariff on imports from China.

Trump said the move was in response to a "major threat" from illegal immigration and drugs, and demanded the countries staunch the flow of fentanyl and illegal immigrants. His office said Chinese officials had failed to prevent drug precursors from being shipped to Mexico and used by cartels.

The new impositions are scheduled to start tomorrow.

Investors are bracing themselves for stock market falls today after Mexico and Canada - the US's two top trading partners - vowed immediate retaliation and China said it would take "counter measures", including lodging a lawsuit with the World Trade Organization.

In a TV address on Saturday night, Canada's prime minister, Justin Trudeau, announced concrete measures, including a tit-for-tat 25% tariff phased in across C$155bn (£86bn) worth of American products.

Claudia Sheinbaum, the president of Mexico, said she had ordered her economy minister to implement tariff and non-tariff measures to defend Mexico's interests.

Economists fear the trade war could push Canada and Mexico into recession. Deutsche Bank's top currency strategist, George Saravelos, said if Trump's tariffs went ahead, they would be the "largest shock" in global trade policy since the end of the Bretton Woods system of fixed exchange rates half a century ago.

"We see immediate recessionary consequences for some of the economies involved and broad-based negative read-across to the world economy," Saravelos added.