Over the weekend, President Trump signed an executive order implementing a 25% tariff on imports from Canada and Mexico and a 10% tariff on imports from China. The only category with a lower tariff is oil imports, at 10%. This was in line with his statement during the inauguration week. Still, it came as a surprise for many, as until Friday, most of them expected it to be just a negotiation tool.
This puts 45% of total imports at risk for price hikes in the near future, with the Automotive, Oil, and Electronic industries being at the top. The purpose of applying it has been said to be twofold: first, as an incentive to companies for local manufacturing, and second, as a negotiation tool.
President also mentioned that the pain will be worth it and reaction from financial markets are not important. Though the reaction from the countries is and leading in them was Canada applying same rate tariff on USA imports.
These actions and reactions open the risk of further hikes on imports of the same country or new countries as demands or results are not met. It also brings the risk of inflation and higher for longer interest rates back to the table.
The unknowns are now rising to a new high leading to uncertainty in the real and financial world. This would translate into more volatile moves in coming months and quarters till there is a crash or reversal of some kind.
Comentarios