US shares retreated on Monday after President Donald Trump dashed hopes of a delay—or even a full reversal—of the increased tariff on goods imported from Mexico and Canada. This decision reignited fears of a trade war between the North American neighbors.
Trump confirmed that the 25 percent tariff on imports from Canada and Mexico will be implemented as planned this Thursday. “Tomorrow — tariffs 25 percent on Canada and 25 percent on Mexico. And that’ll start,” Trump said during a conversation with journalists on Monday.
According to the White House, the tariffs are intended to pressure Canada and Mexico to assist the US in combating fentanyl trafficking and curbing illegal immigration. The tariff hike also aims to address trade imbalances and encourage the relocation of more manufacturing ventures to the US.
The US had previously imposed a 10 percent tariff on Chinese goods last month but delayed the tax increases on Canadian and Mexican imports until this week. Additionally, the US will double tariffs on Chinese goods from 10 percent to 20 percent.
Major imports from Canada, Mexico, and China include cars, computers, crude petroleum, and machine parts. Analysts predict that importers and manufacturers will pass on the additional tariff costs to consumers.
In response, Canada, China, and Mexico have pledged to retaliate. Higher taxes on imports will likely lead to increased consumer prices, fueling inflation and potentially prompting the US Federal Reserve to halt or even reverse its monetary easing plan.
The Dow Jones Industrial Average closed 1.5 percent lower, the S&P 500 dropped 1.8 percent, and the Nasdaq Composite slumped 2.6 percent on Monday.
