Donald Trump’s tariff threats have rattled foreign businesses and governments, with many fearing it could signal the opening salvo of an all-out trade war when he returns to the White House next year.

The president-elect on Monday placed both allies and rivals on notice, vowing to quickly slap an across-the-board tariff of 25 percent on Canada and Mexico, and add a 10 percent tariff on China.

Following through on that threat — or his campaign promise of a 10 percent levy on all US imports — will spark retaliation and have ripple effects across the global economy, analysts say.

“Our assumption is that all these other countries, all these other advanced economies, especially in Asia, they will retaliate in kind,” economist Bernard Yaros of Oxford Economics told AFP.

US tariffs and retaliation including from Europe and Asia would “depress growth” and trade flows, he said, estimating a cut to global growth of 0.1 to 0.9 percentage points in 2026.

Even before tariffs take effect, threats weigh on sentiment and could delay investments and hiring, ING economists Ruben Dewitte and Inga Fechner warned in a note.

Trump has long viewed tariffs as a negotiating tool — or an “all-purpose bludgeon” as a recent Wall Street Journal editorial put it.

On Monday, Trump said that the tariffs on Mexico and Canada would only be removed when illegal immigration and drug trafficking to the United States are stopped.

While seeking to build US leverage, he also risks longer term impacts, with some suggesting he would push countries toward China, Columbia Law School professor Petros Mavroidis said.

“What he definitely does is alienate all his allies,” he told AFP.

Erin Murphy, senior fellow at the Center for Strategic and International Studies, said in Trump’s threats “there is no differentiation” regarding countries’ economic development status or affinity with Washington.

Europe pushback

Europe could be particularly impacted, Dewitte and Fechner said, warning that “a looming new trade war could push the eurozone economy from sluggish growth into recession.”

EU tariffs on car imports were a particular target of Trump during his campaign.

But US reliance on the bloc for strategically important products, mainly in the chemical and pharmaceutical sectors, could give the EU some leverage in talks, ING said.

“European countries will be less likely to strike any kind of bargain with Trump than Canada or Mexico,” said Peterson Institute for International Economics nonresident senior fellow Gary Hufbauer.

He expects the EU could offer to reduce auto tariffs and buy more US agricultural products like soybeans, but it may not be enough for an administration seeking greater market access or rules exemptions.

Should the US impose tariffs, the EU will probably retaliate on iconic US goods like iPhones or whiskey, he said.

European countries could turn to the World Trade Organization (WTO), though even favorable rulings from the international body may not significantly change US practices.

EU chief Ursula von der Leyen has said she will work towards “constructive cooperation” with US authorities.

Jovita Neliupsiene, the EU ambassador to the United States, meanwhile said the bloc is ready to respond to new trade frictions.

Avoiding escalation

In Asia, economies like Japan and South Korea could be targeted over metals and auto exports, while Vietnam may also draw US scrutiny over solar panels, Yaros said.

The US trade deficit with Vietnam has widened in recent years on a surge in goods imports.

Yaros said that countries targeted by Trump’s tariffs, in seeking to avoid escalation, will “retaliate in a way that’s commensurate to the action done by the US, but no greater.”

China, based on precedent, might eschew equal retaliation for tools like export controls, he added.

Daniel Russel of the Asia Society Policy Institute said both Tokyo and Seoul are very focused on preparing for potential tariffs.

He expects partners like South Korea could seek exemptions from blanket US tariffs, for example, by citing its high-tech investments in America.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Washington:

President-elect Donald Trump has vowed to slap a 25% tariff on all goods imported from America’s largest trading partners – Mexico and Canada, starting January 20, his first day in office.

But this tariff imposition is also set to have severe implications on his own countrymen, who may face higher prices on various goods.

His first term was marked by a significant trade war with China, aimed at boosting US manufacturing, securing national security interests, and addressing what Trump believed was an extremely imbalanced trade relationship.

President Joe Biden maintained most of these tariffs and even added new ones.

But the new tariffs come at a time when the US has grown increasingly reliant on imports from Mexico and Canada. Mexico has overtaken China as the top exporter of goods to the US, while Canada is a close third. This means that the new tariffs will be virtually inescapable for Americans, as businesses facing higher costs will likely pass them on to consumers.

This potential trade war could break banks. Here are a few items that could get more expensive if Trump decides to follow through with his tariff plan.

Gas

The US imports a significant amount of crude oil from Canada, which is refined to produce gasoline and heating oil. A 25% tariff could lead to an increase of 25-75 cents per gallon, impacting Americans in the Great Lakes, Midwest, and Rockies regions.

After Canada’ expansion of the Trans Mountain pipeline, the oil imports to the US had reached a whopping 4.3 million barrels per day.

“You can’t simply process different oil overnight. It would take investments/years. More US supply wouldn’t help,” Patrick De Haan, the head of petroleum analysis at GasBuddy said on X.

Produce

As a byproduct of climate change, the US has become less favourable for agriculture and relies heavily on Mexico. 

$44.1 billion worth of agricultural products were imported by the US from Mexico in 2022.

90% of avocados Americans also consumed in 2022 were imported. A 25% tariff could make guacamole and avocado toast more expensive.

Cars

Mexico is a major hub for car manufacturing, with many US carmakers relying on parts from Mexico to build their vehicles. A 25% tariff could disrupt this supply chain and lead to higher car prices.

Last year, $44.76 billion worth of vehicles were imported from Mexico to the US.

Alcohol

According to US Department of Agriculture data, 80% of beer imports come from Mexico. Moreover there is tequila that comes from Mexico and other liqueurs from Canada that drives import growth.

In 2023, $4.6 billion worth of tequila and $108 million worth of mezcal was imported by the US from Mexico, according to the Distilled Spirits Council.

The tariffs of spirits are bound to start a chain reaction leading to job losses in the hospitality industry as well, which are still on their way to recovery after the pandemic.

The tariffs on these imports are bound to hurt the consumers if businesses face higher costs. Trump’s tariff plan has already sparked concerns among businesses and economists, who warn that it could lead to higher prices, job losses, and a decline in economic growth.