Stocks continued their downward trajectory on Monday following President Donald Trump's announcement of impending tariffs on the United States' closest trading partners, Canada and Mexico. The President confirmed that the U.S. will impose a 25% tariff on imports from these countries, effective Tuesday, dashing any hopes of a last-minute agreement to avert a trade conflict.
Earlier in the day, Commerce Secretary Howard Lutnick hinted at a potential softening of Trump's tariff stance. However, Trump's remarks later in the afternoon dispelled such notions. Trump reaffirmed that the delayed tariffs on Mexico and Canada would be reinstated.
"They're all set. They go into effect tomorrow." – President Donald Trump
The President cited ongoing issues with illicit drugs entering the U.S. from Mexico and Canada as a critical factor in his decision. He expressed dissatisfaction with the current efforts by both countries to curb drug trafficking across their borders. Despite previous commitments made by Canada and Mexico to address these border issues, Trump determined that more aggressive measures were necessary.
The reinstatement of tariffs stems from an executive order signed by Trump on February 1, imposing a 25% levy on Mexican imports and various products from Canada. Initially, these tariffs were postponed for a month on February 3, allowing for diplomatic negotiations. However, with no satisfactory progress reported, Trump declared there was no room left for negotiation with the two allies.
Trump's comments not only impacted North American trading relationships but also extended to China. An additional 10% tariff on Chinese imports is set to take effect the same day as the North American tariffs, marking a significant escalation in trade tensions.
Commerce Secretary Lutnick, speaking on CNN earlier, suggested that the President might consider further executive actions to address these issues. He indicated that Trump's plans would be unveiled on Tuesday.
"They haven't done enough on fentanyl. Let's see how the president weighs that today," – Commerce Secretary Howard Lutnick
Trump's statements at the White House underscored his frustration with the current state of affairs and his resolve to take decisive action. The President's hardline stance reflects his administration's broader strategy to address trade imbalances and enforce stricter border controls.
The financial markets reacted swiftly to the news, with stocks sinking further in response to the anticipated impact of heightened trade barriers. Investors expressed concern over the potential repercussions for global trade dynamics and economic growth.
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