Summary
- US tariffs of 25% came into effect on Canadian and Mexican imports on Tuesday (4 March) after a one-month reprieve came to an end.
- US president Donald Trump also doubled the tariff on Chinese imports from 10% to 20%.
- Canada and China have responded by announcing retaliatory tariffs. Mexico has also promised retaliatory action with details to be announced on Sunday (9 March).
- Global stock markets fell after the tariff announcements were made as investors were forced to accept that Trump’s trade threats might be more than just a bargaining chip.
- Economists have warned that tariffs could slow global economic growth and push inflation higher.
- Despite this, the measures coming out of the White House remain unpredictable.
- Later in the day on Tuesday (4 March) US commerce secretary Howard Lutnick said Trump could announce a deal on Wednesday (5 March) to “meet [Canada and Mexico] in the middle”.
The team at MoneyWeek is reporting live on this week’s tariff announcements and what they mean for your money. Refer to our previous live blog for analysis on the tariff announcements made in February.
How concerned are you about the impact of tariffs?
That concludes our coverage for this evening. We will be back with further updates and analysis tomorrow. In the meantime, MoneyWeek would like to hear your thoughts on the latest tariff developments. What do you think it will mean for the pound in your pocket?
Early warning signs in the US economy?
Businesses are already starting to feel the first effects of the tariff-related disruption, based on recent data from the Purchasing Managers’ Index (PMI). The PMI is a survey which gives regular insights into business conditions across different areas of the global economy.
The latest PMI data showed that US exports fell at an increased rate in February – the second biggest drop in 20 months. “North American factories increasingly cited tariffs and trade policy issues as a cause of reduced exports,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
US factories also reported the biggest rise in input costs since November 2022. “These costs were often passed on to customers by US factories, which reported the sharpest rise in selling prices for two years,” Williamson added.
Despite this, US production growth currently looks strong. February's PMI saw production growth accelerate at the fastest rate since May 2022.
The death of the “Trump trade”?
The S&P 500 enjoyed a strong bull run last year, with a further boost coming from the election result in November. Investors were optimistic that tax cuts and deregulation would spell good news for businesses and sought to take advantage of what they were calling the “Trump trade”.
Sentiment has been far more negative in 2025, though, and the S&P 500 is now back where it was at the point of the election.
“Domestically, investors have begun to price in the effects of tariffs which could have unintended consequences such as weakening the economy as well as boosting inflation at a time the situation was coming under control,” said Richard Hunter, head of markets at platform Interactive Investor.
US markets were also rattled earlier this year by the emergence of Chinese chatbot DeepSeek, a rival to ChatGPT. The application delivers comparable performance to ChatGPT, but with lower development costs and less sophisticated semiconductor chips.
Until recently, the US was seen as the undisputed frontrunner in the AI race, but the emergence of DeepSeek suggests China might not be as far behind as previously imagined.
Tech stocks, which have driven US indices higher in recent years, have suffered as a result. With the exception of Meta, the share price performance of the Magnificent Seven has been disappointing so far this year.
A "toxic" trade environment
Economists at European bank ING have described the current trade uncertainty as “toxic for companies and their investment decisions”. However, they believe there is still the opportunity for trade deals to be formed.
They write: “Positive comments towards Australia, China's measured tariff response, diplomatic efforts from India and Japan, and potential consultations between the EU and the US could still result in a watered-down tariff approach. That tariffs will be avoided altogether is not a realistic expectation in the current global trade environment, however.”
Retaliatory tariffs
Canada: Canadian prime minister Justin Trudeau called the latest tariffs “a dumb thing to do”. He announced retaliatory tariffs of 25% against $155 billion worth of American goods. Tariffs on the first $30 billion came into effect yesterday, with the remaining $125 billion due to follow 21 days later.
China: Foreign ministry spokesman Lin Jian said China would “fight [the US] to the bitter end” if it persists in waging a trade war. China announced retaliatory measures including tariffs of up to 15% on American food and agricultural products.
Mexico: Mexican president Claudia Sheinbaum has also promised retaliatory tariffs, but will not announce these until a public speech on Sunday.
Tariffs: a recap of everything the US has announced so far
The latest tariffs on Canada, Mexico and China this week follow on from previous announcements in February. Here is a recap of all of the tariffs that have been announced so far:
- 25% tariffs on Canadian goods (with a carveout for energy products, which will be taxed at 10%) – effective 4 March
- 25% tariffs on Mexican goods – effective 4 March
- 20% tariffs on Chinese goods – first 10% tariff effective 4 February, before being doubled to 20% on 4 March
- 25% tariffs on steel and aluminium imports – effective 12 March
Trump has also hinted at potential tariffs on cars, semiconductor chips, pharmaceuticals and agricultural products. He has indicated that these could be in the region of 25%, with an announcement coming on 2 April.
The president has also suggested that “reciprocal” tariffs could follow on 2 April for countries who impose taxes against the US. This could target a broad range of countries including those who impose VAT, raising fears that the UK could be hit.
What do tariffs mean for the global economy?
The scale of the economic impact will depend on how far Trump actually goes. For now, the line between threats and genuine policy remains fuzzy. What we do know is that there are rarely any winners when it comes to trade wars.
Tariffs typically push up costs for consumers as it becomes more expensive for them to buy imported goods. Domestically-manufactured goods can also become more expensive too, if they include imported components.
Washing machines are often cited as an example from Trump’s previous term. US tariffs imposed on imported washing machines between 2018 and 2023 pushed the cost of laundry equipment up by 34%, according to official statistics cited by the BBC. The price of dryers, an associated good which was not subject to tariffs, also went up.
Trump’s tariff threats this time around have been more wide-ranging, and so could prove even more disruptive.
A general rule that has been quoted by economists at Goldman Sachs, among others, is that each time the average tariff rate goes up by one percentage point, the rate of core US inflation goes up by around 0.1 percentage points.
As well as pushing inflation up, economists have warned that tariffs are likely to slow economic growth. Supply chain disruption and higher costs for businesses and consumers are rarely good news for the economy.
Markets rally on hope of a rollback in policy
Commenting on the latest developments in markets today, Russ Mould, investment director at platform AJ Bell, said: “European and Asian markets were on the front foot on Wednesday amid hopes that Donald Trump might partially wind back tariffs if deals could be struck with Canada and Mexico.
“Investors are looking for any signs that Trump is open to deals rather than doling out tariffs and refusing to listen. Markets would take even the slightest rollback from Trump as a positive sign, helping to settle nerves following concerns about a full-blown trade war.” Mould also noted a shift from “risk-off” to “risk-on” investments in the FTSE 100 this morning as investor optimism was buoyed by the prospect of an easing in policy.
The S&P 500 is down more than 3% over the past five days, at the time of writing.
Good Wednesday afternoon. Welcome to MoneyWeek’s new live blog on US president Donald Trump’s tariffs.
The trade war is heating up but the messages coming out of the White House remain unpredictable. Tariffs of 25% kicked in on Canadian and Mexican imports yesterday, and the levy on Chinese imports was doubled from 10% to 20%. However, later in the day, US commerce secretary Howard Lutnick said Trump could announce a deal on Wednesday (i.e. today) to meet Canada and Mexico somewhere “in the middle”.
This has calmed markets somewhat and raised hopes that Trump will backtrack – at least a little. But investors should brace themselves as the rollercoaster ride is likely to resume before long. The only thing that is predictable about the current inhabitant of the White House is his unpredictability.
Stick with us as we run through the latest news and share analysis on what it means for markets and the economy.