Tariff War: Moves and Impacts of the United States, Canada, and Mexico
1. Overview of the Tariff War
- Recent tariff impositions by President Trump have intensified trade tensions between the United States, Canada, and Mexico.
- The United States has imposed a 25% tariff on Canadian industrial goods and a 10% tariff on energy resources.
- In response, Canada has imposed a 25% tariff on $3 billion worth of U.S. products, and Mexico is planning retaliatory measures.
2. Trade Structure Between Canada and the United States
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Background of Canada's Tariff Imposition
- Canada relies on the United States for approximately 70% of its total exports.
- Energy trade with the United States is a crucial axis of the Canadian economy.
- However, the U.S.'s 25% tariff measure is damaging the industrial sector, and the energy resource tariff also acts as a long-term burden.
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Canada's Retaliatory Measures
- The imposition of tariffs on $3 billion worth of products is more of a symbolic measure, and the actual economic impact is expected to be small.
- There is a possibility of an additional $12.5 billion in tariffs in the future, but the scale is limited.
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Economic Impact
- Canada's GDP is projected to decrease by 2.6%.
- Policy responses such as interest rate cuts are necessary, but the economic shock from tariffs is difficult to overcome in the short term.
3. Mexico's Response and Economic Situation
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Mexico's Response
- 16% of Mexico's GDP and 30% of its total exports are directly linked to the United States.
- Although retaliatory tariff items are undecided, it is difficult to take strong retaliatory measures due to high economic dependence.
- With a high possibility of an economic downturn, retaliatory measures are limited.
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Trump's Strategy
- By utilizing Mexico's and Canada's high trade dependency on the United States, the US is maximizing its negotiation power.
- The policy of "the United States, as a superpower, alleviating economic burdens with money from other countries" is being continued.
4. Global Impact: Economic Burdens of the United States, Canada, and Mexico
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United States
- Although inflation and economic growth slowdown are expected due to tariffs, the impact is less than that on Canada and Mexico.
- The Federal Reserve has maintained that the inflation caused by tariffs is "temporary," but there is a possibility of insurance interest rate cuts depending on the situation.
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Canada and Mexico
- Both countries are certain to see worsened inflation and reduced GDP due to tariffs.
- In the case of intermediate goods such as automobiles, trade costs increase sharply when tariffs are imposed, resulting in negative effects.
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China
- As the tariff dispute between China and the United States is also happening, the vulnerabilities of the global supply chain may be further highlighted.
- In the long term, both the United States and China are expected to suffer economic losses.
5. Response from an Investment Perspective
- Long-term investment adjustments are needed considering growth slowdown and rising inflation.
- It is important to select stocks that are less affected by global economic slowdown, such as technology stocks.
- The Fed's policy direction and changes in global market prices and economies should be closely monitored.
Summary
The tariff war between the United States, Canada, and Mexico is expected to hit the economies of each country. The United States may experience relatively less impact, but Canada and Mexico are highly dependent on the United States, so there is a high possibility of GDP reduction and economic downturn. Investors need to adjust their strategies considering the long-term impact of the tariff war and pay attention to the Fed's policy direction.
[More…]
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Impact of Trade War: Possibility of Restructuring the Global Economy
https://nextgeninsight.net/?s=%EB%AC%B4%EC%97%AD -
Changes in the International Market Brought About by Tariff Imposition
https://nextgeninsight.net/?s=%EA%B4%80%EC%84%B8
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