Trump says Americans could feel 'pain' in trade war with Mexico, Canada, China

President Donald Trump

announced on Sunday that his grand plan of slapping hefty tariffs on Mexico, Canada, and China might give Americans a bit of a financial wedgie in the short term. Global markets are already clutching their pearls at the thought that these levies could throw a wrench in growth and make inflation rear its ugly head again.

Trump mentioned he'd be chatting with the leaders of Canada and Mexico on Monday. Both countries have already retaliated with their own tariffs, but Trump isn't holding his breath for a change of heart.

"I don't expect anything dramatic," Trump told reporters while returning from his Mar-a-Lago getaway. "They owe us a ton of cash, and I'm sure they're gonna cough it up."

He also hinted that the European Union should brace for tariffs too, though he left us hanging on the timeline.

Critics are wagging their fingers at Trump's 25% tariffs on Canada and Mexico and 10% on China, predicting they'll slow down global growth and make life pricier for Americans. Trump insists they're the magic beans to curb immigration, stop drugs, and rev up domestic industries.

"We might feel a little pinch now, and folks get that. But long term, the U.S. has been taken to the cleaners by almost every country," he said.

The financial markets reacted like a cat being dunked in water. U.S. stock futures took a nosedive in early Asian trading, with Nasdaq futures dropping 2.35% and S&P 500 futures down 1.8%. Meanwhile, U.S. oil prices and gasoline futures decided to take a joyride upwards.

North American companies are bracing for impact, worried these new duties could shake up industries from autos to consumer goods to energy.

Trump's tariffs are set to cover nearly half of all U.S. imports, meaning the U.S. would need to more than double its manufacturing output to fill the gap—an idea as feasible as teaching cats to tap dance, according to ING analysts.

"Economically speaking, escalating trade tensions are a lose-lose situation for all countries involved," the analysts wrote, probably while facepalming.

Other analysts warn these tariffs could tip Canada and Mexico into recession and bring "stagflation"—a triple threat of high inflation, stagnant growth, and unemployment—right to America's doorstep.

TUESDAY DEADLINE

The Trump tariffs, laid out in three executive orders, are set to take effect at the stroke of midnight on Tuesday, like some kind of economic Cinderella story.

Some analysts hold out hope for negotiations, especially with Canada and China.

Goldman Sachs economists think the tariffs might just be a temporary hiccup, but the future's as clear as mud because the White House set very broad terms for lifting them.

A White House fact sheet was as detailed as a fortune cookie, giving no clues on what the three countries need to do to get a break.

Trump has vowed to keep the tariffs until he declares victory over the national emergencies of fentanyl and illegal immigration.

China plans to challenge the tariffs at the World Trade Organization and has a few countermeasures up its sleeve, but it's also leaving the door open for a chat with the U.S.

China's sharpest comeback was about fentanyl, saying, "Fentanyl is America's problem," while pointing out China's extensive efforts to tackle the issue.

Mexican President Claudia Sheinbaum, with a fist in the air, promised resilience in a speech outside the capital.

She accused the U.S. of not tackling its fentanyl problem and said tariffs aren't the magic cure.

Sheinbaum plans to spill the beans on Monday about the retaliatory tariffs she ordered over the weekend.

Canada, on the other hand, announced it will take legal action under international bodies to challenge the tariffs.

Prime Minister Justin Trudeau encouraged Canadians to give their longtime ally the cold shoulder after ordering retaliatory tariffs on $155 billion worth of U.S. goods, from peanut butter to lumber.

Canadian officials are prepping measures to help businesses that might get caught in the trade crossfire.

Trump took a jab at Canada, suggesting it should just become the 51st U.S. state. On Sunday, he claimed Canada "ceases to exist as a viable country" without its "massive subsidy."

FOLLOWING THROUGH

The tariff announcement made good on Trump's 2024 campaign promise, ignoring economists' warnings that a trade war would be like putting the economy in a blender.

Trump declared a national emergency under two laws, giving him sweeping powers to impose sanctions and play economic superhero.

Trade lawyers suggest Trump might face legal challenges for stretching U.S. laws like taffy. Democratic lawmakers Suzan DelBene and Don Beyer called it a blatant abuse of executive power, while others warned of rising prices.

"No matter how you slice it: costs are going to climb for consumers," Senate Democratic Leader Chuck Schumer said, vowing to try to "undo this mess."

Republicans, on the other hand, are giving Trump's move a standing ovation.

A Reuters/Ipsos poll showed Americans are split on the tariffs, with 54% against and 43% in favor, with Democrats more opposed and Republicans more supportive.

INVESTORS LOOK AHEAD

Investors are bracing for more tariff fun promised by Trump, including on oil, gas, steel, aluminum, chips, and pharmaceuticals.

Trump also has the European Union in his sights.

A European Commission spokesperson said the EU "would respond firmly to any trading partner that unfairly or arbitrarily imposes tariffs on EU goods."

Europe's biggest carmaker, Volkswagen, is crossing its fingers for talks to avoid a trade spat.

Automakers would be particularly hard hit, with new tariffs on vehicles built in Canada and Mexico potentially turning the regional supply chain into a game of hot potato.

Trump decided to go easy with only a 10% duty on energy products from Canada after oil refiners and Midwestern states voiced concerns. Imports of crude oil from Canada accounted for a hefty chunk of U.S. imports, according to data.

White House officials said Canada will no longer enjoy the "de minimis" U.S. duty exemption for small shipments. They claim Canada and Mexico have become routes for fentanyl and its precursors sneaking into the U.S. via small packages that customs agents often miss.