US President Donald Trump signed an executive order early on February 2 (Vietnam time) imposing a new 25% tax on goods imported from Mexico and Canada, and a 10% tax on goods imported from China from February 4.

The order does not specify when the tariffs will be lifted. It includes a provision for retaliation if any country retaliates in any way, meaning future tariff increases are possible.

Donald Trump's move is aimed at retaliating against Canada and Mexico for failing to stop illegal immigration and the flow of fentanyl (an addictive painkiller) into the US. China is being punished for the fentanyl problem. This is a drug that is said to have "killed tens of millions of Americans".

Canada, in particular, will see a 10% tax on energy resources. Earlier, Donald Trump said higher tariffs on oil and natural gas would be imposed in mid-February.

Total annual trade turnover between the US and these three countries amounts to 1,600 billion USD.

While acknowledging that tariffs could lead to higher costs that would ultimately be passed on to consumers, raising inflation and causing short-term disruption, the White House chief was steadfast, rejecting the idea that he was using tariffs as a bargaining tool.

Mr. Trump's imposition of high tariffs on America's three largest trading partners has officially opened a new era of confrontation in American foreign policy and is an alarm bell for global trade. Mr. Trump said that he could significantly increase tariffs or not, depending on the situation.

During the election campaign, Mr. Trump repeatedly declared that he would impose tariffs of up to 60% on imported goods from China.

To offset the possibility of rising prices due to increased import tariffs, on his first day in office, Mr. Trump signed an executive order declaring a national energy emergency and withdrawing from the Paris climate agreement. The US will replenish its strategic oil reserves and boost energy exports…

Mr. Trump also accused OPEC of being responsible for the war in Ukraine, due to the high oil prices, calling on the organization to lower oil prices. According to Mr. Trump, the war between Russia and Ukraine could quickly end if oil prices were reduced.

Oil prices have fallen sharply over the past two weeks, from nearly $79/barrel of WTI oil on January 15 to $72.5/barrel as of now.

Falling oil prices will help lower input costs for production and business activities, thereby possibly curbing rising commodity prices, even as Washington imposes high tariffs on imports from some major trading partners.

Mr. Trump also said that he planned to impose higher tariffs on the European Union (EU) because "this bloc has treated the US badly."

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US President Donald Trump imposes high tariffs on many countries. Photo: ITR

Global economic alarm

It can be seen that Mr. Trump's imposition of higher import taxes on goods from America's three largest trading partners has opened a new period of confrontation in America's foreign policy.

Canadian Prime Minister Justin Trudeau previously said he would “respond immediately” if the US imposed tariffs. The Mexican government said it was in close contact with the Trump administration to find a solution.

Some analysts say the US’s high tariffs on Canada, Mexico and China are due to the high trade deficit with these countries. The tariff hike will help Mr. Trump speed up the renegotiation of the new US-Mexico-Canada Agreement (USMCA) trade deal.

During his first term, Mr. Trump renegotiated the North American Free Trade Agreement and signed the USMCA agreement, which took effect in 2020.

Early forecasts show that the trade war between the US and Canada and Mexico could cause difficulties for the two US trading partners, leading to recession. Meanwhile, the US is less affected, with a risk of a mild recession.

However, Mr. Trump's biggest trade war target is still China, just like in his first term. Mr. Trump has repeatedly accused China of stealing American intellectual property and dumping cheap goods into the US.

In 2018, Mr. Trump imposed a 25% tariff on most products from China. The Biden administration has since maintained most of those measures.

In the coming time, it is unclear whether the new owner of the White House will raise taxes to 60% on Chinese goods as he pledged during the election campaign.

Recently, the United States was shaken after China's Alibaba and DeepSeek launched two artificial intelligence (AI) platforms with extremely low investment costs and performance no less than ChatGPT of the US OpenAI. This event blew away trillions of dollars in capitalization of US technology corporations and made the giants afraid to find solutions.

The imposition of tariffs on allies or sanctions on opponents has been carried out by Mr. Trump since his previous term and is believed to be aimed at gaining an advantage at the negotiating table to bring benefits to the United States. This is a measure of “maximum pressure” that Mr. Trump has applied globally.

Mr. Trump also just threatened to impose 100% import tariffs on BRICS member countries if they try to create an alternative currency to the USD.

With the world economy, financial and commodity markets fluctuated strongly. Gold prices soared to a new historical peak of 2,820 USD/ounce despite the strong increase of the USD, and Wall Street stocks plummeted due to Mr. Trump's tax. Gold is a commodity that often increases in price when the world is in turmoil and economic-political.

Mr. Trump's decree is considered not just a simple trade story, but can entail many consequences, related to supply chains, FDI capital flows, finance and other geopolitical issues if the war is expanded, along with retaliatory measures.

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