The trade war has begun (again)! The United States has established tariffs on Canada, Mexico and China’s goods after both countries failed to meet the demands set by Donald Trump nor alleviate his concerns regarding the trade deficit. As a response, both Canada and Mexico have imposed tariffs on American goods. However, considering that the United States imports more goods from these countries than it exports, this trade war could ultimately benefit the U.S. economy. Higher tariffs may encourage American businesses to seek alternative suppliers or boost domestic production, potentially creating jobs and reducing reliance on Mexico and Canada.
Canada was hit with 25% tariffs on most goods, except for oil, natural gas and electricity. These exceptions are facing a 10% tariff. The United States is a world leader in refining oil, this serves to alleviate the costs leaking into the common market and foreign markets. As for Mexico, the tariffs reflect the same 25%, however, all of their goods are taxed at this rate, which will have an effect on car parts and other manufactured goods. Given that the United States is heavily consumerist, other countries, such as those in CAFTA-DR and Peru with PTPA, stand to benefit significantly from this trade war.
The United States Dollar has increased in value against both of these currencies. Within 24 hours against the United States Dollar, the Mexican Peso suffered a loss of around 2.7% and the Canadian dollar suffered around 1.3%, respectively. The trade war is already impacting forex speculators and it will likely worsen for Canada and Mexico as this trade war deepens.
