(Picture link: https://regfollower.com/us-trump-introduces-reciprocal-tariffs-rattles-global-trade-relations/)

By Yan Tung Cara Cheuk

Introduction and Background Information:

On 2nd April 2025, U.S. President Donald Trump announced tariffs ranging from 10 % and 50 % on all imported goods from countries in “reciprocal” trade with other countries’ tariffs. The policy aims to improve the U.S. economy and encourage US consumers to buy more American-made goods. The tariffs had taken effect on 5th April, followed by higher tariffs on certain countries that had begun on April 9 (Past tariffs are being added onto the new ones). Luckily, most Canadian and Mexican goods are being temporarily exempted from the latest tariffs, allowing Canadians and Mexicans to unwind from the chaos that is in motion. 

Experts have argued that the current tariffs are even more damaging than the Smoot-Hawley Tariff Act of 1930, which worsened the Great Depression and triggered a global trade war.

The announcement of tariffs sent shockwaves through global markets, creating a major global impact on the global market as $5 trillion had been wiped off the value of the global stock market within the span of 2 days (April 4th), leading to the stock market crisis. 

By deepening the current issue, a trade war started between the U.S. and China, and China responded with its plans to impose a 34% tax on all U.S. imports, which will begin on April 10th and end on April 4th. The higher tariffs began on April 9th, but were later suspended for 90 days, excluding China. Hence, President Trump threatened China with a total of 104%, then a 125% tariff on April 9th. China retaliated with an 84% tax starting on April 10th. Appallingly, the White House clarified that the President’s previous announcement regarding the tariffs is 145% instead of April 10th. 

Meanwhile, Prime Minister Mark Carney declared that Canada would impose a counter-tariff on vehicles imported from the U.S. to match the 25% levies on April 3rd, which had begun on April 9th.

Effects on the Global and Canadian economy:

Many investors have grown fearful and retreated from the stock market after the announcement of tariffs, leading to the sudden crash of the stock market and instability in the global economy. Besides, many businesses and companies are considering seeking to relocate their supply chains away from China, locally or internationally, to avoid tariffs. This shift could lead to jobs being lost due to a decreasing demand for imports from China. Companies such as Apple, Walmart, and Tesla may accelerate relocating production from China to Vietnam, India, or Mexico as the cost of importing manufactured goods is higher. This shift could result in a disturbance in the global supply chain, a reduction in imports and potential inflation for international and Canadian consumers. Higher import costs could lead to a rise in prices on electronics, clothing, and automobiles. Additionally, countries may form new trade alliances to contradict and adapt to the current economy and trade war. 

While Canada faces indirect impacts from the current global trade war and the tariffs, Canadian consumers are encouraged to purchase domestic products, as it could support local businesses and offer more affordable alternatives to imported goods. If the trade war persists, the rate of global GDP growth will decrease. Canada faces challenges, but may benefit from increasing local manufacturing demands. However, Canadians will have to brace for the unpredictable ripple effects in the future, including inflation and economic uncertainty, as the tariffs and the global trade war intensify. 

Works Cited

Barath Harithas, et al. ““Liberation Day” Tariffs Explained.” Csis.org, 2025, http://www.csis.org/analysis/liberation-day-tariffs-explained.

Clarke, Jennifer. “What Are Tariffs and Which Countries Is Trump Targeting?” BBC, 3 Feb. 2025, http://www.bbc.com/news/articles/cn93e12rypgo.

Doane Grant Thornton. “How New Tariffs Could Affect Canadian Businesses.” Doane Grant Thornton LLP, 3 Feb. 2025, http://www.doanegrantthornton.ca/insights/how-new-tariffs-could-affect-canadian-businesses/.

Louis, Serah. “How Tariffs Will Affect Canadian Pocketbooks.” Financialpost, Financial Post, 4 Apr. 2025, financialpost.com/news/economy/how-tariffs-will-affect-canadian-pocketbooks.

Minsberg, Talya. “A Timeline of Trump’s Tariff Fight with Canada, Mexico, China and the E.U.” The New York Times, 13 Mar. 2025, http://www.nytimes.com/2025/03/13/business/economy/trump-tariff-timeline.html.

News, PBS. “A Timeline of Trump’s Tariff Actions so Far.” PBS News, 3 Apr. 2025, http://www.pbs.org/newshour/economy/a-timeline-of-trumps-tariff-actions-so-far.

Rana, Uday. “How Trump’s Trade War with China Could Hit Canadian Wallets.” Global News, 8 Apr. 2025, globalnews.ca/news/11121512/donald-trump-trade-war-china-canadian-wallets/. Accessed 11 Apr. 2025.

Robertson, Harry. “Stocks Plunge Again after Trump Tariff Rout as China Strikes Back.” Reuters, 4 Apr. 2025, http://www.reuters.com/markets/global-markets-wrapup-1-2025-04-04/.

“Tariff Update: Canada Holds Its Breath, for Now | Insights | MLT Aikins.” MLT Aikins, 2025, http://www.mltaikins.com/insights/tariff-update-canada-holds-its-breath-for-now/.

“Trade & Tariff Implications: How They Affect Western Canadian Business and What Can Be Done about It | Insights | MLT Aikins.” MLT Aikins, 2025, http://www.mltaikins.com/insights/trade-tariff-implications-how-they-affect-western-canadian-business-and-what-can-be-done-about-it/.

Wu, Huizhong, and Elaine Kurtenbach. “China Imposes 34% Tariff on Imports of All U.S. Goods.” AP News, 4 Apr. 2025, apnews.com/article/china-tariff-trade-trump-earths-02cd23e913649f32985f075058e787c4.

Wyatte Grantham-Philips. “Trump Has Begun Another Trade War. Here’s a Timeline of How We Got Here.” AP News, 26 Mar. 2025, apnews.com/article/tariffs-timeline-trade-war-trump-canada-mexico-china-a9d714eea677488ef9397547d838dbd0.