Trump’s tariffs threats are going to cause chaos

It turns out it wasn’t just China after all. Mexico, and indeed Canada, are just as much in the firing line. President-Elect Trump announced last night that he will impose an immediate 25 per cent tariff on imports from both of the US’s two largest land neighbours, threatening huge disruption to their economies. Trump may think he is being clever by weaponising access to the American market, and in the short-term he may even by right. The trouble is, he is going to break the global trading system – and it will be very hard to put back together afterwards. 

It is no surprise that the Canadian and Mexican markets are falling sharply today. Tariffs of 25 per cent on everything they sell into the US is going to wreak havoc on their industrial base. Canada exports $439 billion of goods to the US every year, and Mexico $452 billion.