Trump escalates trade tensions with EU, Canada, and Mexico

Trump escalates trade tensions with the EU, Canada, and Mexico, reaffirming tariff threats as global markets react and retaliatory measures loom.

By Ahmed Azzam | @3zzamous | 3 February 2025

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  • President Trump threatens tariffs on the EU, citing trade imbalances and limited US exports.

  • Scheduled calls with leaders of Canada and Mexico are unlikely to yield a major breakthrough, as tariffs are set to take effect on Tuesday unless a deal is reached.

  • Global markets react negatively, with declines in US stock futures, Asian markets, and currencies including the Mexican peso, Canadian dollar, and euro.

Trump intensifies trade dispute with the EU and North America

Amid rising global trade tensions, US President Donald Trump reinforced his threat of imposing tariffs on the European Union while preparing for discussions with Canada and Mexico. The developments rattled financial markets as investors braced for further disruptions.

Speaking to reporters on Sunday night, Trump confirmed he would engage in separate calls with Canadian Prime Minister Justin Trudeau and Mexican leaders on Monday. His remarks followed the announcement of 25% tariffs on key trade partners, which are scheduled to be enforced on Tuesday unless a last-minute resolution is reached.

“I don’t anticipate anything dramatic,” Trump stated regarding the upcoming discussions. “The tariffs are in place. They owe us a lot, and they will have to pay.”

EU trade deficit sparks tariff threat

Trump also reiterated his frustration with the EU, criticizing its trade policies and reaffirming his commitment to implementing tariffs.

“They don’t accept our cars, they don’t accept our agricultural products,” Trump claimed. “We take everything they export—millions of cars, massive amounts of food and farm goods—while they give us almost nothing in return.”

The comments left little hope for an immediate resolution, with concerns growing over a potential global trade war. The financial fallout was swift—US stock futures fell, Asian markets slipped, and the peso dropped to its lowest level against the dollar in nearly three years. The Canadian dollar weakened to a 20-year low, and the euro lost ground as investors reacted to Trump’s renewed threats.

Retaliatory measures loom from Canada, Mexico, and China

Both Canada and Mexico have pledged to respond if the US proceeds with tariffs. Mexican President Claudia Sheinbaum is expected to outline Mexico’s countermeasures early Monday, while Trudeau has warned of retaliatory duties on $106 billion worth of American products.

Meanwhile, China, also facing a 10% tariff on its exports to the US, has vowed reciprocal action, though specific measures remain undisclosed. The timing of Beijing’s response may be affected by the ongoing Lunar New Year celebrations.

Trump has signaled a willingness to escalate tariffs further if other nations retaliate.

Tough conditions for tariff repeal

When asked what actions trading partners must take to see the tariffs lifted, Trump provided a firm response: “They need to balance the trade deficit, first and foremost. They also need to stop illegal migration into our country and tackle the fentanyl crisis—China included.”

However, Trump did appear to soften his stance on the UK, describing the trade relationship as “out of line” but “negotiable.” The US president expressed a positive rapport with British Prime Minister Keir Starmer, despite recent criticism of Starmer by Trump’s ally, Elon Musk.

“So, the UK’s trade position is unbalanced, but I think we can work that one out,” Trump remarked. “The European Union, on the other hand, is a complete disaster.”

Starmer, who is working to rebuild relations with the EU post-Brexit, faces additional complications following Trump’s remarks as he attends a European defense summit on Monday.

EU braces for imminent tariffs

Trump’s threats against the EU are not new, having resurfaced repeatedly in recent months. As recently as Friday, he had warned of forthcoming measures.

The EU has made it clear that any US tariffs will be met with firm retaliation. However, Trump declined to provide a definitive timeline or specifics for the EU tariffs, simply stating, “It will happen soon.”