Markets are wondering just how much pain United States President Donald Trump is willing to take. China’s retaliatory tariffs on American agricultural goods took effect today, and Trump has refused to back down from implementing more - and when asked, wouldn’t rule out a near-term recession.
“I hate to predict things like that. There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing,” Trump said during an interview with Sunday Morning Futures.
“It takes a little time, but I think it should be great for us.”
US shares continue fall
The S&P 500 has slid 3.1% since March 1st, and took its biggest hit on Monday dropping 2.7% to close at 5,614.56 points - a whopping 9% off its record high close of 6144.15 on February 19.
The Nasdaq fared even worse, dropping 4% - its biggest one-day loss since September 2022, while the Dow Jones fell almost 900 points for a 2.1% decrease.
Goldman Sachs increased its recession forecast Friday, giving 20% odds of a significant downturn over the next 12 months, up from 15%, as Trump’s trade policies ripple across the globe.
“The recent moves might well have further to go,” GS chief economist Jan Hatzius said in a note.
With that in mind, GS says that gold's safety should see its price cross US$3,000/oz this year.
Farm goods hit Trump's support base
Chinese agricultural tariffs have now been implemented and are likely to hurt U.S. farmers - a large base of support for Trump across his presidential terms.
The Middle Kingdom is the United States’ largest overseas market for its farm products - such as chicken wheat, corn and cotton - which all were hit with 15% levies; while sorghum, soybeans, pork, beef, fruits, vegetables and dairy and fish products all received a further 10% tax.
In the midst of an all-out trade war, there are hopes that the U.S. and China can reach an agreement before further escalations occur.
It seems no other country more than Canada wishes this to happen, as it has not only been affected by U.S. tariffs on its goods, but from Beijing too.
More than US$2.6 billion worth of Canadian agricultural goods have been targeted by China, seen as like-for-like retaliation for a 100% tax increase on Chinese-made EVs and 25% import duties on steel and aluminium products back in October last year.
The huge tariff increase on EV imports from the Occident is designed to protect Canada’s transforming automaking sector which it wants to build from raw material production right across the supply chain to vehicle manufacturing.
“Whether it is a tariff war or a trade war, both begin with harming others and end with harming oneself,” a Chinese Foreign Ministry spokesperson said at a briefing in Beijing.
Trump recently slapped 25% tariffs on imports from Mexico and Canada and doubled Chinese tariffs to 20%.
Cars coming from Canada and Mexico that fall under an existing USMCA trade agreement have been exempted from the tax increase until 2 April.
