"Turn everything off for them - with a smile" Trump launches trade war - is a global conflagration brewing?

US President Donald Trump has launched a new round of punitive tariffs - with drastic consequences for consumers and companies. Canada, Mexico and China are the main targets of the new import duties, but Europe could soon be affected too.

US President Donald Trump has once again drastically tightened his trade policy: from today, Tuesday, blanket 25 percent punitive tariffs have been imposed on imports from Canada and Mexico. Energy products from Canada are subject to a 10 percent tariff, and in February the government had already doubled the tariffs on Chinese goods from 10 percent to 20 percent.

Officially, the White House justifies the measures with the enforcement of a stricter migration and drug policy. Experts, however, see this as an aggressive economic policy move that could have a severe impact on the US economy itself.

The new tariffs affect a wide range of goods. They will be particularly noticeable in everyday areas of life. Many fresh foods from Mexico will become more expensive, such as tomatoes, peppers, grapes and other fruit and vegetables, as there are hardly any alternative year-round sources of supply within the USA.

The same applies to certain agricultural goods from Canada, such as maple syrup, wheat and popular luxury foods: numerous types of beer such as Mexico's most exported beer brand "Modelo" and spirits such as tequila and mezcal come from Mexico, while Canada supplies significant quantities of whiskey and syrup. All of these products will become noticeably more expensive as a result of the punitive tariff.

Canada and Mexico also supply numerous components for US vehicles - higher import costs could cause car prices to rise. Experts expect cars to become several thousand dollars more expensive.

Prices are likely to rise significantly

Many Chinese products such as smartphones, computer parts and household appliances are also subject to tariffs, meaning that machinery, electronic devices and consumer goods from China and other countries will also become more expensive.

Steel and aluminum were already subject to tariffs during Trump's first term in office; now aluminum shipments are being hit again. Many US breweries and beverage manufacturers, for example, increasingly imported canned aluminum from Canada after 2018 to avoid the China tariffs at the time. This is now coming to an end: cans, kegs and lids from Canada are becoming more expensive - and are also causing prices to rise.

Most companies are likely to pass the higher costs on to customers. Economists therefore expect prices in the USA to rise significantly. An analysis by the Federal Reserve Bank of Atlanta quantifies the effect as follows: if the new tariffs are passed on in full to buyers, the cost of everyday purchases could rise by around 1.6 percent - and in non-food product groups by as much as 2.6 percent. In comparison: last year, inflation for these goods was only around 1.2 percent.

Everyday goods would therefore become significantly more expensive within a short period of time, which is likely to put a noticeable strain on consumers' wallets.

Specific examples illustrate the potential surcharges: The US beverage company "Constellation Brands", which imports Corona and Modelo beer as well as tequila from Mexico, expects import costs to rise by around 16% as a result of the duty. This would probably lead to price increases of around 4.5 percent for end consumers.

Fresh foods such as Mexican tomatoes or avocados in the US winter range would also become more expensive - as these goods are often imported, consumers would have to expect noticeable surcharges at the checkout

Inflation will increase, growth will slow down

Economists and financial analysts have analyzed the possible macroeconomic consequences of the new tariffs. One key finding is that the measure is likely to increase inflation and slow growth in the short term, meaning that any benefits, such as more domestic production or higher customs revenue, will be negated.

The Wells Fargo Investment Institute, for example, expects that although the tariff policy could initially boost prices and even the US dollar, it will ultimately dampen economic growth.

Higher prices also increase the pressure on the US Federal Reserve to keep interest rates high, which makes investment more difficult. According to Wells Fargo, particularly broad-based tariffs across many countries and product categories are likely to hit consumer budgets and also reduce the profits of numerous companies.

Foreign trade experts are also painting a gloomy picture: the Munich-based ifo Institute has calculated that Trump's new tariffs and the foreseeable backlash from partners could hit US exports hard. Overall, US exports could slump by around 22% if Canada, Mexico and China retaliate as announced.

While China can redirect its trade flows relatively flexibly, Canada and Mexico would be massively affected due to their strong focus on the US market.

However, these figures also make it clear that such a decline in Canadian/Mexican exports implies the mirror image of a loss of many intermediate products and imported goods for the US, which would put further pressure on production and consumption there. The US economy is therefore not isolated - it would also suffer considerable damage in an escalating tariff war.

Escalation on the horizon

The affected countries are therefore reacting quickly: Mexico's President Claudia Sheinbaum made it clear that her country would impose counter-tariffs on US products. Canada's Prime Minister Justin Trudeau announced retaliatory tariffs worth over 100 billion dollars on US goods within 21 days

This signals an escalation: Each side is imposing new levies on the other, further exacerbating the conflict. Trading partners in Europe have also reacted with harsh rhetoric. EU Industry Commissioner Thierry Breton (or Commission Vice-President Stéphane Séjourné) declared that Europe would "react immediately and decisively" if Trump were to actually introduce tariffs against the EU.

It is interesting to note that even within Trump's Republican Party, criticism is being voiced. Several Republican senators from affected states warned of the consequences. For example, Susan Collins, a Republican from Maine, expressed great concern, as her state's economy is closely intertwined with Canada. Maine's lobsters and blueberries are processed in Canada and then imported back into the USA, which would be significantly disrupted by the tariffs.

Similar concerns come from border states such as Texas and Michigan, where many jobs depend on smooth North American trade. Canada is also reacting angrily. The mayor of the Ontario region said in a CBC interview: "If they want to try to destroy Ontario, I'll do anything, even cut them off - with a smile on my face."