Trade war latest: Trump threatens 'out of line' UK after imposing tariffs on three countries - and stock markets take huge tumble

White House says Mexico 'serious' about tariffs but Canada 'appears to have misunderstood'

The White House has said today it has noticed that Mexico is "serious" about Donald Trump's executive order on tariffs but Canada has "misunderstood" it.

White House National Economic Council director Kevin Hasset told CNBC: "The good news is that in our conversations over the weekend, one of the things we've noticed is that Mexicans are very, very serious about doing what President Trump said.

"[The] Canadians appear to have misunderstood the plain language of the executive order."

As we've been reporting today, Trump on Saturday ordered sweeping 25% tariffs on goods from Mexico and Canada.

Following the move, stock markets have tumbled.

In Asian markets, Japan's Nikkei stock market index fell nearly 3%, and South Korea's Kospi was also down more than 2.5%. 

Both countries are export-heavy nations with car manufacturing which is vulnerable to further US import tax hikes.

 

Mexico: US 'shooting itself in the foot'

Mexican President Claudia Sheinbaum said that the US was "shooting itself in the foot" by imposing a 25% tariff on Mexican goods entering the US following Donald Trump's announcement.

To a cheering crowd, she said she told the US it was important to "cooperate".

"I say coordination yes, subordination, no," she added.

You can watch her response here...

 

How Donald Trump's tariffs could impact consumers

Donald Trump has long threatened increasing tariffs on goods from Mexico, Canada and China.

The second-time president argues higher levies will help reduce illegal migration and the smuggling of the synthetic opioid fentanyl to the US.

On Saturday, the president confirmed he would subject Mexican and Canadian goods to the full 25% tariff - and Chinese imports to 10%.

However, Canadian energy, including oil, natural gas and electricity, will be taxed at a 10% rate. The levies will take effect tomorrow.

Although the Trump administration says the changes will boost domestic production, there will likely be wide-ranging negative consequences for the US consumer.

Economists argue supply chains will be disrupted and businesses will suffer increased costs - leading to an overall rise in prices.

 

Downing Street doesn't say if it would retaliate if Trump imposes tariffs

We've getting more comment from the prime minister's official spokesperson now, who has been asked whether the UK would respond if the US imposes tariffs on British goods and services. 

However the spokesperson didn't give an answer either way, saying: "I am not going to get into hypotheticals. 

"The government looks forward to working with the Trump administration to deepen our already strong trading relationship that supports businesses and jobs on both sides of the Atlantic." 

So far, the government has been keen to stay on the US president's good side - and it's possible this has paid off after Trump hinted the UK may be exempt from tariffs. 

Asked if the government was confident the UK can avoid US tariffs, the spokesperson said: "We are committed to free and open trade.

"We have a strong UK-US trade relationship and as we have said before we look forward to working with President Trump to continue to build on the trading relations that support so many jobs on both sides of the Atlantic."

Can Starmer trust Trump?

As we've been reporting, Trump suggested he believes a deal could be done with the UK to avoid imposing tariffs. 

The prime minister's spokesperson was therefore asked whether Sir Keir believes he can trust the president to keep his word.

"Yes, the prime minister has had a really constructive early set of conversations with President Trump, and looks forward to working with him to deepen our trade, investment, security and defence relationship," he said.

The US is an "indispensible ally" to the UK, he added.

"We've got a fair and balanced trading relationship which benefits both sides of the Atlantic.

"It's worth around £300bn and we are each other's single largest investors, with £1.2trn invested in each other's economies," he said.

 

Tariffs 'could push Canadian and Mexican economies into recession'

Donald Trump's tariffs could send Canada and Mexico into a recession, a financial expert has told Sky's business presenter Darren McCaffrey.

Henry Allen, macro strategist at Deutsche Bank Research, said: "If these tariffs go ahead it will be the biggest shock to global trade we have seen since the Second World War.

"For Canada and Mexico in particular, they do a huge amount of their trade with the US so this would be seismic.

"This, if sustained, would push both of their economies into recession.

"In economic terms it would be a shock bigger than Brexit was for the UK."

Asked why Trump had decided to take such a decision, he added the answer was "twofold".

"He's concerned about the flow of opioids into the US," Allen added.

"In broader terms this fits into Trump's broader world view that if the US is running a trade deficit with a country, he sees that as bad."

 

'Starmer is very nice': Trump's exchange on UK tariffs

In case you missed it earlier, Donald Trump said the UK could not be ruled out of his tariffs plan (see post at 8.12am).

But he also hinted at the possibility of coming to an agreement with Britain, calling Sir Keir Starmer "very nice" and saying he would see if he could "balance out the budget".

So could the UK potentially be off the hook? 

Here is the full transcript of his exchange with reporters in Maryland last night...

Question: Which country will be next on tariffs? Would you consider taxing the UK?

Trump: Well, we're going to see what happens. It'll happen.

Question: With the UK?

Trump: Might. Let's see how things work out. It might happen with them.

It will definitely happen with the European Union, I can tell you that, because they've really taken advantage of us. 

We have over $300bn deficit. They don't take our cars, they don't take our farm products, they take almost nothing, and we take everything from them - millions of cars, tremendous amounts of food and farm products.

So the UK is way out of line. And we'll see. But European Union is really out of line. UK is out of line, but I'm sure that one, I think that one, can be worked out.

But the European Union, it's an atrocity what they've done.

Question: Prime Minister Starmer wants a closer relationship with the EU.

Trump: Well, Prime Minister Starmer has been very nice. We've had a couple of meetings. We've had numerous phone calls. We're getting along very well. We'll see whether or not we can balance out our budget.

 

What's the UK's secret weapon?

Donald Trump's tariffs announcement could have a far reaching impact on the world.

But is there anything protecting the UK?

Our economics and data editor Ed Conway says the UK's secret weapon is "we don't make much stuff".

"We have deindustrialised more than any other economy in the world and we don't send more to the US than they send to us," he says.

Conway says Europe and China send more stuff to America than the US sends to them and that means there is a "trade deficit for America".

"Donald Trump hates trade deficits - that's the main thing he dislikes," he adds.

When it comes to the UK, the country is less of a threat because we do not send much to the US, Conway adds.

"Having left the EU, we are also able to make our own negotiations so there are some things that are definitely in the UK's favour at the moment," he said.

But he notes the issue is when world's biggest economy is slapping massive tariffs on its goods that's just "economic destruction of a kind we have rarely seen".

 

South African rand slumps after Trump says he will cut off funding

The South African rand has slumped in early trade today after Donald Trump said he would cut off funding for South Africa.

At 6.30am (UK time), the rand traded at 18.96 against the US dollar, about 1.4% weaker than its closing level on Friday.

Yesterday Trump said, without citing evidence, that "certain classes of people" in South Africa were being treated "very badly" and that he would suspend aid until the matter was investigated.

He said South Africa was confiscating land, about a week after President Cyril Ramaphosa signed into law legislation that allows the state to expropriate land in the public interest under certain circumstances.

Earlier we reported that Ramaphosa had said he would like to engage with Donald Trump about cutting off funding for South Africa (see post at 7.41am).

 

EU can react with its own tariffs

German Chancellor Olaf Scholz has said that the EU is strong enough to react to any tariffs imposed by the US.

"We will have intensive discussions about our cooperation with the US," he told reporters.

"Both the US and Europe benefit from a trade of goods and services.

"If trade policies make this more difficult it will be bad for the US and Europe.

"What is clear is that as a strong economic area, we can shape our own policies and respond to tariffs with our own tariffs.

"That is something we must and will do."

But he added the "goal should be to proceed in a way that ultimately leads to cooperation".

 

Countries react to tariffs announcement

Leaders and officials from across the world have been reacting to Donald Trump's tariffs announcement this morning.

Here are some of the comments that have been coming through...

Poland

Polish Prime Minister Donald Tusk has said: "Poland will for sure be a country that encourages common sense and caution. But we also have to say clearly that any plans to introduce customs and [wage] trade wars are a complete mistake."

Luxembourg

Luxembourg Prime Minister Luc Frieden said the answer to trade tariffs is to reply with the same measures.

"I think tariffs are always bad. Tariffs are bad for trade. Tariffs are bad for the United States," he said.

EU 

European Union foreign policy chief Kaja Kallas said there were no winners in a trade war, and if US and Europe started one "then the one laughing on the side is China".

"We are very interlinked. We need America, and America needs us as well," she said.

Finland 

Finland's Prime Minister Petteri Orpo said Europe should negotiate with Trump on trade.

"The most important issue that we all need to understand is that Russia is a threat, a real threat. This is not an opinion, this is a fact," he said.

France

French central bank governor Francois Villeroy de Galhau said the tariffs imposed by Trump "will increase economic uncertainty".

Villeroy, who is also a European Central Bank policymaker, said Trump's tariffs were "very brutal" and would hit the autos sector especially.

On possible retaliatory measures, Villeroy said such a response should not be excluded but he urged caution. 

"The key is to make our economy stronger," he said.

 

China to propose restoring 2020 'Phase 1' trade deal with US

China's initial proposal to tariffs imposed by Donald Trump will centre on restoring the Phase 1 trade deal signed in 2020 during Trump's first term, the Wall Street Journal reports.

The paper, which cites sources, reports that other parts of China's plan will include a pledge to not devalue the yuan, an offer to make more investments in the US and a commitment to reduce exports of fentanyl precursors.

For context: The Phase 1 trade deal Trump signed with Beijing in 2020 ended a nearly two-year tariff war at that time. 

The deal required China to increase purchases of US exports by $200bn over two years, but Beijing failed to meet the targets as the COVID-19 pandemic hit.

China had also agreed to take more action against counterfeiting.

 

Canadian fans boo American national anthem after Trump tariffs

Canadian sports fans booed the US national anthem at a sports event over the weekend hours after Donald Trump followed through on his threats regarding import tariffs. 

Fans at an NBA game between the Toronto Raptors and Los Angeles Clippers were heard booing as the anthem was played out.

It came after similar reactions broke out at NHL games in Ottawa, Ontario, and Calgary, Alberta.

 

Tariffs will have 'big economic consequences' for America and the world

Donald Trump's tariffs are going to have "big economic consequences" for the world, our economics and data editor Ed Conway says.

He says that Trump's first term in the White House had been a rollercoaster and this time "it's clear it's going to be the same".

Conway notes we are already seeing market reaction but we will "have to wait and see what happens" in the coming hours and day, adding: "This is such a consequential thing."

"If suddenly you're saying there has to be a tariff on basically everything, that's enormous," he says.

He explains that when Brexit happened in the UK, what ensued was years of negotiation. 

"And then you had the agreement between the UK and the EU which meant there are no tariffs," Conway says.

"So at no point were there actually tariffs between the UK and the rest of the EU in this case. 

"But if the US tariffs do go ahead tomorrow, then you're talking about tariffs instantly overnight in a way that we have never had in a far bigger, economic area. 

"It's an enormous consequence."

Conway says this is something Trump likes to use as leverage but there are many implications to putting tariffs in place. 

"You're talking about big economic consequences for America, Canada, Mexico, China and for the rest of the world," he adds.

 

FTSE 100 index falls at the open

Following on from our last post, a look at the London's FTSE 100 Index shows it has tumbled more than 1% on opening after Donald Trump announced a wave of tariffs and warned the EU would be next.

The blue chip share index fell 104.7 points to 8569.2 soon after the London market began trading at 8am.

Following Trump's tariffs announcement stock markets across Europe are expected to suffer hefty falls.

Experts are also expecting stock indices to open sharply lower in Europe in volatile trading.

As we reported earlier the Asian markets were the first to open since the weekend tariff announcements, with Japan's Nikkei slumping 2.8% and the Hang Seng in Hong Kong 1% lower, although mainland Chinese markets remain shut for the Chinese Lunar New Year holiday until Wednesday.

 

UK stocks down - as market plummet continues

The Trump tariff stock market plummet continues as markets open across Europe.

It's the first trading day since President Donald Trump made good on his promise to slap high taxes on imports to the US and announced higher-than-expected 25% tariffs on Mexican and Canadian goods. The measures take effect tomorrow but the impact can be seen today.

UK stocks are down a significant amount. The benchmark FTSE 100 index containing the most valuable companies on the London Stock Exchange dropped more than 1.3% on the open.

It was worse for the large FTSE 250 index of companies more based in the UK, it's shed 1.84%.

Sterling has taken a hit as the dollar strengthened. One pound buys $1.2316, a near two-week low but still above the lows recorded in mid-January. The pound is still faring well against the euro - in fact, it's at a high not seen since the early days of the year, €1.2019.

Trump said the UK was "out of line" and tariffs would "definitely happen" on the EU, which he described as an "an atrocity".

Globally the reaction was similar.

The Canadian dollar hit its lowest level since 2003. The Mexican peso tumbled by nearly 3%.

In Europe, stock markets opened sharply lower while the euro slid 1.3%. The Europe-wide index of companies, the Stoxx 600 dropped as much as 1.5% this morning.

 

UK has 'fair and balanced' trading relationship with US

Britain has a "fair and balanced" trading relationship with the US, a government spokesperson has said.

After the US president suggested he is poised to expand his tariff regime to both the UK and the EU, there have been fears about the looming prospect of a trade war.

Speaking on the announcement, the government spokesperson said: "The US is an indispensable ally and one of our closest trading partners, and we have a fair and balanced trading relationship which benefits both sides of the Atlantic.

"We look forward to working closely with President Trump to continue to build on UK-US trading relations for our economy, businesses and the British people."

Trump has said tariffs on imports from Europe were coming and did not rule out imposing tariffs on UK goods, but also said the situation with Britain "can be worked out". 

 

Trump threatens UK and EU with tariffs

We reported earlier that Donald Trump had hinted the European Union could be next in line to face tariffs, along with the UK (see post at 6.47am)

Speaking from Maryland, the US president said the UK and EU "take almost nothing" from the US and "we take everything from them".

He said the UK was "out of line" and the EU was "an atrocity".

But he took a slightly more conciliatory tone when it came to Sir Keir Starmer, saying the British prime minister has been "very nice".

"We'll see whether or not we can balance out the budget," he added.

 

What are Trump tariffs?

Donald Trump's tariffs could have an impact on global trade.

By imposing a tariff, a country is in effect putting a tax on the goods imported from another country. 

Importers are responsible for paying these levies when these shipments arrive and are likely to pass the cost onto consumers in the form of higher prices.

But there's another fallout here...

There's a potential cycle of retaliation or a trade war, with a sanction country deciding to hit back with tariffs of its own.

Supply chains could also be disrupted - this could lead to prices going up as it raises inflation.

Why were the tariffs imposed?

Trump's executive orders say the tariffs are a consequence of illegal immigration and drug smuggling - two of the main promises on which he was elected.

It should be noted this is not a reasoning everyone agrees with.

On Mexico, Trump says drug traffickers and the country's government "have an intolerable alliance" that in turn impacts national security in the US.

With Canada, he says Mexican cartels are operating in that country.

And then with China, he says the country's government provides a "safe haven" for criminal organisations.

 

South Africa to 'engage' with Trump over aid suspension

South African President Cyril Ramaphosa has said this morning that he looks forward to engaging with Donald Trump after the US leader said he would cut off funding for South Africa.

"We look forward to engaging with the Trump administration over our land reform policy and issues of bilateral interest. We are certain that out of those engagements, we will share a better and common understanding over these matters," Ramaphosa said in a statement.

"South Africa is a constitutional democracy that is deeply rooted in the rule of law, justice and equality. The South African government has not confiscated any land."

The South African leader said except for PEPFAR aid, which constitutes 17% of South Africa's HIV/Aids programme, there was no other significant funding provided by the US.

 

Markets shaken all over Asia this morning

The markets are shaken all over Asia this morning, our Asia correspondent Nicole Johnston reports.

She says the markets in South Korea, Japan and Hong Kong are all down 1-2%.

She also notes there hasn't yet been a reaction from mainland China but that is because they are in the middle of the Chinese New Year until Wednesday.

This comes after Donald Trump imposed 10% tariff on goods from China.

"They [China] are taking a fairly careful considered approach so far. There hasn't been any strong rhetoric from the Chinese," Johnston says.

"They are still talking about dialogue."

-SKY NEWS