The newly imposed US tariffs on Mexico, Canada, and China could reduce US real GDP growth by 0.9 percentage points over the next four quarters, while inflation could rise by 0.6 percentage points in the same period, according to The Conference Board.
The economies of Mexico, Canada, and China are also expected to experience slower growth as a result of these measures.
The tariffs, initially scheduled for February 4, were postponed for 30 days before coming into force. As of today, a 25 per cent tariff has been imposed on imports from Mexico and Canada, while an additional 10 per cent levy on Chinese goods is also taking effect.
Canadian energy imports, however, will face a reduced rate of 10 per cent. These levies affect a broad range of consumer and business goods, with Canada, Mexico, and China collectively accounting for 41 per cent of US imports.
The impact is evident, as the latest Manufacturing ISM Report on Business revealing a contraction in the new orders index, while the prices index has surged to its highest level since June 2022. Many businesses are expected to pass the increased costs onto consumers.
Businesses should explore alternative sources for products and inputs, but the situation remains highly fluid. A schedule of reciprocal tariffs affecting over 200 US trading partners is expected to be announced in the coming months, creating significant uncertainty around supply chain adjustments, the TCB said in a release.
ALCHEMPro News Desk (HU)
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