Trump said his tariffs on the three largest U.S. trading partners, which take effect on Tuesday, might cause Americans some short-term pain, but “long term, the United States has been ripped off by virtually every country in the world”.

Global stock markets and currencies tumbled over concerns that the tariffs would trigger an economically damaging trade war. Futures for Wall Street’s S&P 500 fell more than 1.7 per cent before the opening bell, on the heels of the year’s biggest daily losses on a string of Asian and European bourses.

Speaking in Washington on Sunday after returning from his Mar-a-Lago estate, Trump indicated that the 27-nation European Union would be next in the firing line, but did not say when.

“They don’t take our cars, they don’t take our farm products. They take almost nothing and we take everything from them,” he told reporters.

EU leaders meeting at an informal summit in Brussels on Monday said Europe would be prepared to fight back if the U.S. imposes tariffs, but also called for reason and negotiation.

Arriving at the talks, French President Emmanuel Macron said if the EU were attacked in its commercial interests it would have to “make itself respected and thus react”.

Chancellor Olaf Scholz of Germany said the bloc could respond if necessary with its own tariffs against the U.S., but stressed it was better for the two to find agreement on trade.

Trump hinted that Britain, which left the EU in 2020, might be spared tariffs, saying: “I think that one can be worked out”.

The U.S. is the EU’s largest trade and investment partner. According to the Eurostat data from 2023, the United States had a deficit of 155.8 billion euros ($161.6 billion) with the EU in the trade of goods, offset by a surplus of 104 billion euros in services.

EU foreign policy chief Kaja Kallas said there were no winners in a trade war, and if one broke out between Europe and the United States, “then the one laughing on the side is China”.

TUESDAY DEADLINE

The tariffs on Canada, Mexico and China, outlined in three executive orders, are due to take effect 12:01 a.m. EST  on Tuesday.

Trump said he would speak on Monday with the leaders of Canada and Mexico, which have both announced retaliatory tariffs of their own, but downplayed expectations that they would change his mind.

“They owe us a lot of money, and I’m sure they’re going to pay,” Trump told reporters.

White House National Economic Council Director Kevin Hassett suggested Washington was more satisfied with Mexico’s response so far than Canada’s. He told CNBC that Mexico appeared to be “very, very serious about doing what President Trump said,” but the “Canadians appear to have misunderstood the plain language of the executive order”.

Economists said the Republican president’s plan to impose 25 per cent tariffs on Canada and Mexico and 10 per cent tariffs on China would slow global growth and drive prices higher for Americans.

Trump says they are needed to curb immigration and narcotics trafficking and spur domestic industries.

Financial market reaction on Monday reflected concerns about the fallout from a trade war. Shares in Tokyo ended the day down almost three per cent and Australia’s benchmark — often a proxy trade for Chinese markets — dropped 1.8 per cent. The mainland China market was shut for Lunar New Year holidays.

Around lunchtime in Europe, Germany’s DAX index was down two per cent, France’s CAC down 1.9 per cent and Britain’s FTSE 100 down 1.3 per cent.

The Chinese yuan, Canadian dollar and Mexican peso all slumped against a soaring dollar. With Canada and Mexico the top sources of U.S. crude oil imports, U.S. oil prices jumped more than one per cent, while gasoline futures rose nearly three per cent.

Trump’s tariffs will cover almost half of all U.S. imports and would require the United States to more than double its own manufacturing output to cover the gap — an unfeasible task in the near term, ING analysts wrote.

Other analysts said the tariffs could throw Canada and Mexico into recession and trigger “stagflation” — high inflation, stagnant growth and elevated unemployment — at home.

In Europe, economists at Deutsche Bank said they were currently factoring in a 0.5 per cent hit to gross domestic product (GDP) should Trump impose 10 per cent tariffs on the bloc.

NATIONAL EMERGENCY

A White House fact sheet gave no details on what Canada, Mexico and China would need to do to win a reprieve.

Trump vowed to keep the sanctions in place until what he described as a national emergency over fentanyl, a deadly opioid, and illegal immigration to the U.S. ends.

China called fentanyl America’s problem and said it would challenge the tariffs at the World Trade Organization and take other countermeasures, but also left the door open for talks.

Mexican President Claudia Sheinbaum vowed resilience and said she would provide more details on Monday of the retaliatory tariffs she ordered on the weekend. Canada said it would take legal action under the relevant international bodies to challenge the tariffs.

Automakers would be particularly hard hit, with new tariffs on vehicles built in Canada and Mexico, burdening a vast regional supply chain where parts can cross borders several times before final assembly.

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James O’Brien, head of the State Department Office of Sanctions Coordination, said leaders at the U.N. General Assembly this week discussed efforts to revive the deal, which Russia abandoned in July.

Western countries have accused Russia of using food as a weapon of war by quitting the Black Sea deal, which had helped bring down global food prices, and then carrying out repeated air strikes on Ukrainian ports and grain stores.

“A couple of factors are going to… affect their calculation. One is that their leverage will decline. Ukraine’s already now had a few ships leave and stay in territorial waters,” O’Brien said of Moscow’s thinking on the Black Sea Grain Initiative.

He said the second factor was that Russia’s pricing would be hurt by its attacks on Ukrainian ships, which leads to insurers raising rates and Moscow’s costs going up.

“Over the next several weeks, I think the factors that led Russia to believe it would benefit from withdrawing are going to change.”

Russia quit the grain deal, brokered by the U.N. and Turkey in 2022, saying that its own food and fertilizer exports, while not subject to Western sanctions, faced obstacles and that not enough Ukrainian grain was going to countries in need.

Ukrainian ports across the Danube River have since become a vital export corridor for Ukrainian grain, and Russia has targeted the route with regular air strikes.

Ukraine last month announced a “humanitarian corridor” to release ships trapped in its ports and to circumvent a de facto blockade.

— Reporting for Reuters by Daphne Psaledakis, Humeyra Pamuk and Michelle Nichols.

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“The United States … calls for Russia to immediately return to the Black Sea Grain Initiative,” State Department deputy spokesperson Vedant Patel said in a briefing, referring to a pact that had allowed export of Ukraine grain by the Black Sea. Russia quit the deal on July 17.

Patel said the U.S. was seeking “to possibly find ways and corridors in which we can continue to get grain to the places it needs to go,” without providing details. He added that Washington has not seen any indication from the Russians that they wanted to go back to the deal.

Since quitting the accord, Russia has attacked Ukrainian agricultural and port infrastructure. Exports through the corridor were vital to helping address a global food crisis worsened by Moscow’s invasion of Ukraine.

Overnight air strikes damaged silos and warehouses at Reni on the Danube River, a vital wartime route for food exports, Ukrainian officials said. They posted photos of destroyed storage facilities and piles of scattered grain and sunflowers.

“Putin simply does not care about global food security,” Patel said, adding that Moscow’s attacks were escalating food shortages.

Moscow has repeatedly said it was ready to return to the deal “immediately” once an accompanying agreement concerning Russian exports was implemented.

— Reporting for Reuters by Humeyra Pamuk, Simon Lewis, Kanishka Singh and Daphne Psaledakis.

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Enabling those Russian exports is a key part of attempts by the United Nations and Turkish officials to broker a package deal with Moscow that would also allow for shipments of Ukraine grain from the Black Sea port of Odesa, which have been blockaded by the war.

The written U.S. clarification came a day after Russia, Ukraine, Turkey and U.N. officials met in Istanbul for talks aimed at resuming Ukraine’s grain exports. Turkey announced that the parties would return next week to sign a deal.

“The United States strongly supports efforts by the United Nations to bring both Ukrainian and Russian grain to world markets and to reduce the impact of Russia’s unprovoked war on Ukraine on global food supplies and prices,” the U.S. Treasury Department said in the factsheet.

The war in Ukraine has sent prices soaring for grains, cooking oils, fuel and fertilizer, stoking a global food crisis.

Russia’s Feb. 24 invasion and blockade of Ukraine’s ports has stalled exports, leaving dozens of ships stranded and some 20 million tonnes of grain stuck in silos at Odesa.

Moscow has denied responsibility for worsening the food crisis, blaming instead a chilling effect from Western sanctions for slowing its own food and fertilizer exports and Ukraine for mining its Black Sea ports.

Ukraine and Russia are major global wheat suppliers, and Russia is also a large fertilizer exporter, while Ukraine is a significant producer of corn and sunflower oil.

The U.S. Treasury made clear that the sale and transport of agricultural commodities, as well as medicine and medical devices, was allowed and would not be breaching a raft of sanctions that Washington has imposed on Russia.

Washington also stressed that there were no sanctions on Russia’s production, manufacturing, sale, or transport of agricultural commodities, including fertilizer, and that providing insurance or reinsurance for the transportation or shipping of those products was not prohibited.

Imports of Russian fish and seafood to the U.S. are banned under Washington’s sanctions.

As the U.N.-led talks got underway in May to revive Ukraine and Russian food exports, the U.S. ambassador to the U.N., Linda Thomas-Greenfield, had said Washington was prepared to give written assurances — known as “comfort letters” — to shipping and insurance companies in relation to Russian exports.

— Reporting for Reuters by Daphne Psaledakis and Michelle Nichols.

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