Shaken by Trade Wars: Canada and Mexico’s Growth Takes a Hit

Trade wars have always been a hot topic, but when a major economy like the United States starts imposing tariffs left and right, the effects are felt across the globe. Former US President Donald Trump’s aggressive trade policies, including steep tariffs on steel, aluminum, and other goods, have sparked concerns about slower economic growth, rising inflation, and even potential recessions in some countries.

In this article, we’ll break down how these tariffs impact different economies, what experts are predicting, and what it means for the future.

The Ripple Effect of Trump’s Trade Tariffs

Trade policies don’t just affect the countries directly involved; they create ripple effects throughout the global economy. When tariffs are imposed, businesses face higher costs, prices go up, and economic growth can slow down.

Canada and Mexico: The Hardest-Hit Economies

Canada and Mexico, two of the US’s largest trading partners, have taken the biggest hit from Trump’s tariffs. These countries have been subjected to a 25% tariff on steel and aluminum exports to the US, along with additional tariffs on other products.

As a result:

Canada’s economy is expected to grow at a much slower pace than previously predicted. The OECD (Organisation for Economic Co-operation and Development) has cut its growth forecast significantly.
Mexico is facing a potential recession, with its economy expected to shrink instead of grow as originally predicted.

Retaliation from Other Countries

The moment the US imposed tariffs, it was only a matter of time before other nations fought back. Canada, the European Union (EU), and China have all announced retaliatory tariffs on US goods.

This means American businesses that rely on exports are now facing higher trade barriers in these countries, making it more expensive and difficult for them to sell their products abroad.

The Global Impact: Inflation and Slower Growth

How Inflation Comes into Play

One of the biggest concerns with these trade policies is inflation. When import prices rise due to tariffs, businesses pass on these costs to consumers. That means everyday products, from electronics to cars to groceries, can become more expensive for people around the world.

The OECD has warned that interest rates may stay high for longer to control inflation. This can make borrowing more expensive for businesses and individuals, slowing down economic growth even further.

The US Economy Also Feels the Heat

Even though the US initiated these tariffs, it hasn’t escaped the negative effects. While Trump’s administration argued that tariffs would protect American industries, the OECD has actually downgraded the growth forecast for the US economy.

Growth estimates for the US have been lowered, meaning the economy is expected to expand at a slower rate than previously anticipated.
Higher costs for businesses can lead to lower profits, job cuts, and reduced investments, further weakening the economy.

China’s Growth Remains Resilient

Despite being a major target of US tariffs, China’s economy has shown surprising resilience. The OECD has actually increased its growth forecast for China slightly, suggesting that the country has managed to adapt to trade restrictions better than expected.

One reason for this could be China’s ability to diversify its trade partnerships, shifting focus towards other nations and relying less on the US market.

What Experts Are Saying About the Future

With the ongoing trade tensions, experts believe that the global economy will continue to slow down.

Slower Global Growth

According to the OECD:

World economic growth is expected to decline slightly, as trade barriers continue to disrupt international business.
Countries that rely heavily on trade—especially export-driven economies—will be the most affected.

Inflation Will Stick Around

Although inflation is expected to ease, it may not decline as quickly as previously thought. Many countries are now bracing for higher consumer prices for a longer period.

The Impact on Businesses

Many companies have already voiced their concerns. For example, Tesla, the electric car giant led by Elon Musk, has warned that US exporters could be among the biggest losers in this trade war.

In a letter to the US government, Tesla pointed out that if other countries retaliate with tariffs, American businesses that depend on exports could suffer. Higher costs and reduced global competitiveness could put them at a serious disadvantage.

The UK and European Economies Face Challenges Too

Trade tensions don’t just affect North America and China. The UK and European economies are also feeling the pressure.

The UK’s growth forecast has been revised downward, meaning the economy is expected to expand at a slower pace than previously predicted.
The Bank of England has issued an even gloomier prediction, warning that economic growth could be much weaker than expected in the coming years.

With economic uncertainty on the rise, businesses and investors are becoming more cautious, further slowing down economic activity.

Final Thoughts: What This Means for Everyone

So, what does all of this mean for you? Whether you’re a business owner, an investor, or just an average consumer, these trade policies will have an impact in some way.

For consumers: Prices on everyday goods might increase due to tariffs on imported products.
For businesses: Increased costs can lead to lower profits and fewer job opportunities.
For investors: Trade tensions create market uncertainty, making investments riskier.

As trade battles continue, global economies are adjusting—some better than others. The biggest takeaway? Trade wars don’t have just one winner or loser; they create complex challenges for economies around the world.

It remains to be seen how governments will respond in the long run, but for now, higher prices, slower growth, and economic uncertainty seem to be the new reality.