What Just Happened?
On August 7th, a fresh wave of adjusted U.S. tariffs will shake the global economy and strain relationships with key trading partners. Nations are starting to feel the tension, as Trump tests the boundaries of their relationship, and the effect of the tariffs are beginning to seep into the global market.
Tariffs: Australia, Canada and more
Although there were talks about an increased tariff rate for Australia, our rate has maintained at the lowest imposed rate of 10%. However, many countries have been hit with higher tariffs including New Zealand, rising from 10% to a 15%, and Canada, with tariffs jumping from 25% to 35%. Trump is yet to impose higher tariffs on China as they are in the midst of negotiations.
Mexico was also hit with a higher rate, but was given a 90 day pause. This grace period was not given to Canada, and there are some theories as to why Mexico was given a break, while Canada wasn’t.
U.S. and Canada’s Beef
A potential reason could be due to Canada’s retaliatory tariffs of 25% on American goods. Canada implemented retaliatory tariffs, which severely impacted the U.S, as Canada is the U.S’s largest foreign supplier of steel and aluminium. Canada’s reciprocal tariffs cost the U.S. a total of $29.8 billion.
While Canada imposed retaliatory tariffs, Mexico did not, which has kept them in Trump’s good graces.
Geopolitics at Play
Additionally, there may be a geopolitical reason.
Canada’s Prime Minister, Mark Carney, declared that the nation would continue to recognise a Palestinian state, which Trump has publicly disagreed with, standing firmly with Israel.
Recently, Trump’s allies: France, the UK and now, Canada have publicly stated that they recognise a Palestinian state and it’s evident that the Trump administration is frustrated, announcing that they will not “participate in this insult” and how it “will make it very hard” for the possibility of a trade deal due to their disagreement.
Market Reactions
The adjusted tariffs have sent U.S. stocks into another downfall.
If you care about the stock market, the S&P 500 have had its worst week since May, dropping by 1.6%. Peter Ricchiut, a senior professor at Tulane University, reported that there is “recognition that the tariff damage will get worse”. The stock market could take a severe hit – just like it did after Trump’s first round of tariffs.
Trump’s Endgame
Trump’s intentions were to “smash the global system” that he believes has robbed Americans of jobs, opportunities and money.
Imposing such high tariffs creates hesitancy amongst major trading partners. Majority of firms that are hit with 20% or higher tariff rate may refuse to trade with the U.S, instead opting to find alternative markets.
Due to the slowing of international imports to the U.S., Trump believes more American made brands will be supported, therefore aiding the U.S government and businesses nation-wide.
Despite Trump’s efforts to help America businesses and brands, data has shown that Trump’s increase in tariffs has bled through to consumer prices as inflation has increased 21.6% from last year and 0.3% in June.
Is This Sustainable?
Trump’s plan has been faced with criticism, with experts pitching that the Trump administration’s plan will backfire and leave them “economically and diplomatically isolated”.
I agree with this notion, that America is not the only trading partner in the world. Countries faced with massive tariffs will eventually find other accessible markets.
The U.S. risks forming strained relationships while other countries move forward, building long-lasting trade relationships. America may simply be left behind.
If I were a trade partner of America, I’d be tired of waiting and observing when the tariffs would increase, then negotiate, and negotiate again until we would settle on an agreement. All this uncertainty over a deal that neither party would be particularly happy with. Trump’s adjustments in tariffs is causing a ripple effect for the global market, and truthfully, is unsustainable for the long run.
Final Thoughts
This year, Trump’s hikes in tariffs have generated $124 billion for the U.S, a 131% increase from last year. Sure, this looks incredible for American on paper, but give it some time. Trump’s plan may just bite him in the bum.
Nations will choose stability over chaos, maybe seeing America as a liability instead of a reliable trading partner.
Meanwhile, the pressure of inflation will settle on American families, with prices climbing, grocery runs getting more expensive and key American industries bracing for setbacks. It’s clear that Trump is playing a power game, but in the global market, it’s difficult to win alone.
Image: Canadian Press. 2025. Trump Is to Impose a 35% Tariff on Canadian Goods Not Covered by the US-Mexico-Canada Trade Agreement If the Two Countries Do Not Reach an Agreement by the Friday Deadline. The Guardian. https://www.theguardian.com/world/2025/jul/31/trump-canada-trade-deal-carney-palestinian-statehood.
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