Another week and another round of US tariffs on imports, with the White House threatening a 35% levy on Canada and 30% on goods from the EU (European Union) and Mexico.

The three regions are major trading partners with the US, so if the tariffs are implemented as planned on 1 August it would mean a significant increase in the price of goods and therefore inflation, but in his usual style President Trump has said he might make changes or he might not.

The Financial Times quoted a US administration official as saying the tariffs on Canada would likely be waived for goods which comply with the 2020 trade agreement signed by Trump, which could blunt their impact, but no final decision had been made.

According to the Department of Commerce, Canada had a trade surplus of just $36 billion last year, while the EU and Mexico ended 2024 with trade surpluses of around $148 billion and $176 billion, although they still trailed China which had a surplus of $262 billion.

The EU, the biggest trading partner with the US, is reportedly stepping up efforts to engage with other countries hit by tariffs, including Canada and Japan, as well as looking to deepen trade relationships with India and countries in South-East Asia.

EU competition chief Teresa Ribera told Bloomberg TV: ‘We need to explore how far, how deep we can go in the Pacific area with other countries.’

Meanwhile, European Commission chief Ursula Von der Leyen told reporters the EU would continue to suspend its current trade countermeasures against the US, which would impact around $25 billion of goods, until the start of August to allow for further talks.

The UK, which imports more from the US than it exports, has just a 10% tariff on goods and services, which makes it a clear winner if the status quo is maintained.

Stock markets, which might have been expected to sell off as they did in April after the ‘Liberation Day’ announcement, have instead powered to new highs, leading analysts to raise their year-end price targets for the S&P 500 index.

The acid test for investors will be the second-quarter earnings season, which kicked off this week with the major US banks including JPMorgan Chase (JPM:NYSE) and Wells Fargo (WFC:NYSE).

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