Trump's Tariffs Threaten Canada, Mexico, China — And American Wallets

U.S. President Donald Trump is preparing to slap tariffs on America’s largest trading partners despite rising signs of an increasingly less stable economy.

What To Know: Trump has announced plans to impose 25% tariffs on imports from Canada and Mexico, as well as 20% tariffs on China, beginning Tuesday, according to CNN.

Meanwhile, consumer confidence has taken a turn, some GDP forecasts have gone negative and consumer spending unexpectedly declined in January, raising concerns about the economic growth trajectory. Inflation has also proved to be sticky with Consumer Price Index data from January showing a 3% increase, above economist forecasts.

Tariffs could put further pressure on CPI measures as tariffs tend to increase costs. Canada, Mexico and China have also said they would retaliate with tariffs of their own, which creates the possibility for a trade war. If inflation remains elevated above the Federal Reserve’s 2% goal, rates could remain high for longer than expected.

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According to CNBC, Treasury Secretary Scott Bessent on Sunday said Trump’s proposed tariffs are not likely to put further pressure on inflation. Bessent indicated that China will “eat any tariffs that go on.”

"China will pay for the tariffs because their business model is exporting their way out of this inflation,” the Treasury Secretary reportedly said in an interview.

St. Louis Federal Reserve President Alberto Musalem also said that near-term inflation expectations have “risen substantially” over the past few weeks during a keynote address at the National Association for Business Economics conference on Monday.

Although the risks appear to be more skewed to the upside, Muslim’s baseline case is for “continued disinflation.”

The Fed kept rates steady in January following three consecutive rate cuts that began in September. The federal funds rate currently sits at a target range of 4.25% to 4.5%. The next meeting is slated for later this month.

The implied probability that the Fed will keep rates unchanged again is currently at 93%, according to CME Group's FedWatch tool.

The SPDR S&P 500 SPY faces heavy selling pressure Monday. Trump’s tariffs will go into effect in less than 24 hours. At last check, it was down about 1.89% at $583.10, according to Benzinga Pro.

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