Trump's tariffs on Mexico, Canada will be inflationary, says Maersk

Source: Maersk

- The White House insists the tariffs will not cause inflation, but Charles van der Steene, president of Maersk North America, said the economic impact of President Donald Trump's tariffs - whether they apply to Mexico, Canada, China or any other country - would "clearly" be inflationary in the short term.

- Mr. van der Steene, the head of the global shipping group, said retaliatory measures from affected countries would prolong inflationary pressures at least in the medium term.

Trump's tariffs on Mexico and Canada will increase commodity prices

That's Maersk's warning about the escalating trade war between the North American nations. While the White House has said inflation is not a concern, Maersk said the new tariffs on Mexico and Canada - along with retaliatory tariffs from the two countries - are a threat to the US economy.

"The short-term effect of any tariff clearly is inflation," van der Steene said at the TPM Conference in Long Beach, California - a key event for the logistics industry.

Major retailers, including Target - whose CEO has warned that product prices could rise in just a few days - and the US Chamber of Commerce have said the tariffs will "only raise prices" across the entire supply chain, ultimately affecting consumers.

As of midnight, 25% tariffs on goods from Mexico and Canada, along with 10% tariffs on Canadian energy products and an additional 10% tariff on Chinese goods, went into effect.

Canada responded with 25% tariffs on more than $100 billion worth of US goods within 21 days, Prime Minister Justin Trudeau announced. Mexican President Claudia Sheinbaum announced that retaliatory tariffs would be announced on March 9, while China confirmed that it would impose new tariffs on US goods from March 10.

Maersk warns of lingering inflationary impact

As global tariffs continue to rise, Maersk expects the inflationary impact to persist in the medium to long term. However, van der Steene said that "the impact will eventually subside".

Longer term, he said, there is still a lot of uncertainty around tax policy and the potential for supply chain shifts.

While recent survey data and comments from retailers like Target suggest that the US consumer is weakening, van der Steene stressed that US consumption remains a bright spot amid the trade war.

"We continue to see the U.S. consumer and the U.S. market overall to be extremely resilient and strong," said van der Steene. "Consumer consumption has continued to be strong, not just in the last quarter but over the last six quarters. And it’s been a big motor behind the U.S. economy overall," he said.

International retailers are also expanding into the US market thanks to their steady purchasing power, which is much stronger than in other markets.

In an interview with CNBC on Tuesday, US Commerce Secretary Howard Lutnick asserted that tariffs are not inflationary and that tax policy will be "clearly aligned" with reciprocal tariffs starting April 2.

Treasury Secretary Scott Bessent said over the weekend that tariffs are unlikely to increase inflation because China “will bear the brunt of the impact of the tariffs.”

“These countries have used us and abused us,” Lutnick said on CNBC. “That is going to change. It’s unbelievable the way we get ripped off around the world and Donald Trump is going to level set it, make it reciprocal and make it fair.”

Impact on global trade and supply chains

On average, countries around the world impose import tariffs more than twice as high as the US, but this comparison ignores important details of trade relations. Many countries impose high tariffs on food, apparel, alcohol and tobacco to protect domestic industries or regulate consumption. This reflects the strategic role of trade policy in global markets.

India, which has the highest average import tariffs on US goods, has benefited from manufacturers expanding capacity outside of China. This trend has attracted major investments, including Maersk’s $5 billion plan for India, focused on port infrastructure and inland logistics.

Mr Trump has threatened to impose tariffs on India as part of the US administration’s broader retaliatory tariffs.

While tariffs on India may have a short-term impact, van der Steene said the country's importance in the global supply chain - from a manufacturing perspective and rebalancing capacity with China - "will not significantly change the global trade structure".

"We believe fundamentally that global trade is for the benefit of all, everywhere," he added.

Trade wars and tariffs are a major concern for the shipping and shipping industry, with the risk of a slowdown in consumption leading to a drop in freight orders, especially after many customers had ramped up their imports ahead of the new administration's tariff policy.
 

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Source: Phaata.com (According to CNBC)

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