Trump says stocks and US economy will boom with new tariffs, as countries plan response

US President Donald Trump on Thursday said that stocks and the American economy would boom, despite a plunge in US and global markets set off by his sweeping new tariffs.

"Markets are going to boom, stocks are going to boom and the country is going to boom," Mr Trump told reporters before leaving the White House for his Florida golf resort for the weekend.

The broad market index dropped 5 per cent on Thursday, putting it on track for its worst day since June 2020. The Dow Jones Industrial Average tumbled 1,630 points, or 3.9 per cent, while the Nasdaq Composite plunged nearly 6 per cent, its biggest decline since March 2020.

Mr Trump, who campaigned on an America First approach to foreign and economic policy, announced a baseline 10 per cent tariff on all imports on Wednesday. He also announced so-called reciprocal tariffs on dozens of other trading partners, including China and the EU.

The move sparked fears of a recession in the US and an increased cost of living. It has also raised concerns of a global trade war as some countries have vowed to retaliate.

But Mr Trump said he thinks "it's going very well" and that he expected the move to bring in "six or seven trillion dollars".

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Mr Trump, who took office on January 20, has argued that "friend and foe" trading partners alike have taken advantage of the US, and framed the tariffs as a way to realign economic relations. He is also hoping that the increased tariffs will lead other countries to reduce their own tariff barriers and open up their markets to American exports. He would then negotiate reducing the tariff rate.

Experts have warned, however, that the new tariffs could slow the global economy.

Global response

The Canadian dollar rose to a four-month high against the greenback after Canada dodged new tariffs on its goods. Products from Canada and Mexico that comply with the USMCA trade agreement between the three countries will largely remain exempt from tariffs, except for cars, steel and aluminium, which fall under separate tariff policies.

Canadian Prime Minister Mark Carney announced that his country will impose 25 per cent tariffs on US car imports that do not comply with the USMCA. He said Mexico would be exempt from the levies.

”Canada is ready to take a leadership role in building a coalition of like-minded countries,“ he said. “If the United States no longer wants to lead, Canada will.”

Mexican President Claudia Sheinbaum said the free-trade agreement had shielded the country from further levies. She encouraged companies producing in Mexico who had not been exporting under the free-trade agreement for various reasons to take the necessary steps to qualify.

While Mexico and Canada may have escaped, other countries were preparing their response to the tariffs. Germany and France have called for a robust reaction, advocating for a forceful retaliation that could strengthen the EU’s negotiating position.

German Chancellor Olaf Scholz called the tariffs "an attack on a trade order that has created prosperity all over the globe". Bloomberg reported that French President Emmanuel Macron believes the bloc should be ready to respond with options such as tariffs for US tech and services.

India said it was studying the effect of its new 27 per cent tariff and vowed to push for a trade deal this year, indicating a conciliatory tone despite failing to get relief from Mr Trump's trade policy. He had threatened tariffs during Prime Minister Narendra Modi's visit to Washington this year, and has described India as a “very big abuser” of trade ties with the US.