Image source, Reuters

From Tuesday, tariffs of 25% will hit Canadian and Mexican goods entering the US, with 10% on Chinese goods. But why?

Canada:

The White House said on Saturday that tariffs were "necessary to hold China, Mexico, and Canada accountable for their promises to halt the flood of poisonous drugs into the United States".

Trump has also repeatedly needled Canada about becoming the 51st US state.

On his Truth Social platform, he claimed that the US pays "hundreds of billions of dollars" to subsidise Canada, and suggested that "without this massive subsidy, Canada ceases to exist as a viable country".

"Canada should become our Cherished 51st State. Much lower taxes, and far better military protection for the people of Canada — AND NO TARIFFS!"

Mexico:

Like with Canada, Trump has said drugs and border security are behind the 25% tariff on Mexican goods, citing the "major threat of illegal aliens and deadly drugs killing our citizens, including fentanyl".

China:

During his election campaign, Trump warned of tariffs as high as 60% on Chinese goods. He’s settled on 10% for now, but tariffs of as much as 25% were imposed during his first term.

"We’re going to tell China that if you continue to send fentanyl to Mexico or any place else and it comes into our country, we’re going to charge you a 25% tariff on everything you sell into the United States of America," he said during a campaign rally.

The EU:

The EU threats seem more related to trade deficits - that is when a country imports more from a country than it exports.

"They don't take our cars, they don't take our farm products, they take almost nothing and we take everything from them," Trump said overnight. "Millions of cars, tremendous amounts of food and farm products."

Joao Da Silva
Business reporter

We earlier looked at the impact on the share prices of Japanese car makers - more broadly, Asian shares slid on Monday after US President Donald Trump's tariffs plans.

Hong Kong's Hang Seng Index was down 0.4%, Japan's Nikkei 225 was 2.6% lower, South Korea's Kospi tumbled 2.5% and Australia's ASX 200 fell 1.8%.

Markets in mainland China remained closed for the Lunar New Year holiday.

Meanwhile, the US dollar was showing strength, rising to a record high against China's yuan, while the Canadian dollar plunged to its lowest level since 2003.

"If tariffs become a long-term strategy rather than a short-term tool, the risks increase," said Charu Chanana, Chief investment strategist at investment bank Saxo.

"Companies will be forced to absorb higher costs, cutting into operating margins."

Read more here.

Chris Mason
Political editor, in Brussels

Cryptic, threatening and yet tantalising – Donald Trump’s gift for delivering an overnight missive for us to wake up to is deployed again.

Its timing coincides with European Union leaders gathering in Brussels, acknowledging the continent needs to take greater responsibility for its own defence – a key and recurring demand of President Trump.

Keir Starmer will join EU leaders for dinner later; a symbolically significant moment and an important staging post towards what the government calls its "reset" with the European Union. An EU-UK Summit to sort it is expected in the spring.

But Trump's timing neatly illustrates a dilemma Whitehall has been conscious of ever since Donald Trump’s re-election: a shimmy towards Brussels will likely tread on Washington’s toes; overdo the overtures in the Oval Office and the EU will be miffed.

After his visit to Brussels today, the prime minister is expected in America in the next few weeks.

Joao Da Silva
Business reporter

With European markets set to open soon, it is worth keeping an eye on the stocks of major European car makers.

Companies like Volkswagen and Stellantis have operations in Mexico which leaves them exposed to the impact of Donald Trump's tariffs.

The stocks of Japanese car companies fell sharply during Asia trading hours. Nissan shares were down 5.5%, Toyota's fell 5% and Honda's plunged 7%.

Several Japanese car manufacturers rely on factories in Mexico to supply the US and other markets.

The new tariffs are hitting car manufacturers at a time when many of them face slowing sales in key markets and growing competition from China's car industry.

The US buys more from the EU than it sells to thempublished at 06:58 Greenwich Mean Time 3 February

06:58 GMT 3 February

Nick Marsh
Asia Business Reporter

The United States runs a trade deficit with the European Union, which means it imports more from European countries than it sells to them.

Last year, the US ran a deficit of $213bn - which President Trump has just described as "an atrocity".

The president argues that the border taxes will help protect American jobs and products domestically.

Among the top European exports to America are pharmaceuticals, cars and other types of advanced machinery. The US, meanwhile, sells oil, gas and financial services to Europe.

Different countries will be affected in different ways by US tariffs. Ireland, for example, is by far the most reliant on the American market - nearly half of its exports outside the EU are destined for the US.

Countries that buy a lot from the US include the Netherlands and Germany - although the latter exports a huge volume of cars in return.

Even so, the EU says it will act as a collective "respond firmly" if and when tariffs come in - that probably means retaliatory taxes.

When it comes to the UK, things are slightly different. The US doesn't run as high a trade deficit with Britain -- in fact at one point last year it ran a surplus - and government ministers hope that this will persuade the president to spare the UK from tariffs.

As President Trump put it, the UK is "out of line" but the EU is "really out of line".

Here is the key section from Donald Trump's overnight comments, when the BBC asked if the US could hit the UK with tariffs...

"It might happen with that, but it will definitely happen with the European Union. I can tell you that, because they've really taken advantage of I said, you know, we have over $300 billion deficit.

"They don't take our cars, they don't take our farm products. They take almost nothing, and we take everything from the millions of cars, tremendous amounts of food and farm products. So the UK is way out of line, and we'll see the UK, but European Union is really out of line.

"UK is out of line. But I'm sure that one, I think that one, can be worked out, Prime Minister Starmer has been very nice. We've had a couple of meetings, we've had numerous phone calls, we're getting along very well, and we'll see whether or not we can balance out our budget with the European Union.

"It's $350 billion deficit, so obviously, something's going to take place there."

On a timeline for EU tariffs, Trump said: "I wouldn't say there's a timeline, but it's going to be pretty soon."

Good morning from London.

The UK and European Union are waking up to the prospect of tariffs - extra taxes - on goods that are sold to the United States.

Asked by the BBC overnight, President Trump said tariffs on the EU will "definitely happen". He struck a softer tone with the UK - saying that, while it is "out of line", a deal could be worked out.

We'll have Trump's full comments, plus analysis from our experts around the world, in this page. Stay with us.

Image source, Reuters