The Trump Administration’s tariffs on Canada, Mexico, and China took effect on March 4, though some have been temporarily postponed since. Notably, the 25% tariff on imports from Canada and Mexico was subsequently granted a one-month exemption by President Trump of the United States. China responded swiftly, declaring its readiness for a tariff war or “any other type of war,” signalling its intent to retaliate decisively. As the world’s second-largest economy braces for countermeasures, global investors are preparing for prolonged economic turbulence marked by market volatility and financial uncertainty. Some prominent US economists, including Greg Howard, caution that the imposition of these tariffs could provoke retaliatory measures that may ultimately impact American consumers. Howard noted, “It will be interesting to see how the rest of the world responds. It has been a long time since we have seen trade wars of this scale, but historically, such disputes have led to widespread tariff increases across multiple industries and countries. This will not only affect US consumers but also American producers.” Market trends reflect growing investor concern. Global money market funds recorded a surge in inflows, with investors seeking safer assets in response to the United States’ decision to escalate its trade dispute. According to LSEG Lipper data cited by Reuters, global money market funds attracted $61.32bn in the week ending March 5, following net purchases of $39.55bn the previous week. Conversely, demand for global equity funds declined, reaching a four-week low as they secured only $2.97bn in inflows. US equity funds, in particular, experienced significant net outflows of approximately $9.54bn, while European and Asian funds saw strong inflows of $5.87bn and $5.83bn, respectively, during the same period. Despite the Trump Administration’s assertions that tariffs will bolster America’s economic position, the reality may prove more complex. Increased import costs force businesses to either absorb financial losses or pass them on to consumers, potentially driving inflation and reducing household purchasing power. Higher import costs often get passed on to consumers, increasing inflation in countries around the globe. Domestic businesses relying on imported materials also face higher costs, reducing profitability. Nigel Green, CEO of deVere Group, warns: “Tariffs are an act of economic warfare. This aggressive escalation could cause the most severe economic disruption since the global financial crisis, excluding the pandemic. “The fallout extends far beyond tariffs alone, with ripple effects threatening corporate profits, inflation rates, and supply chain stability. Trade barriers of this magnitude are not a pathway to strength; they are self-inflicted wounds that raise costs for businesses, dampen consumer spending, and weaken economic resilience.” Higher tariffs increase the cost of trade, reducing economic activity and slowing global GDP growth. The International Monetary Fund (IMF) has repeatedly warned that trade wars reduce business confidence and investment, leading to slower expansion. Trade wars typically produce more economic drawbacks than advantages. While they may offer temporary protection to certain industries, ultimately they hinder global trade, increase costs, and generate uncertainty that weighs on economic growth. Given that the global economy is still recovering from the disruptions of the Covid-19 pandemic, it is ill-equipped to endure a tariff war at this juncture.