Countries may "retaliate" as Donald Trump's tariff talk causes tremors around the world.

Foreign countries and companies have been alarmed by Donald Trump's tariff threats, which many believe might be the first shot in a full-scale trade war.

Foreign countries and companies have been alarmed by Donald Trump's tariff threats, which many believe might be the first shot in a full-scale trade war when he takes office again next year.

The president-elect put both allies and opponents on notice Monday, promising to swiftly impose a 25 percent general tariff on Canada and Mexico and a 10 percent tariff on China.

Analysts predict that if he follows through on that threat or his campaign pledge of a 10 percent tax on all US imports, it will lead to retaliation and have an impact on the world economy.

Oxford Economics analyst Bernard Yaros told AFP, "We assume that all these other nations, all these other advanced economies, especially in Asia, will retaliate in kind."

He estimated a 0.1 to 0.9 percentage point decline in global growth in 2026 as a result of US tariffs and retaliation, notably from Europe and Asia, which would "depress growth" and trade flows.

Economists Ruben Dewitte and Inga Fechner of ING cautioned in a letter that threats affect sentiment even before tariffs go into force and may cause delays in hiring and investment.

According to a recent editorial in the Wall Street Journal, Trump has long considered tariffs to be a "all-purpose bludgeon" that may be used in negotiations.

Trump stated on Monday that the removal of tariffs on Canada and Mexico will only occur when the United States combats drug trafficking and illegal immigration.

According to Petros Mavroidis, a professor at Columbia Law School, he risks longer-term effects while attempting to increase US leverage, with others speculating that he will pressure nations toward China.

"What he definitely does is alienate all his allies," he stated to AFP.

According to Erin Murphy, a senior scholar at the Center for Strategic and International Studies, "there is no differentiation" in Trump's warnings between nations' levels of economic growth and their relationship with Washington.

Pushback from Europe

According to Dewitte and Fechner, Europe may be especially affected, cautioning that "a looming new trade war could push the eurozone economy from sluggish growth into recession."

During his campaign, Trump specifically targeted EU tariffs on auto imports.

However, ING stated that the US's dependence on the bloc for strategically significant goods, primarily in the chemical and pharmaceutical industries, would provide the EU with some negotiating strength.

Gary Hufbauer, a nonresident senior scholar at the Peterson Institute for International Economics, stated that "European countries will be less likely to strike any kind of bargain with Trump than Canada or Mexico."

For an administration looking for additional market access or rule exemptions, he anticipates that the EU's offer to lower auto tariffs and purchase more US agricultural products, such as soybeans, might not be sufficient.

According to him, if the US imposes duties, the EU will likely retaliate against famous American products like whiskey or iPhones.

European nations might approach the World Trade Organization (WTO), but even positive decisions from the global organization might not have a big impact on US policies.

Ursula von der Leyen, the head of the European Union, has stated that she will strive for "constructive cooperation" with US authorities.

In the meantime, EU ambassador to the US Jovita Neliupsiene stated that the group is prepared to address fresh trade disputes.

Keeping things from getting worse

According to Yaros, the US may target Asian economies like South Korea and Japan for their auto and metal exports, while Vietnam may also come under examination for its solar panels.

Due to an increase in goods imports, the US trade deficit with Vietnam has grown in recent years.

In an effort to prevent escalation, Yaros stated that nations targeted by Trump's tariffs will "retaliate in a way that's commensurate to the action done by the US, but no greater."

According to history, China may forego equal response in favor of instruments like export curbs, he continued.

Seoul and Tokyo are also heavily focused on getting ready for possible tariffs, according to Daniel Russell of the Asia Society Policy Institute.

He anticipates that allies like South Korea would use its high-tech investments in the US to request exclusions from all US tariffs.