US tariffs create uncertainty, highlight aggressive trade policies

The rating agency warned that these moves introduce heightened economic uncertainty.

"China is subject to US trade investigations, and we think US tariffs on Chinese imports are likely to rise further this year, consistent with President (Donald) Trump’s description of the 10% increase as an 'opening salvo' and his focus on reducing US trade deficits," the report said.

"It is unclear what will emerge from the US-Mexico and US-Canada negotiations, how far the US is prepared to revise its proposals and how similar efforts at de-escalation with China may proceed (more limited Chinese retaliatory tariffs are due to take effect on 10 February)."

The report stressed that Trump's trade policy represents a clear and significant risk to Fitch's macro-economic forecasts for the three countries.

The US tariffs' overall increase would result in $350 billion more in import taxes, which might lead to a 0.4% decline from Fitch's estimates in 2026 GDP and a hike in inflation.

"Despite the bigger impact on GDP, the boost to US consumer prices would likely be enough to further slow Federal Reserve policy rate cuts," it noted.

Meanwhile, the impact on the Mexican and Canadian economies would be far bigger, reflecting the high share of exports to the US relative to GDP.

The decline in GDP from Fitch's estimates would be 2.3% and 1.4% for the two countries, respectively.

On Saturday, Trump signed an executive order imposing tariffs on imports from Mexico, Canada and China.

Although the US paused the implementation of the tariffs on goods from Canada and Mexico for 30 days on Monday, the 10% tariffs on Chinese goods seem to be implemented as scheduled. China has responded by imposing tariffs of 15% on some American products.