For the time being, United States President Donald Trump has delayed the implementation of the tariffs against Canada and Mexico by one month -- to March 1 -- after phone calls with their respective leaders, noted ABN Amro.

However, Trump's rhetoric has taken a hard line, wrote the bank in a note. Even if tariffs don't go ahead in the near term, the risk will remain elevated.

Trump has also sought to prepare the public for the massive disruption that is likely to result from tariffs, acknowledging that "we may have short term some little pain." This would come from three main channels: 1) Canada and Mexico have vowed a massive retaliation in the form of tariffs on U.S. imports; 2) higher US inflation; 3) US companies with complex cross-border supply chains, such as automakers, which may see a compounding effect of tariffs where goods cross borders multiple times.

As 'painful' as all of this may be, Trump's comments suggest a high bar for him to permanently climb down from tariffs, pointed out ABN Amro.

Canada, Mexico and China are three of the U.S.'s top four trading partners, accounting for 42.5% of U.S. goods imports. Tariff rises on imports from these countries would raise the trade-weighted average tariff from about 2.5% to 11% overnight, though this would gradually decrease as trade flows adjust -- due to trade rerouting/diversion, stated the bank.

This could result in a hit of about 0.8%-1.1% to U.S. gross domestic product, occurring quite rapidly. Core inflation would increase by about 0.6-0.7% over the coming months.

A significant portion of the headline inflation impact would be avoided, as energy imports, which account for over 30% of imports from Canada, would 'only' be subject to a 10% tariff. Still, crude oil imports from Canada make up 60% of total U.S. oil imports, likely leading to unpopular increases in gasoline prices. The automotive industry would be particularly affected due to its reliance on the USMCA -- the successor to NAFTA -- to maintain highly integrated cross-border supply and production chains.

Given the fluidity of the situation, ABN Amro is keeping its base case unchanged for now.

While the bank thought that 2025 would be The Year of the Tariff, President Trump has surprised even its expectations with how aggressively he has pursued his flagship economic policy. As such, ABN Amro judges the risk of the more negative scenarios outlined in its Global Outlook report has risen significantly.

The bank will update in the coming days with a potential update to its base case.