President-elect Donald Trump announced that on his first day in office he would impose prohibitive tariffs on imports from the three most important U.S. trading partners: Mexico, Canada and China.
From Jan. 21 all goods imported from Mexico and Canada will be subject to a 25% tariff at the U.S. border. The decision that Donald Trump announced on his Truth Social platform marks a breach of the three-nation agreement (United States-Mexico-Canada Agreement) signed by the president himself during his first term in 2018 in Buenos Aires.
What is more, this is a reversal of three decades of free trade in North America that began with the NAFTA agreement in 1992. For now, it is just speculation and conjecture. But the very announcement of the U.S. president-elect about the introduction of 60% and even 100% tariffs on imports from China has already affected American corporations.
In addition, Trump announced that, at the same time, he would impose a 10% tariff on imports of all goods from China. In this case, however, it will be a tightening of similar existing fees introduced by the billionaire after winning the White House for the first time in 2016, and that were expanded by the Joe Biden administration.
Will Donald Trump be able to reduce drug trafficking and illegal immigration? In his Truth Social post, Trump explained that cancellation of new tariffs lies in the hands of U.S. trading partners. It is, in his opinion, dependent on two things: putting an end to drug trafficking (in particular, fentanyl, which last year caused the death of 75,000 Americans) and stopping illegal immigration into the U.S. In the case of China, Trump pointed to Beijing’s alleged breach of its promise to punish with death those caught producing or exporting fentanyl.
The fulfillment of these conditions would, however, border on a miracle. America’s 53-year “war on drugs,” which has cost the country more than $1 trillion, has so far failed spectacularly. Since 1999 alone, the number of drug overdose deaths has jumped from 2.9 per 100,000 people up to 21 per 100,000, and 64% of Americans believe that the drug problem “is very serious.”
This is primarily due to the growing demand for narcotic substances in a society plagued by growing poverty and income disparity.
The prospects for controlling illegal immigration across the U.S. border with Mexico (approximately 1,926 miles) and Canada (approximately 5,500 miles) are no better in the case of full employment in the U.S. and the economic crisis in many Latin American countries. NAFTA was an attempt to solve this problem by supporting Mexico’s development along the lines of what the EU has been doing for years.
Therefore, it is more likely that Trump’s announcement will be the beginning of a trade war that will put an end to globalization. Right after the president-elect published his post, Canadian Prime Minister Justin Trudeau called him. He was trying to be conciliatory.
However, Mexican Economy Minister Marcelo Ebrard signaled that his country would respond to Trump’s initiative by imposing punitive tariffs on imports from the U.S. Chinese state television called the announcement posted from the Mar-a-Lago “irresponsible.”
During his first term, Trump also imposed punitive tariffs; however, they were aimed at selected countries — primarily at China. Nevertheless, this did not reduce the U.S. trade deficit, which in 2023 was already over $1 trillion.
This happened in part because exporters began to shift production to countries not yet subject to America’s punitive tariffs. For this reason, Mexico has overtaken China to become the most important U.S. partner. It has generated a trade surplus with its northern neighbor in the amount of as much as $160 billion.
To reduce the trade deficit, Trump would have to force Americans to cut consumption. First and foremost, the U.S. deficit is structural. It is the consequence of the fact that Americans have been consuming far more than they produce for years. This results not only in a huge budget deficit ($1.8 trillion this year), but also household debt. Trump would have to drastically reduce the living standards of American people to put an end to the country’s trade deficit.
Economists also warn of the damaging effects of tariffs on the prices of many products. An example is cars mass-produced for the American market (also by American companies) — especially in Mexico.
Investors expect inflation to rise and the Federal Reserve to keep interest rates high. Hence, they buy dollars, causing an increase in the U.S. currency exchange rate. This will further hamper U.S. exports and the country’s trade balance.
The fight against high prices is just an excuse to hide the real reasons why Americans bet on the Republican candidate — according to Guy Sorman, a prominent American-French columnist.
Paradoxically, inflation was the key reason for Kamala Harris’ election defeat in early November. During his campaign, Trump promised that he would lower energy prices by allowing the environmentally harmful process of oil and gas extraction through hydraulic fracturing. Yet, the U.S. imports 60% of consumer oil from Canada — as a result, its price is set to soar.
Historical analogies: How did the introduction of high tariffs by the U.S. end in the past? The historical analogies are also disturbing. In 1929, then-U.S. President Herbert Hoover imposed a 20% tariff on European food imports. America’s trading partners responded in kind, which caused a sharp deepening of the financial crisis and, according to many historians, contributed to Adolf Hitler’s rise to power.
Franklin Delano Roosevelt’s abandonment of the policy in the 1930s has remained unchallenged by his successors — until Trump.
The imposition of punitive tariffs on Chinese imports represents the end of the policy of rapprochement with China, initiated over 50 years ago by Richard Nixon and Secretary of State Henry Kissinger, based on the opening of the American market for Chinese products. This led to the dissolution of the Chinese-Soviet alliance. However, since then, Beijing has grown into Washington’s powerful rival, and Chinese-Russian ties have grown stronger. Although this time around, it is the Chinese who are playing the first violin.
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