Advertisements
Home News Trump’s Tariff Strategy: Success With Colombia, Risks With Canada And Mexico

Trump’s Tariff Strategy: Success With Colombia, Risks With Canada And Mexico

by Celia

After successfully pressuring Colombia to accept deportees by threatening a 25% tariff, President Donald Trump is now considering similar moves against Canada and Mexico, potentially as early as Saturday. However, economists warn that the stakes are much higher this time, and the potential economic damage could be significant.

Advertisements

“The potential for such sizable economic impacts ought to act as enough of a deterrent that Trump will not end up implementing these higher tariffs,” said Matthew Martin, senior U.S. economist at Oxford Economics.

Advertisements

Trump has repeatedly stated that tariffs are coming for Canada and Mexico, despite both countries working to address his concerns about illegal border crossings and fentanyl smuggling. Trump believes that tariffs will force other countries to “respect” the United States.

Advertisements

“We’re going to immediately install massive tariffs,” Trump said in a Monday speech, adding that Colombia, “a very strong-willed country,” backed down rather than face import taxes.

Multiple economic analyses show that universal tariffs against Canada and Mexico could lead to more inflation and an economic slowdown. This is a much larger issue than Trump’s previous moves against Colombia, which accounts for only about 0.5% of U.S. imports. In contrast, nearly 30% of all U.S. imports come from Canada and Mexico, increasing the risk that tariffs could fuel inflation and undermine Trump’s promises to control prices.

Trump’s director of the White House National Economic Council, Kevin Hassett, dismissed these concerns. He said that analyses skeptical of tariffs do not consider the full scope of Trump’s policies.

“When the people who are trying to cause panic over President Trump’s trade policy simulate what it’s going to do, they don’t account for all the other policies,” Hassett said in a Monday interview on the Fox Business Network. “So President Trump is drill, baby, drill, and deregulate and tax cuts and reduce spending.”

Mexican President Claudia Sheinbaum suggested in November that Mexico could retaliate with its own tariffs. Since then, she has emphasized the strong bilateral relationship and willingness to engage in dialogue. Sheinbaum pointed out that drugs are a U.S. problem, but in December, the Mexican military seized more than a ton of fentanyl pills in two raids, calling it the largest catch of synthetic opioids in Mexico’s history.

Top Canadian ministers said last week that Canada was prepared to retaliate if Trump imposed import taxes, even as Canadian Foreign Minister Mélanie Joly said they “will continue to work on preventing tariffs.” The working theory in Canada appears to involve being ready for anything Trump might do.

On Monday, the economics division of the insurance company Nationwide estimated that Trump’s proposed tariffs on Canada and Mexico would increase inflation by as much as 0.5 percentage points and reduce growth by 0.7 percentage points. The analysis did not account for potential retaliatory tariffs from Canada or Mexico, which could amplify the negative impact on inflation and GDP growth.

Trump has made lower gasoline prices a key strategy for tackling inflation, but tariffs on Canada could drive up prices at the pump unless Trump creates exemptions in his plan.

“For example, 60% of oil and gas imports come from Canada,” said Oxford Economics’ Martin. “A 25% tariff would lead to higher gasoline, diesel, and petroleum product prices for households and firms, especially in the Midwest and Rocky Mountain regions, where refineries are connected to Canada by pipeline.”

The tax services firm PwC looked at the possible impact of 25% tariffs and found that companies importing from Canada could have to pay $106 billion more annually in import taxes, and those importing from Mexico could owe $131 billion more.

“When we think about hardest-hit industries, we think about transportation and automotive,” said Chris Desmond, a principal at PwC’s international trade practice. “The amount of companies that have operations in Mexico and Canada in that industry with components and parts, including even airplanes, that’s going to be a huge hit.”

Desmond estimates that taxes paid on imports in the transportation sector from all of Trump’s tariff plans, which include new taxes on China and other countries, could increase from $4 billion a year to $68 billion. It’s unclear how companies would absorb those costs or pass them along to consumers.

None of these analyses seem to be at the forefront of Trump’s public thoughts. His argument is that tariffs would make the U.S. wealthy by sheltering it from competition and safer by forcing other countries to reduce illegal immigration.

“Tariffs, I told you, most beautiful word in the dictionary,” Trump said Monday as he recalled his campaign speeches praising the import taxes. He concluded that tariff is the fourth most beautiful word after “God, love, religion.”

Read more:

Advertisements

You may also like

logo

Bilkuj is a comprehensive legal portal. The main columns include legal knowledge, legal news, laws and regulations, legal special topics and other columns.

「Contact us: wougua@gmail.com」

© 2023 Copyright bilkuj.com