President of the United States Donald Trump announced last Monday, January 20, during a signing ceremony in the Oval Office that his administration would impose 25% tariffs on goods imported from Canada and Mexico from February 1.
The mentioned intention, as noted by the media, is an extraordinary decision from the point of view of the traditional paradigm of trade policy implemented in North America. It is expected that the materialization of Mr. Trump’s plan is likely to trigger price growth for US consumers.
It is worth mentioning that during the election campaign, Donald Trump repeatedly declared his intention to tighten the tariff policy on imported goods. In this context, countries such as Canada, Mexico, and China were singled out as a kind of main target. Initially, speculation circulated that plans regarding tariffs on imported goods would be implemented immediately after the inauguration of Donald Trump. However, Mr. Trump continues to declare relevant intentions, but concrete actions with practical consequences have not yet been taken in this direction.
As for the intentions regarding Mexico and Canada, in this case, the time frame for the implementation of the plan has already been announced. At the same time, the tightening of tariffs on goods imported from China as a prospect has more unknown components. During his first term as president, which lasted from 2017 to 2021, Donald Trump imposed tariffs on several categories of products manufactured in the Asian country. Against this background, the trade war between Beijing and Washington began. After yesterday’s inauguration, Donald Trump did not immediately impose new tariffs on Chinese goods. The media published insider information according to which the administration of Mr. Trump is not aimed at an instant tightening of trade conditions with China but at a potential cooperation with the Asian country. Insiders claim that Washington will try to reach an agreement on interaction with Beijing. It is worth noting that the relevant intentions do not cancel the plans related to tariffs on goods imported from the Asian country. A positive outcome of the negotiation process is not guaranteed. It is also worth noting that in recent years, relationships between the United States and China have been on a downward trajectory. Cooperation between Beijing and Washington as a system of a certain scale is decreasing. The administration of former United States President Joe Biden has restricted the export of advanced chips and equipment for the manufacture of microcircuits of the appropriate category to China. Some of Washington’s allies have joined the relevant measures. As part of its response, China has banned shipments of certain minerals to the United States. The likelihood that Donald Trump will repeal the mentioned restrictive measures from Washington is virtually minimal. There is a kind of bipartisan consensus in the United States regarding the need to develop the domestic semiconductor industry and increase the country’s competitiveness in the global technology sector.
Some experts suggest that Donald Trump may use the tariff threat as a negotiating tool. The fact that he did not immediately impose pledged tariffs can be interpreted as a signal in favor of the mentioned assumption, but the experience of the trade war between the United States and China indicates that such an opinion is premature, including in the context of intentions towards Mexico and Canada.
It is also worth noting that the tariff threat from Washington still continues to be something that may become the circumstance of reality or, most likely, will become this, but is not something that has already happened. This threat, in case of its implementation, is expected to affect the European Union, Japan, and South Korea. These measures will be painful for Tokyo and Seoul, as their economies rely heavily on exports. There have been recent calls in the European Union for a potential deterioration in trade relationships with the United States.
During the election campaign, Donald Trump repeatedly announced plans to impose tariffs of up to 20% on all imports and a 25% tax on products from Mexico and Canada. For goods shipped from China, a 60% levy was provided. It is still unknown for sure whether these intentions will become a fact of economic reality.
There is also information based on analysts’ assumptions that Donald Trump may use the tariff threat to negotiate with Denmark to put pressure to give control over Greenland to the United States.
On Monday, Mr. Trump, responding to a question about tariffs on China’s goods, said that the corresponding extensive measures that he imposed during his first presidential administration are still in force after Joe Biden largely left them in place. Commenting on universal tariffs, Donald Trump said that Washington may, but is not ready for that just yet.
The executive action, which was signed by Mr. Trump on Monday, stipulates that the secretaries of Commerce and Treasury and the United States Trade Representative should investigate the causes of the US trade deficits with foreign nations, to determine how to build an External Revenue Service to collect tariffs, to identify unfair trade practices and to review existing trade agreements for potential improvements. Also in this case, government agencies should analyze how the United States-Mexico-Canada trade agreement (the USMCA) affects American workers and businesses. Moreover, the question of whether Washington should remain in the mentioned agreement, which was signed by Donald Trump during his first presidential term, will be answered.
Apart from that, government agencies must conclude whether the tightening of the United States trade policy can restrict the flow of fentanyl and undocumented migrants into the country.
In Donald Trump’s executive action, it was noted that US residents benefit from and deserve an America First trade policy. Mr. Trump said he is establishing a robust and reinvigorated trade policy that promotes investment and productivity, enhances the country’s industrial and technological advantages, defends economic and national security, and, above all, benefits American workers, manufacturers, farmers, ranchers, entrepreneurs, and businesses.
Judge Glock, director of research and a senior fellow at the Manhattan Institute, a conservative-leaning think tank, said in a media comment that the potential waiver of certain provisions of the USMCA is associated with some risks. According to the expert, other countries will be more reluctant to negotiate similar deals in the future if they know that these agreements will not be able to ensure consistent trade relationships.
Clark Packard, a research fellow at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, said that 25% tariffs would be a very serious mistake and would violate the terms of the USMCA.
Journalists published information that Donald Trump’s economic team held regular meetings to chart a path to implement sweeping tariffs for both the United States’ allies and adversaries. Media reports say that officials in Mr. Trump’s administration are currently arguing about how to fulfill promises to change US trade policy, which were repeatedly announced during the election campaign. As a part of his inaugural address, Donald Trump made unequivocal statements about the intention to make significant changes to tariffs in one form or another.
On Monday, during a speech in the US Capitol rotunda, Mr. Trump noted that he would immediately begin an overhaul of the United States’ trading system to protect American workers and families. He stated that instead of taxing citizens to enrich other countries, his administration would tariff and tax foreign countries to enrich US citizens.
Donald Trump also said that he would establish a new government office called the External Revenue Service, which will be tasked with collecting tariff revenue. According to him, the Treasury of the United States will receive huge amounts of money from foreign sources. At the same time, according to media reports, there is no common understanding in Donald Trump’s economic team on how to achieve the corresponding goal. According to information released by journalists, alternative solutions were proposed, such as, for example, reducing tariffs, but with a subsequent increase in this indicator. Another option is to impose tariffs that do not take effect for several months, which gives the Donald Trump administration time to get counterparties to the negotiating table.
Also, according to media reports, the issue of what legal framework to use to back up tariffs is currently being discussed, especially if the countries and companies affected by the relevant measures file a lawsuit. Donald Trump’s advisers are considering using emergency powers, which would give the president broad authority to regulate imports.
Market-minded officials such as Scott Bessent, Mr. Trump’s pick for Treasury secretary, and Kevin Hassett, his pick to lead the National Economic Council, have advocated a softer approach. Tariff champions such as Peter Navarro, a White House trade adviser, and Howard Lutnick, Donald Trump’s pick to lead the Commerce Department, argue that the full bore is needed to send the message the president wants.
Mr. Trump is reportedly calling on allies on Capitol Hill to gain support for the tariffs. At the same time, a specific policy in the relevant area has yet to be decided.
Tariff increases may increase costs for residents of the United States, who have already become tired of high inflation in recent years. Tariffs are paid by US companies importing foreign goods. These costs are typically faced by consumers who start paying more for their purchases.
Donald Trump claims that foreign countries will pay the tariffs, not consumers in the United States. At the same time, the results of new research from the Peterson Institute for International Economics suggest the opposite. In this case, it is argued that Donald Trump’s aggressive tariff campaign will force US consumers to pay more for practically everything, including foreign-made sneakers and food.
Mexico and Canada are among the largest trading partners of the United States. Last year, the United States exported $322 billion worth of goods to Mexico. The total value of products shipped from the United States to Canada in 2024 is $354 billion. The mentioned figures account for a third of the value of all goods exported by the United States last year.
Also in 2024, the United States imported $418 billion worth of items from Canada. The corresponding figure for products shipped last year from Mexico to the United States is $475 billion. Together, imports from the two mentioned countries are equivalent to 30% of the value of all goods shipped to the United States in 2024. This is evidenced by federal trade data.
It is possible that Washington’s tightening of trade policy towards Mexico City and Ottawa will provoke retaliatory measures. In this case, it is implied that Mexico and Canada will impose tariffs on goods shipped from the United States. The implementation of the corresponding scenario is highly likely to harm US businesses.
Judge Glock said that the tightening of Washington’s tariff policy would have a negative impact on the economic system of the United States.
The Peterson Institute for International Economics stated that Donald Trump’s tariffs would trigger price increases. Among other things, this potential impact will affect electrical devices, toys, and sporting goods shipped to the United States. At the same time, businesses will be subject to new taxes on imports of transportation equipment, chemicals, and other items.
Supporters of Donald Trump’s tariff plan argue that import taxes will be used strategically to further the interests of the United States in the world. In their opinion, in the long run, an appropriate approach will be a salvation for US consumers. It is worth noting that in addition to the example of the trade war with China, Donald Trump’s first term as president is also notable for the fact that there were cases when he initially threatened tariffs as part of his rhetoric and then dialed back his intentions when other countries came to the negotiating table.
At the same time, most economists are pessimistic about the potential consequences of implementing Mr. Trump’s plans related to tightening Washington’s trade policy framework. They are convinced that such measures will provoke an acceleration of the inflationary process in the United States’ economic system. Also, supporters of the mentioned point of view argue that the implementation of Donald Trump’s tariff threat may become a spook stock market. Moreover, they say that the materialization of Mr. Trump’s intentions could cause a full-blown trade war. The corresponding wording implies strict mutual restrictions and a reduction and, in some cases, the complete disappearance of the space of economic interaction between many countries. It is worth noting that there is currently an increase in geopolitical tensions. To a large extent, trade wars are a logical escalation of the relevant process. From this point of view, Donald Trump’s tariff threats can be described as one of the actions in the logic of geopolitical tension. This statement does not negate the potential negative consequences of implementing Mr. Trump’s intentions. At the same time, the mentioned paradigm of thinking does not state the senselessness of the tariff threat. In the relevant context, the main inference lies in the fact that certain historical periods in the world as the space of human civilization’s existence form such a system of circumstances and conditions of the common being, for which the main characteristic is a large-scale confrontation, not necessarily involving literally every country, but at the same time becoming the dominant geopolitical tendency. In this case, it does not imply a certain configuration of reality driven by so-called conspiracy theories. At certain stages of the forward movement of the history of human civilization, different political centers can make such decisions, the implementation of which in the material and applied plane involves a clash of interests and forms a situation characterized by difficulties in mutual understanding, against which global tension begins, temporarily transforming into something like the status quo. In the context of this configuration of the world’s reality, international cooperation is degraded to one degree or another, and the strategy of both external and internal actions of world capitals is based on the logic of confrontation. Such historical periods can be characterized as periods of geopolitical turbulence. This configuration of global reality contains many unfavorable factors, including for the economy, and certain existential risks. The corresponding kind of pattern of the common being does not mean the inevitable desire of mankind for war or at least mutual hostility. Sometimes an action can generate a result that is significantly different or directly opposite to the original goal. It is not yet known what outcome the present period of geopolitical turbulence will have. There is a risk of further degradation of the system of cooperation between world capitals, and there is a possibility of fragmentation of the world into different groups of countries in the condition of confrontation with each other, but the final form of the future as an existential process is still hidden behind the symbolic walls of the metaphysical boundary between the current days and the days to come.
It is worth noting that if the present geopolitical tensions continue and eventually find themselves on a trajectory of expansion and escalation, then all economic systems will face certain negative consequences, meaning losses and a deterioration in prospects. Within the framework of the relevant state of affairs, the world’s largest economies will be better able to cope with the challenges of the historical moment due to a greater margin of safety. From this point of view, the United States has positive prospects. It is still not definitively known what impact the tariff policy proposed by Donald Trump will have on the US’s ability to survive in the face of geopolitical turbulence.
Returning to the issue of fears of retaliatory measures as a reaction to Washington’s tightening trade strategy, it is worth noting that there are examples in the history of the current century that prove the high realism of such a probability. During the first presidential term, the reaction to tariffs from the United States was similar measures in the opposite direction, affecting a wide range of US goods, including cars, soybeans, and whiskey. For example, in April 2018, during the trade war between Beijing and Washington, China decided to impose a 25% levy on imports of approximately 1,300 items from the United States. In August of the same year, the scope of these tariffs was expanded.
Currently, according to media reports, ideological debates are taking place in Donald Trump’s economic team. It is worth noting that a similar situation was also observed during Mr. Trump’s first presidential term. At that time, Steven Mnuchin and Gary Cohn, Wall Street alums serving atop the Treasury and the National Economic Council, respectively, led a vocal charge to halt or dilute tariffs proposed by Donald Trump. The corresponding position was related to fears of recession and retaliatory measures. During Donald Trump’s first presidential term, the mentioned discussions lasted more than a year. The presidential administration then announced its intentions to impose tariffs as part of the national security investigation.
The repeated claims that Donald Trump may reconsider his tariff intentions are difficult to assess from the point of view of realism. The probability of such actions is not zero. In this case, the argument is a kind of political logic. At the same time, at the level of official rhetoric, Donald Trump demonstrates what can be described as unequivocal determination regarding implementing the tariff threat. For this reason, it is most correct to evaluate the revision of plans as a prospect in the 50/50 format.
