Trump Pauses 25% Tariffs on Mexico & Canada – Negotiation Leverage
25% tariffs on goods from Mexico and Canada were supposed to hit today from an executive order by President Trump. However, President Trump put a pause on those tariffs.
Ahead of the pause, I spoke to my brother-in-law, who’s a U.S. ambassador in a small Mexican city, and he told me he didn’t think those tariffs would actually go into effect, or if they did, it would only be for a couple days. He believed the purpose of the tariffs on Mexico and Canada were to gain negotiating leverage. It turns out, he was exactly right.
Mexico and Canada agreed to take actions in securing their borders with the United States. BBC reporters Madeline Halpert and Jessica Murphy wrote in an article that was republished by Yahoo! News:
After last-minute calls with Trump, Canadian Prime Minister Justin Trudeau agreed to reinforce his country’s border with the US to clamp down on migration and the flow of the deadly drug fentanyl.
Earlier, Trump made a deal with Mexican President Claudia Sheinbaum. She agreed to reinforce the northern border with troops. In return the US would limit the flow of guns into Mexico.
Increasing border security was one of the major issues Trump ran on, and he’s wasted no time attacking the problem that became a major concern for voters after the “border crisis” that saw millions and millions of people illegally pour into the country during the Biden/Harris Administration. The way he used tariffs as a leverage tool could have shippers looking at tariff announcements with suspicion.
But shippers should not presume President Trump is bluffing when he and his administration announce tariffs. He is very much willing to actually put them into effect. In fact, the tariff hike he’d announced on China did go into effect today.
Trade War w/ China
Katherine Li and Huileng Tan reported in a Business Insider article that was republished by Yahoo! News:
While Canada and Mexico have secured a brief reprieve from Trump’s tariffs, China hasn’t. Blanket tariffs of 10% on Chinese goods took effect at 12:01 a.m. ET on Tuesday.
China hit back swiftly, announcing tariffs on various US goods, including coal, liquefied natural gas, crude oil, and agricultural machinery.
This likely reminds shippers of the trade war with China during President Trump’s first term. Tariffs escalated and escalated until it culminated with the Phase One Trade Agreement. Unfortunately, President Trump didn’t even have time for a victory lap over the trade deal full of concessions by China because immediately after its signing, Covid broke out in Wuhan, China and spread throughout the world. With that, the provisions of the trade deal were set aside, seemingly forgotten.
However, you can bet President Trump didn’t forget about the deal. He likely wants everything the U.S. was able to negotiate out of China in that deal plus more.
The 10% tariff increase President Trump just put on China along with any retaliatory tariffs from China is likely only the beginning of a new trade war between the countries. Of course, it could be considered a continuation of the previous trade war.
Despite President Biden and other democrats’ harsh criticism of President Trump’s tariffs on China, the Biden/Harris Administration never removed those tariffs. It almost seemed odd as when he entered the White House, President Biden’s administration went about seemingly trying to undo every policy of President Trump’s previous administration. By the end of President Biden’s term, his administration was even adding to the tariffs on China.
Ultimately, tariff news is likely to be a major thing shippers will have to watch over the next four years. While running for this second term, President Trump often spoke of heavily using tariffs. Right away, we’re seeing it in his new administration’s policies. Get ready for them to keep coming, sometimes as threats to gain leverage in negotiations with other countries and sometimes fully going into effect.
