Trump Stalls North American Trade War
Mexico, Canada Faked Concessions, China Has Measured Response
President Donald Trump signed three executive orders on Saturday imposing 25% tariffs on Mexican and most Canadian imports and 10% on goods from China.
The tariffs were to go into effect on Tuesday. By Monday afternoon ‘deals’ had been struck with both North American nations, suspending the import taxes for 30 days.
Mexico’s negotiations promised that an additional 10,000 troops would be deployed to the southern border to stem the flow of migrants. This is no big deal, sinceMexico sent 15,000 troops to the border in 2019, and sent 10,000 again in 2021 following non-threatening negotiations with the Biden administration..
And what hasn’t been widely reported is President Claudia Sheinbaum’s claim that the US promised to crack down on gun smuggling into Mexico. Also not mentioned are whatever promises President Trump received regarding fentanyl smuggling.
Since 2023 the Mexican government has been cooperating with the US on a fentanyl crackdown, extraditing, for example, the Sinaloa Cartel leader Ovidio Guzmán López. Law enforcement officials were privately concerned that a trade war could upend that cooperation.
My guess is that the Trump administration will eventually say that part of the negotiations was confidential, so as not to tip off cartel leaders.
Canadian prime minister Justin Trudeau said Canada would appoint a fentanyl czar, launch a joint strike force to combat organized crime and list cartels as terrorists, among other steps. In December, the Canadian government announced a variety of measures to combat drug trafficking into the US, including more funding for technological detection tools and dog teams.
Seizures of fentanyl at the northern US border amounted to 43 pounds ( .2%) of the total amount captured in 2024, compared to 21,148 pounds (96.6%) at the Mexican border.
This past weekend Trump resumed suggesting he was imposing tariffs on Canada to force it to become the fifty-first state. Canadians, suffice it to say, are not enthusiastic about that idea, with surveys showing 70% are opposed to giving up universal health care and taking up American rudeness.
With Mexico and Canada tariffs on hold, that leaves China. Given that the Asian nation is such a big competitor with the US, it’s curious that its tariffs were held at 10%. They did go into effect, and there will be reprisals, except they’re not to start until February 10, leaving a window for negotiation open.
China’s promised tariffs include US coal and liquefied natural gas (10%), and (15%) crude oil. As well as fuel, China has slapped a 10% tariff on agricultural machinery, pick-up trucks, and some large cars. The targeted goods represent about $20 billion worth of annual imports - around 12% of China's total imports from the US, as opposed to $450 billion in Chinese goods being targeted by the US.
At his Substack newsletter, Paul Krugman speculated that the Chinese government kept Trump’s China tariff at 10% by purchasing vast numbers of Trump’s memecoins. Forty somebodies, aka whales, own 94% of the Trump memecoins, according to Business Insider.
You might be wondering why Trump is threatening tariffs, mostly at countries normally considered US allies. Bloomberg describes Trump’s idea of a tariff wall as “the most extensive act of protectionism taken by a U.S. president in almost a century.” (The biggest since the Smoot-Hawley tariffs of 1930, which made the great depression worse)
Our current President has said many times that taxes collected at the border could either supplant or eliminate the need for pesky income taxes. And if you look at the bump in prices paid by consumers, tariffs end up functioning almost like sales taxes… they function a lot like sales taxes in that the burden they levy gets heavier on the lower end of the economic ladder.
The notion is that tariff revenue wouldn’t be as susceptible to electoral disapproval, and thus more malleable than sources of current federal income. And, as if by magic, Trump signed an executive order directing the U.S. to take steps to start developing a government-owned investment fund.
The incoming president signed an order on his first day in office to grant TikTok until early April to find an approved partner or buyer, but he’s said he’s looking for the U.S. to take a 50% stake in the massive social media platform. Commerce Secretary Howard Lutnick, who would be participating in the planning, said the government could take a profit-earning stake in vaccine manufacturers as another example.
Sovereign wealth funds are common among governments who run revenue surpluses. The US is not one of those governments, and there’s speculation that creation of such an entity would create a parking place for tariff revenues, free from congressional oversight.
The European Union is expected to be the next target for Trump’s trade buffoonery, and those nations aren’t likely able to pull a presto-chango to placate the President of the US. Elon Musk and other tech bros are facing serious challenges to their business practices in the EU. Getting out from under the damage tariffs could do to their economies would require something on the order of a reverse tariff, or, gasp, foreign aid. Or the US could just not do anything, having the effect of inviting an initiative from either Russia (militarily) or China (economically).
Paul Krugman is not happy with this trade war, and thought Wall Street would eventually talk Trump out of it.
As I get ready to hit the publish button, stock futures are down — but not nearly as much as the situation seems to warrant. Investors still seem to believe that there’s a good chance that Trump will use some minor concessions (about what?) to declare victory and dial the tariffs back. As I wrote about the same time Goldman and Dimon were telling us to chill out, this market complacency is a self-defeating prophecy: muted market reaction makes it likely that Trump will continue and expand his trade war.
And even if some of the tariffs prove temporary, the Rubicon has been crossed. We now know that when the United States signs an agreement, on trade or anything else, the president will treat that agreement as a mere suggestion to be ignored whenever he feels like it. That revelation in itself will do huge long-term damage.
All of this was entirely predictable. But there are none so blind as those who will not see.
Trade wars and imperialist yearnings of Trump could end up disrupting the status quo of the world order, which by itself wouldn’t necessarily be a bad thing. But with the combination of billionaire technofascists and Christian nationalists populating the US government, I can guarantee that any new order won’t be an improvement.
One very scary side-note, since I’m talking about international politics: the new top diplomat proposed by Marco Rubio, Darren J. Beattie, thinks the U.S. should sell (?) Taiwan to China in return for concessions in Antarctica. And he’s was a bit slow in deleting past tweets…
