True to form, U.S. President Donald Trump disrupted global markets with a three-day surge of tariff announcements, border security negotiations and ultimately a 30-day pause for Canada and Mexico tariffs, leaving China alone facing Trump’s new tariffs. The tariffs on all three countries were announced hours before they were to become effective on Saturday February 1, allowing a small amount of weekend administrative space before most businesses/customs offices in those countries reopened on Monday, February 3 but not before global financial markets swooned before partially recovering. Curiously the tariffs on close U.S. trade partners Canada and Mexico were initially set at 25 percent, with those for China designated at a lower 10 percent rate.
The “dealmaker” back at work
Furious negotiations with the leaders of Canada and Mexico were considered a Trump success with both countries sidestepping a North American trade war by agreeing to stricter border security and to take bigger steps to address fentanyl trafficking.
Canada’s lame-duck Prime Minister, Justin Trudeau, made additional commitments to Trump which allowed for a 30-day reprieve. Media reports state that Canada will now appoint a “fentanyl tsar” and launch a new $200 million (Canadian) intelligence directive to fight organised crime and fentanyl, which is a relatively minor issue compared to America’s southern border. Canada had taken steps at the end of 2024 to deal with the border security matter, but Trump clearly wanted more action. At that time, Canada announced $1.3 billion (Canadian) in measures that included steps to halt the fentanyl trade, new tools for law enforcement and enhanced coordination with American law enforcement partners.
Mexico’s President Claudia Sheinbaum entered last weekend believing Mexico, the United States’ largest trading partner, would avoid the tariff pronouncement, but it actually required a telephone call with Trump on February 3 to secure the 30-day pause. Sheinbaum agreed that Mexico will post an additional 10,000 Mexican National Guard members on the border (not the first time for Mexico) with the promise to “prevent drug trafficking,” in particular fentanyl. Sheinbaum also managed to get Trump to promise the U.S. would do more to tackle the flow of high-powered weapons from American sources, in order to prevent them from ending up in the arms of cartel gunmen. Secretary of State Marco Rubio is expected to make a trip to Mexico upon concluding his current trip to Central America and the Caribbean to manage the details of the U..S.-Mexico deal.
China first in the sights but its planned retaliatory steps will cause Trump indigestion
The pause of the planned tariffs for Washington’s North American trade partners left China alone in the U.S. President’s sights, although a phone call with China’s leader is expected in the next week, which may well lead to a climb down of current tensions, based on Trump’s tactics since he returned to the White House. As things stand now, essentially all Chinese products are facing a 10 percent levy from February 4, painful but far from the 60 percent number he was using on the campaign trail last fall. Bilateral trade remains wildly out of balance; China still sells four times more goods to the United States than it buys. Nonetheless, the tariffs will add inflationary pressure to the U.S. economy, and Trump’s MAGA base will certainly feel the impact. In a new development, the Trump administration temporarily froze acceptance of all incoming mail parcels from China, seen as a step to close a small but growing customs loophole used by China’s online/mail order companies.
In terms of retaliatory steps, Beijing has stated it would implement a 15 percent tariff on U.S. coal and liquefied natural gas (LNG) products as well as a 10 percent tariff on U.S. crude oil, agricultural machinery and large-engine cars from 10 February, allowing the Trump administration some time to reach a solution but keeping importers and traders in suspense. The proposed tariffs on U.S. energy products are sure to please sanctions-ridden trade officials in the Kremlin, which stands to increase its already price-discounted sales to China if Moscow can overcome transport and pipeline capacity limitations.
There are several non-tariff measures Beijing is threatening which can add to the Trump administration’s pain:
First is an anti-monopoly investigation into American tech giant Google. While Google’s search services have been blocked in China since 2010, the company still has some business presence in the country through providing apps and games to Chinese markets through local partners.
Second, China plans to add PVH, the American company that owns designer brands Calvin Klein and Tommy Hilfiger, to its so-called “unreliable entity” list and accused them of “discriminatory measures against Chinese enterprises.” The list, which already has other U.S. firms on it, was created in 2020 by Beijing amid the worsening of trade tensions. Listed companies may face local sanctions, including fines, and having the work visas of their foreign employees revoked. This is not a uniquely Chinese practice. Washington has its own “entity list,” which prohibits certain organizations from buying products from American companies without government approval.
Third, and perhaps more painful in the long run, is the Chinese threat to impose export controls on twenty-five rare metals, many of which are essential components for various electrical products and different military equipment. China generates a high percentage of global output of these refined metals, including tungsten, but is not the sole supplier.
Washington may have a contingency plan for this Chinese step. On February 3, Trump said he wanted Ukraine to guarantee the supply of more rare earth metals in exchange for $300 billion of support in its fight against Russia.
The EU is next on the list
Trump has been routinely unleashing caustic tariff threats against other partners, most notably the EU but sometimes even the UK. The America First (trade and tariffs) Executive Order Trump signed in his first week set a review period for incoming Washington trade officials to generate coordinated policy recommendations, with an April 1 delivery to the President being cited as the hard deadline. EU officials in particular are diligently working on targeted retaliatory tariffs against U.S. companies and states that support Trump (as they did in 2017-18), as well as other new measures against U.S. companies in the EU if they are needed in the spring, in addition to the usual continual EU regulatory pressure on American tech giants for succeeding as well as they have in the EU market.
When Trump placed tariffs on China before, farmers had to be bailed out to the tune of $28 Billion.
China, Mexico & Canada don't pay the tariff, we pay higher prices at the cash register.#ProudBlue #TrumpTariffs #TrumpIsUnfitForOffice #TrumpisaNationalDisgrace #MAGAMorons pic.twitter.com/OvH6sJHjDY
— LA Blue Dot in GA 🌊💔 (@namwella1961) February 1, 2025
The post Global reaction to Trump tariffs only reinforces his use of this tired and risky strategy appeared first on NE Global Media.