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President Donald Trump set the cat among the pigeons globally when he introduced a slew of punishing tariffs on trade with Canada, Mexico, and China, with even more taxes promised for other trading partners in the months ahead. Markets in Japan, South Korea and across Asia were roiled as fears peaked of the fallout on supply chains for North America, particularly in sectors such as automobiles, which have enjoyed the strong presence of foreign investment for decades. Over the weekend, Mr. Trump signed three executive orders that slapped Canadian and Mexican goods with a tariff of 25%. Only Canadian energy products were spared — a 10% tax will be applied. The White House further announced, in line with the promises Mr. Trump made on the campaign trail, a 10% tax on goods from China. Beijing responded angrily, saying that it would file a lawsuit with the WTO against the U.S. for “wrongful practice”, even as it said that it would take “necessary countermeasures….” While Ottawa and Mexico City warned that retaliatory tariffs would be coming soon, Mr. Trump’s subsequent calls to Mexican President Claudia Sheinbaum led to a one-month pause before the tariffs kicked in, and the White House appeared to strike a conciliatory note with Mr. Trump speaking to Canadian Prime Minister Justin Trudeau as well. Meanwhile, Mr. Trump has suggested that the EU was next in the firing line, even though the U.K. appeared to win a modicum of a reprieve for issues with Washington.
While tariffs are traditionally applied sparingly, and mostly in cases of trade imbalances in the context of artificial price barriers imposed by one country that impact its trading partners, the official reasoning supplied by the Trump White House for its tariff plan was that it would serve to address the “national emergency” resulting from “the extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl”. On one hand, this opens the floodgates to other nations retaliating to U.S. tariffs and dampening world trade at a time when global economic growth prospects are precarious. The move also signals that it is acceptable for nations to weaponise tariffs as a countermeasure against unrelated inter-country disputes. Few would deny Mr. Trump’s administration the prerogative that it enjoys to crackdown on the U.S.’s “ridiculous Open Borders” — but most would have imagined that this process would entail intensified law enforcement activity rather than internecine tariffs. The tariffs will almost certainly have a deleterious effect on the prices that American consumers pay for imported products, besides a broader inflationary impact through higher input prices across industries. Perhaps it will take a full four years of economic pain in the U.S. before the realisation dawns that tariffs are hardly a panacea to curb immigration and drug inflows.
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Published – February 04, 2025 12:10 am IST
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Tariff turmoil: on Trump and punishing tariffs on trade
