By: Daryn J. Stack
Tensions between the United States and its closest trading partners are rising. Since the beginning of his presidency, President Donald Trump has threatened Mexico and Canada with a 25% tariff on all goods sold within the United States. Trump has similarly chosen to apply a 15% tariff on all Chinese goods, prompting all three nations to respond defensively.
Trump has attempted to justify these tariffs by categorizing them as a response to the crisis at the border between the United States and Mexico as well as the flood of fentanyl in the United States. The tariffs are currently utilized as a key negotiating tactic to encourage Mexico and Canada to increase border security. This has proven successful in some capacity as both nations have since offered their own plans to enhance border security. In response to the negotiations, Trump decided to place a thirty day hold on tariffs for both countries.
However, the same cannot be said for relations with China. The fentanyl that is currently wreaking havoc on American citizens is actually produced in China. Because of this fact, Trump has refused to hold negotiations over these specific tariffs. In response, China has chosen to implement a tariff of their own. These repercussions range from 10% to 15% tariffs and apply to crude, liquefied natural gas farms, machinery, and other select products that are produced in the United States. This is problematic and may harm American industries which happened with the soy bean industry in 2018. During that time, China imposed a 25% tariff on United States soybeans, which caused a 74% drop in exports from the United States to China.
Although the tariffs can be used for negotiation purposes, these specific tariffs imposed on China have the potential to be incredibly problematic for American consumers. This is because China is the United States’ third largest trade partner. And, taxing Chinese goods will result in high prices in American stores. Trump even alluded to this when he mentioned in a press release: “We (the American people) may have short term, a little bit of pain, and people understand that. But long-term, the United States has been lip ripped off by virtually every country in the world. We have deficits with almost every country…..and we’re gonna change it.”
However, Trump has also defended his decision by stating that tariffs can be beneficial. Beyond using them as a negotiation tactic, Trump wishes to bring more foreign investment and encourage companies to produce their products in the United States. This is an effort that could result in long-term price reductions and an increase in job production and investments from companies currently working outside of the United States’ borders.
Recent press releases have revealed that the tariffs imposed on both Mexico and Canada have been delayed once again. The proposed 25% tariffs are now set to take effect on April 2. Additionally, there are plans for “reciprocal tariffs” which the United States would place on any country that currently imposes tariffs against United States goods and serves. So, Canada may still be hit hard by tariffs because they currently impose tariffs (as high as 300%) on dairy products, poultry and eggs that are produced in the United States.
Trump has recently made alterations to the imposed baseline tariffs. He chose to make an exception for Canadian energy only charging 10% instead of 25%. The administration also chose to increase Chinese tariffs to 20%. All three countries remain consistent in threatening retaliatory tariffs of their own. The “reciprocal tariffs” are set to take effect April 2 as well and can establish a more fair and equal trade between the United States and all other countries.
