President Trump has been far from shy ever since he returned to the Oval Office. One notable policy he enacted early on in his presidency was a 25% tariff towards the neighboring countries of Canada and Mexico. President Trump’s intention is to boost the American economy by implementing this bold move.
When tariffs are made, buying foreign goods becomes more expensive. In theory, consumers are then encouraged to buy cheaper, local products, which in turn allows the domestic economy to grow. But in the end, businesses are the ones who will bear the costs of tariffs and will likely try to compensate by raising the prices of the products they sell. As a result, the cost of living may increase for the public when tariffs are implemented. Despite the uncertainties of tariffs promoting affordability, Trump is still motivated to tax imported goods for other reasons.
The President clarified that the tariffs towards Canada and Mexico were also aimed at addressing dangers that sneak across the U.S. border. By placing tariffs, Trump seeks to halt the flow of drugs like fentanyl to the U.S., despite Canadian Prime Minister Trudeau indicating that less than 1% of fentanyl and illegal crossings at the U.S. border come from Canada. Canada is not the only one targeted in Trump’s tariff campaign, though.
China has also received a tariff of 10%. Because China happens to be a competitive economic power as well as a major trading partner with the U.S., the President does not want domestic economic growth to be synonymous with Chinese dependence. By increasing tariffs on China, the President is prompting more manufacturing to be done within the U.S. to increase jobs and productivity. This then allows the county to become more economically independent. However, it is possible that China could retaliate because of this.
After Trump levied specific items from China in his first term, China retaliated by imposing its own tariffs. Therefore, it won’t be far-fetched to think that China would decide to do this once more. In fact, it won’t be far-fetched to believe Canada could also be another opposing force to these tariffs.
Trump plans on imposing a 10% tariff on Canadian oil later in February. Since Canada happens to be the biggest exporter of crude to the U.S., Canada would lose substantially if America is encouraged to drill more of its own petroleum and become less reliant on Canada’s supply. Displeased with the situation, Prime Minister Trudeau announced that if the tariffs are passed through, “Canada’s ready with a forceful and immediate response.”
This trade tension between the world’s biggest economic powers will not only strain diplomatic relations. It would become a liability for everyone involved too. If countries bombard each other with tariffs, farmers will find it challenging to sell their produce across borders, supply chain systems will face disruption, and prices for nearly all products will increase. Therefore, the decisions each country makes will influence economic processes around the world.
The upcoming 25% tariffs on Canada and Mexico represent a pivotal moment in U.S. trade policy. As the tariffs begin their implementation, consumers, traders, and governments are all preparing for the potential consequences. While the Trump administration aims to bolster domestic industries, the broader economic implications remain to be seen. Nevertheless, the tariffs will redraw global economic relations as well as determine each country’s individual economic progress.
