Image courtesy of Tabrez Syed
What Countries And Materials Might Be Affected
The first week of President Donald J. Trump’s second term has been marked by an avalanche of executive action from the bully pulpit. Trump is looking to make an impact as quickly as possible issuing a flurry of 75, and counting, memorandums, proclamations, and executive orders. The focus is wide-ranging, affecting everything from immigration policy to medical research, as well as socially focused issues such as gender and diversity programs.
Notably absent from any official documents are the tariffs that Trump made a cornerstone of his campaign. Messaging from the new administration is mixed, with the “Day One” rhetoric removed in favor of February 1st as a new target date for tariff implementation or an even longer delay. It is possible Trump will be lighter on tariffs than expected. The S&P 500, which rose 4% between Election Day and Inauguration Day, has continued to rise each day that goes by without new tariffs.
Colombia Backs Down
Part of the reason for the continued talk, but lack of action, is Trump appears to enjoy the threat of tariffs more than the economic policy itself.
On Sunday, January 26th, Colombian President Gustavo Petro blocked two U.S. military planes carrying undocumented immigrants from landing. Trump then threatened a 25% tariff on all goods and materials from Colombia in a retaliatory move, with the potential for that number to rise to 50%. This, in turn, led to Petro floating tariffs on U.S. exports. While many Americans consume Colombian oil and coffee, the weight of this was too much for the considerably smaller nation and Petro backed down. A Colombian military plane was sent to San Diego on Monday, January 27th to transport the Colombian citizens that had been deported from the U.S.
Image courtesy of Benoit Debaix
Canada and Mexico Prepare Retaliatory Measures
The tariff tiff with Colombia was a preview of Trump’s intentions with larger countries like Canada and Mexico who he views as treating the U.S. unfairly. Economists are skeptical that Trump will impose his stated tariffs on these allies, comparing it to self-inflicted wound. “The potential for such sizable economic impacts ought to act as enough of a deterrent that Trump will not end up implementing these higher tariffs,” said Matthew Martin, senior U.S. economist with Oxford Economics. For an example of that size, Colombia accounts for 0.5% of U.S. imports; Canada and Mexico combine for 30%.
Chrystia Freeland, a candidate for Prime Minister of Canada, released a list of products worth nearly $140 billion that she would place retaliatory tariffs on. “Being smart means retaliating where it hurts,” Freeland said. “Our counterpunch must be dollar-for-dollar—and it must be precisely and painfully targeted: Florida orange growers, Wisconsin dairy farmers, Michigan dishwasher manufacturers, and much more.”
Image courtesy of Ling Tang
Trump, after pinning inflation on gas prices, is almost certain to raise them with high tariffs on Canada. Kevin Hassett, the Director of the White House National Economic Council, believes domestic production will make up for the deficit. “President Trump is drill, baby, drill, and deregulate and tax cuts and reduce spending.”
China Could Benefit from Trade Wars with Latin America
Lost in the shuffle is the dragon in the east. China, one of Trump’s main targets during his first term, is quietly sitting on the sidelines for the moment.
Despite being separated by the Pacific Ocean, China trades more with Brazil, Argentina, Chile, and Peru than those countries do with the United States. While Trump’s aggression won the day with Colombia, it is possible that strategy will not prove successful over the next four years.
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