Rama Krishna Sangem
At least two countries – Mexico and Canada – are readying for the Trump presidency, that begins January 20. Donald Trump’s inauguration promises to usher in an era of upheaval in global commerce, forcing governments around the world to scramble in preparation for a tariff onslaught even before he’s back in the White House, says a Bloomberg story.
Soon after calls to congratulate the president-elect on his Nov 5 victory, officials began quietly looking for ways to appease him while simultaneously mapping out ways to retaliate if needed.
The threat to China is longstanding, meaning its leaders have had ample time to prepare defenses and retaliatory strategies. But this time around, Trump and the trade hawks he’s enlisted are broadening their scope in what threatens to be a more prolonged and unpredictable trade war than during his first presidency.
Mexico & Canada on Trump radar
Mexico and Canada have borne much of the brunt of Trump’s trade threats since election day, prompting leaders from both American neighbors to publicly warn of retaliation. Others are making preparations behind the scenes — Vietnam’s officials have promised to buy more US goods, the European Union has bolstered its ability to counter tariffs, while Indian officials aim to negotiate their way through the coming storm.
“Trump 2.0 trade policy seems to be much more radical compared to 1.0,” says Yeo Han-koo , senior fellow at the Peterson Institute for International Economics and former South Korean trade minister. “It’s like a prisoner’s dilemma — the best scenario for all these countries is to band together and then resist, but there’s a motivation for each country to race to get a better deal compared to your competitors.”
If implemented, Trump’s threats to increase levies on Chinese goods to 60 per cent and to 20 per cent for the rest of the world would transform the structure of global trade flows away from the US, according to Bloomberg Economics. Retaliation would exacerbate the shock.
Track 2 scenes
In Mexico, President Claudia Sheinbaum warned of the hit to US inflation in response to Trump’s 25 per cent tariff threats. The country has been quietly rolling out a strategy to reduce reliance on China. Developed over the last few months, the government’s plan includes tapping major automakers about sourcing components elsewhere.
Law enforcement kicked off a country-wide “cleaning operation” with a raid on a Mexico City shopping complex filled with Chinese goods in November. The following week, Mexico announced its biggest-ever seizure of fentanyl pills, a drug Trump says is being smuggled into the US from its southern neighbor.
Mexico is set to scale up such efforts, carrying out searches for goods that entered the country without proper taxation. To that end, Mexico slapped 19 per cent tariffs on goods imported through courier companies, a move that analysts said targets major e-retailers Temu and Shein. “If we coordinate on this, there won’t be any tariffs,” Sheinbaum said about working with the US in late November.
Trudeau rejected Trump proposal
In Canada, outgoing Prime Minister Justin Trudeau flew to meet with Trump days after his 25 per cent tariff threat. Following Trump’s suggestion that its northern neighbor become America’s 51st state, Trudeau shot back there’s not a “snowball’s chance in hell” of that happening.
How the country approaches Trump has been thrown in limbo with Trudeau’s resignation. Behind the scenes, officials are examining export taxes on major commodities it sends to the US in a move that would drive up American prices.
When Trump enacted levies on $200 billion in imports from China in 2018-2019, Vietnam was one of the biggest beneficiaries as exports to the US more than doubled. Up to 16 per cent of the increase in 2021 alone was a result of rerouting of goods to avoid US tariffs on China, according to a Harvard Business School white paper.