Through self -insurance for businessmen and trick, a big Booker player, President Donald Trump opened a new and uncertain era in US trade relations this week.
Hours before a 25 % tariff began to punish the largest commercial partner in America, Mr. Trump agreed to delay for one month. There are no commercial tasks to divide the details. Instead, the president relied on direct individual calls with the leaders of Mexico and Canada to conclude deals.
On the other hand, they agreed to intensify the limits enforcement initiatives they already started. On the contrary, the third largest trading partner in America-China-has criticized definitions and other measures when Mr. Trump began a 10 % smaller increase in the duties against it.
Why did we write this
In postponing some threatened customs tariffs, but not others, US President Donald Trump cultivates the uncertainty of companies and consumers in his country and abroad. Its tactics can record some victories, but also with great risk.
It is not clear that he really got a lot of concessions from Mexico and Canada. However, such tactics are expected to be used again.
“Trump will continue to use customs tariff threats to get a few victories, and small victories in his conflict with Mexico on the three main topics” for migration, security and trafficking, says Victor Gomez Ayala, professor of macroeconomic economy at the independent technology institute in Mexico.
“It is clear that this uncertainty will not disappear,” says Dan Kelly, President of the Canadian Federation of Independent Business. “We will have to sleep with one eye open over the next four years.”
At some point, the tactic can be alienated even close allies such as Mexico and Canada. Like China, they may call Mr. Trump a trick with their own tariffs. Immediately after a 10 % American tariff entered Tuesday on all goods imported from China, Beijing announced that starting February 10, a 15 % tariff will be imposed on certain types of coal and liquefied natural gas from the United States and 10 % tariffs on crude oil, Agricultural machinery, large motor cars, and captured trucks.
The reaction of the reaches against TAT threatens to prepare the US-Chinese trade war 2018-2019. A trade war in North America will strike the economies of the United States, Canada and Mexico more difficult. High risks (see the graph below).
Definitions act as a tax on importers. As a result of the definitions of the new China, an American company buys Chinese -Chinese smartphones, for example, will have $ 1,000 to pay the federal government by 10 %, or $ 100. The company absorbs either this additional cost or passes it to consumers in the form of phones with a higher price.
The new tariffs against China will fly only about 0.1 % US economic growth and raise federal revenues (and US tax) by about 241 billion dollars, according to the Tax Corporation.
Some analysts believe that consumers will not notice much of the high prices, but they will pay more for Chinese electronics, machinery and games. In the end, companies can adjust their supply chains to manufacture or buy elsewhere, but the process is very slow in general. Despite seven years of high definitions and short -term trade war, the United States still buys hundreds of billions of Chinese goods every year.
Interlocking economies
If the separation of China is difficult, then doing the same thing with Mexico, and Canada will require more effort. This is because many industries have depth interlocking operations, wood, fishing to paper and other manufacturing, says Christine Vikasi, a political world at Maine University.
“It will really take it … to re -create supply chains in many of the large basic industries that we see, especially in the Middle West,” she says.
Take cars. The car part can move across the United States, Canadian and Mexican six times or more with the addition of the council’s value. In Mexico, auto parts of low -wage workers and assembly of cars directed almost exclusively to the American market.
However, the head of comprehensive definitions threatens Trump by imposing it in one month that does not take into account this backward integration. According to one of the estimates, imposing fees on US car manufacturers by 25 % at a time will enhance a part or car in the United States the average price of a new American car by about 3000 dollars.
In all, the Peterson International Economy Institute estimates that the tariffs of 10 % on China in addition to the 25 % definitions on Mexico, and Canada will cost American families more than $ 1,200 annually in prices rise in everything from a newly created house to gasoline.
The losses can be greater in the rest of North America. The Canadian Chamber of Commerce said, in a recent estimate, that the tariff of Mr. Trump will cost Canada’s consumers more than $ 1300 per person annually.
The customs tariff reduces the demand for the manufacture of vehicles by more than 15 % and agriculture by 8 %, and an economist at Calgary University of Trevor Tombby estimates. He says that the precise influence is difficult to predict, because “we have never passed in recent times through the shock of commercial policy.”
Mexico is especially weak. After the American -Chinese trade war, multinationals operating in China varied by opening new operations in Mexico. They started exporting to the United States everything from complete cars and semi -conductors to flat -screen TV and Avocado.
But multinationals that have moved to Mexico can also be transferred if US tariffs continue. With about 40 % of its economy dependent on exports (which goes on the vast majority to the United States), Mexico has little influence to negotiate with Mr. Trump. If a 25 % tariff is imposed, the nation faces the risk of reducing the large volume of industrial work and job losses.
Where will the commercial bargain end?
The method of negotiations for the high risks of the president pumps uncertainty in making political and economic decisions. In Monday’s invitation with Mr. Trump, Mexican President Claudia Shinbom Bardo agreed to send 10,000 national guards to patrols in the northern border of Mexico. This is nearly five guards for each mile of the border. On the other hand, she obtained a one -month delay in imposing a customs tariff, and said that a pledge to stop US weapons flow to Mexico.
It is its most clear effort to meet his demands to limit drug trafficking and migrate to the United States in the four months of his position, and her administration says she seized 40 tons of drugs and arrested about 10,000 people in contact with drug smuggling organizations.
Also on Monday, Mr. Trump issued a delay at the last minute for a month on the Kinda tariff. In a call, Canadian Prime Minister Justin Trudeau said that he will implement a border plan of $ 900 million, and he appoints “Ventanil Caesar”, officially recounted drug gangs as terrorist organizations, creating a joint strike force with the United States with the United States
This negotiation on high drama not only maintains the guesses of countries, but also makes it difficult for companies to plan investments. Will definitions be imposed? How long will it continue? The answers will be determined on these questions whether companies are moving – usually a multi -year process of planning and implementation.
“This is the crazy part,” says Hill Uttar, an economist at Greenil College in Iowa,. “The investment does not move like this. … commercial wars are expensive, especially with your neighbors.”
