The Trump Trade War
Author: Greg Valliere
November 26, 2024
DONALD TRUMP ISN’T KIDDING — in one harshly worded statement last night, he has transformed trade relations — for the worse — between the U.S., Canada, Mexico and China.
TRUMP WANTS NEW TARIFFS to take effect on Jan. 20, the date of his inauguration. The scope of his tariffs — and the threat of even more — undoubtedly will lead to litigation and threats of retaliation.
EVEN IF THERE’S NO DEAL UNTIL SUMMER — or no deal at all — the stunning sweep of Trump’s tariffs will plunge global trade into deep uncertainty. For the financial markets, which seemed giddy last week, this is a bombshell.
WE TALKED WITH TRADE EXPERTS last night who think Trump is itching for a fight. He wants strict curbs on illegal immigrants entering the U.S., and he wants the death penalty for those who ship fentanyl from China to Mexico to the U.S.
ONE ANALYST THINKS TRUMP WILL SEEK EVEN HIGHER TARIFFS than he threatened last night. His trade tariffs against China — Trump’s primary target –almost certainly will rise further.
TWO KEY ISSUES: Huge new tariffs almost certainly will lead to retaliation, and they almost certainly will lead to inflation as key products — such as oil from Canada — are hit with new tariffs.
THE SCOPE OF IMPORTS AND EXPORTS FROM Mexico includes cars, machinery, electrical equipment, food and beer. Canada supplies oil and gas, machinery and parts and much else. The United States relies on China for electronics, particularly phones, along with toys, furniture and plastics.
ECONOMISTS WARN that tariffs could affect grocery prices, which were a key issue in the U.S. election. Mexico supplied more than half of U.S. fresh fruit imports in 2022, according to the Agriculture Department.
WE’RE ENCOURAGED that Canadian officials, including Prime Minister Justin Trudeau, talked extensively with Trump yesterday, undoubtedly seeking tariffs lower than the 25% that Trump is seeking.
HOW THE TRUMP TARIFFS could affect negotiations on a new U.S.-Mexico-Canada treaty remains to be seen. The economies in all of the affected countries will be under a cloud of uncertainty for many months to come.
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