Explanation
President Donald Trump faces the challenge of imposing tariffs on Mexico and Canada to protect China from using them as a backdoor to the United States, while also supporting the terms of the US and Mexico-Canada Agreement (USMCA).
Initially, Trump imposed tariffs on Mexico and Canada in response to concerns that the Chinese Communist Party (CCP) was using these countries to bypass US trade restrictions. On February 1, he signed an executive order to implement 25% tariffs on all goods from Mexico and Canada, reducing the 10% tariffs on Canadian oil and energy exports.
These tariffs were originally set to take effect on February 4th, but were postponed for a month after negotiations. In retaliation, China, Canada and Mexico have announced plans to impose counter-offence on US goods. After further discussions with Mexican and Canadian leaders, Trump announced additional moratoriums on several US tariffs in both countries.
However, the increasing differences in China’s policy have strained our relationship with our allies, putting the US and Trump in an enviable position that they must undermine national security to maintain their alliance.
Since his first term, Trump has imposed serious tariffs on China, citing a long list of unfair actions by the administration. The main concern is the US trade deficit, where more China exports to the US than China imports in return. This imbalance was partly due to China’s increased tariffs on US goods, even before the start of the trade war. In January 2018, China’s average tariff on US exports was about 8%, while the US tariff on Chinese products in 2017 was 3.1%.
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Apart from the trade deficit, Trump is also concerned about the theft of intellectual property and technology, with the FBI identifying China as the world’s worst offender. In the context of US-China competition, particularly in the high-tech sector with companies like Huawei, tariffs were seen as a way to enhance military capabilities and limit access to critical technologies that could provide economic benefits.
Furthermore, they hope to increase investment and manufacturing within the US as European and Asian companies are still looking to access the US market. The price increases experienced by Americans are the costs of increasing foreign investment in the US, expanding US manufacturing, fighting fentanyl, and reducing taxpayer money flows.
Canada and Mexico generally have loose policies on China and immigration. This has given China access to the US over the past decade. Mexico and Canada lamented the strengthening of policies and closing these backdoors, but were slow to act. However, in late February, Shaynbaum’s administration proposed that Mexico coincided with China’s US tariffs, rather than the US imposed on Mexico. The move aims not only to avoid US tariffs on Mexico, but also to counter the influx of cheap Chinese products, especially counterfeit products.
Speaking at the Economic Club in New York on March 6, Bescent said it aims to strengthen Trump’s position and create a more equitable global trading system. It rewards innovation, security, legal stability and economic resilience, not wage control, currency manipulation, intellectual property theft or excessive regulation. He argued that “access to cheap products is not the essence of American dreams.”
The views expressed in this article are the views of the authors and do not necessarily reflect those of the epoch era.
