Trump’s tariffs are already bearing fruit
Day one of the Trump tariff threat, which comes into force Tuesday, and the President has already scored a massive win. Mexico blinked.
Global reaction to the prospect of tariffs slapped on China, Canada and Mexico, probably the EU, has been uniformly negative; only the UK, by dint of Trump having holidayed here, feels sheepishly off the hook. Canada threatens retaliation; hockey fans booed the Star Spangled Banner in Ottawa.
Trump, said the commentators, had gone mad, turning the clock back to the isolationism of the 19th century.
But, lo, what is this? The president of Mexico, a grand lady in her sixties who puts one in mind of Lucille Bluth, delivered a nervous press conference at which she revealed she had spoken with Trump and, following a frank exchange of opinions, the tariffs will now be suspended for a month.
Why? Because Mexico has agreed to a series of migration and narcotics agreements that includes sending 10,000 guardsmen to patrol the border.
Hallelujah.
This is in-line with a separate statement by Kevin Hassett, Trump’s top economic advisor, to the effect that the administration is not pursuing a trade war but “a drug war”. The United States wants to stop the flow of fentanyl and criminals across its southern and northern borders. Help it to do that and, it would seem, the tariffs become magically negotiable.
Hopefully markets will now rally; S&P and Nasdaq have regained some earlier losses.
In a column this morning, I asked if Trump’s tariffs were about “revenge” or “revenue” – that is using the threat of trade barriers as a foreign policy tool or as part of a project to shift America decisively away from imports. If Mexico sets a pattern – and we’ve yet to see what plays out with Canada – then we have our answer. It’s about coercion, not economic revolution. Hassett used the word “leverage,”
No doubt, the world will breathe a sigh of relief. It appears Trump is playing brinkmanship, creating a crisis to force other nations to respect the US and adjust their trade/policing policies. It’s not nice. It’s going to cause some short-term pain.
But it’s not irrational either, and if the price for continuing to access US markets is helping it to fight drugs, reduce immigration, spend more defence and stop cheating in trade – are these demands so unreasonable?