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Bluff or existential threat? As Trump vows tariffs on all imports from Canada, Mexico and China, leaders wonder if he's serious

Kate Linthicum and Patrick J. McDonnell, Los Angeles Times on

Published in Political News

MEXICO CITY — Bluff? Negotiating tactic? Or existential menace?

World leaders, economists and investors are struggling over how to view President-elect Donald Trump's repeated threats to impose broad tariffs on imports to the United States.

That question took on new urgency this week when Trump announced that he would hit the top three U.S. trading partners hard on his first day in office.

In a post Monday on his Truth Social platform, Trump said he would levy a 25% tariff on goods from Canada and Mexico "until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this invasion of our Country!"

In another post, Trump threatened a 10% tariff on all goods from China, which he blamed for not doing enough to stop clandestine manufacture of the deadly synthetic opiate fentanyl — which U.S. authorities say is mostly produced in Mexico from chemicals imported from China.

Trump's posts were the most serious indication yet that he intends to follow through with his campaign pledge to impose sweeping tariffs — a move that economists warn could wreak havoc on global supply chains and hurt U.S. companies that rely on cross-border trade.

Global markets, at least, appeared to take Trump's latest threats seriously, with the currencies of Canada and Mexico falling against the dollar.

At the same time, others held out hope that Trump may be using the threat of tariffs as a negotiating tactic before he returns to the White House.

"There's just a tremendous amount of uncertainty right now," said Sofía Ramírez, an economist who heads México, ¿cómo vamos?, a research group. "No one knows what's going to happen."

The anxiety is especially acute in Mexico, whose economy is largely built on its proximity to the massive U.S. consumer market. Mexico sends 83% of its exports to the U.S.

Economists warn that even a small increase in tariffs on Mexico's goods could lead to a rise in unemployment and poverty there — and prompt more people to migrate to the United States.

Mexican President Claudia Sheinbaum had been saying for weeks that officials were planning to meet with Trump's team in a bid to dissuade him from proceeding with tariffs. But her government was clearly blindsided by his announcement.

At her news conference Tuesday, Sheinbaum avoided direct criticism of Trump but warned of retaliatory levies by Mexico on U.S. products entering the Mexican market.

"One tariff would be followed by another in response, and so on until we put at risk common businesses," she said.

Mexican officials plan to rally support among both U.S. and Mexican investors and industrialists to make the point that Trump's tariff plans would hurt U.S. businesses and consumers. She singled out General Motors, one of a number of U.S. automotive companies producing vehicles in Mexico.

Sheinbaum said she expects her government to reach an agreement with the U.S. But it was unclear what more concessions Mexico can give when it comes to Trump's demands that it curb the illegal flow of narcotics and migrants to the United States.

Reading from a letter she planned to send to Trump, Sheinbaum pointed out Mexico's efforts to keep migrants from crossing the U.S. border, and said illegal border crossings have plummeted in recent months.

While she said Mexico is taking steps to combat fentanyl smuggling, she laid blame for the crisis on the U.S.

"Fundamentally it is a public health and consumption issue within your society," she said.

Sheinbaum also noted the illegal flow of arms from the U.S. into Mexico: "You must be aware that 70% of the illegal weapons seized from criminals in Mexico come from your country. We do not produce the weapons, we do not consume the synthetic drugs."

Mexico became the United States' leading trading partner in 2023, with almost $800 billion in exports and imports.

Like Mexico, China and Canada also responded quickly to Trump's tariff announcement.

"The economic and commercial cooperation between China and the United States is of a mutually beneficial nature," the spokesman for the Chinese Embassy in Washington, Liu Pengyu, wrote on X. "No one will win a trade war."

Canada released a statement emphasizing the closeness of its relationship with Mexico, while Prime Minister Justin Trudeau called Trump hours after he announced the tariffs to talk about trade and border security.

Mexico, China and Canada purchased more than $1 trillion in U.S. exports in 2023 and sent almost $1.5 trillion of goods and services in the other direction.

 

Experts said Trump can unilaterally impose tariffs by claiming a national emergency, though he would almost certainly face legal and political challenges.

It's unclear how Trump could impose tariffs without violating the United-States-Mexico-Canada trade agreement that he helped negotiate during his first term. Mexico and Canada could challenge tariffs under a dispute resolution mechanism that is part of their agreement. They could also lodge complaints with the World Trade Organization.

And on Tuesday, 10 House Democratic lawmakers representing Washington, California and other states introduced the Prevent Tariff Abuse Act, a bill to stop the president from imposing tariffs without congressional approval.

But the most forceful pushback would probably come from the business community and financial markets.

Auto manufacturers have spent decades building up complex and cost-efficient supply chains in which parts are transported back and forth across North American borders, and new tariffs will cause significant disruptions and almost certainly price increases to consumers.

The ripple effects of trade skirmishes could lead to higher inflation and higher interest rates, risking a pullback from investors and sliding stock markets. Trump has often spoken of the stock market as a key barometer of his performance.

"He wants his tariffs, but he doesn't want to sink the market," said Dean Baker, a senior economist at the Center for Economic and Policy Research in Washington. "He doesn't want to tank the market, he doesn't want to be unpopular, he doesn't want inflation to go up. If the market starts to fall, he'll listen to that."

Given those economic stakes, some have questioned whether Trump is simply using tariffs as a negotiating tactic.

In his first term, Trump threatened to impose import levies against Mexico if it failed to crack down on U.S.-bound migrants. Mexico quickly caved, dispatching troops to turn back migrants headed for the United States.

Trump's pick for Treasury secretary, billionaire hedge fund manager Scott Bessent, has described tariffs as a powerful means of negotiation.

"Tariffs are ... a useful tool for achieving the president's foreign policy objectives," he wrote in a recent opinion piece for Fox News. "Whether it is getting allies to spend more on their own defense, opening foreign markets to U.S. exports, securing cooperation on ending illegal immigration and interdicting fentanyl trafficking, or deterring military aggression, tariffs can play a central role."

He dismissed warnings by many economists who say that tariffs could trigger a trade war and inflation.

It's unclear what Mexico could give in negotiations.

Since January, Mexican troops and agents have been detaining record numbers of migrants from Central and South America, Asia, Africa and elsewhere, arresting them on roads and in safe houses; pulling them from vehicles and freight trains; and catching them at airports and bus stations. Most are shipped back to southern Mexico, where many begin the trip north anew.

However, experts said it would be impossible for Mexico to stop the flow completely along an almost 2,000-mile long border, much of which remains without barriers or a large presence of U.S. agents.

Trump's demands "show a fundamental disconnect from the realities of the border, of immigration," said Adriana Jasso, coordinator of the U.S.-Mexico border program in San Diego for the American Friends Service Committee. "This migration is not something that can be just stopped in 15 days, in two months, or in years. It's a very complex problem, related to poverty in other countries and the needs of people seeking a better life."

Similarly, it is unclear what concessions Mexico could make on the issue of security.

Critics said it was unrealistic to expect Mexico to shut down billion-dollar trafficking organizations that have been expanding their territories, rackets and power for years.

Mexican trafficking organizations are also among the largest employers in Mexico, their payrolls bloated with gunmen, lab workers, logistics experts, and corrupt cops and officials.

"It's not realistic," Mike Vigil, former head of international operations at the U.S. Drug Enforcement Administration, said of Trump's demand. "What he is implying is that Claudia Sheinbaum and the Mexican government can just say: 'We're going to shut down drug trafficking now.' It doesn't work that way."

_____

(Linthicum reported from New York and McDonnell from Mexico City. Staff writer Don Lee in Washington and special correspondent Cecilia Sánchez Vidal in Mexico City contributed to this report.)

______


©2024 Los Angeles Times. Visit latimes.com. Distributed by Tribune Content Agency, LLC.

 

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