The article discusses the potential impact of Donald Trump’s tariff threats on Canada, Mexico, and China. Here are some key points from the article:
Potential Impact of Tariffs
- Tariffs could lead to higher prices for oil and gas in the US, which could have a negative impact on consumer prices.
- The US imports 8.3 million barrels per day (mbd) of petroleum products, with 70% coming from Canada and Mexico.
- If tariffs are applied to oil and gas, it could harm Canadian and Mexican economies, as well as the US economy.
Canada’s Options
- Canada can try to negotiate with Trump to avoid tariffs or reduce their impact.
- The best option for Canada might be to wait and see what the impact of the tariffs will actually be.
- Economic modeling suggests that retaliation by Canada to Trump’s tariffs might make the damage to the Canadian economy worse.
Mexico’s Options
- Mexico can try to negotiate with Trump to avoid tariffs or reduce their impact.
- Mexico has a trade surplus with the US, but it runs an overall trade deficit against all trading partners.
- If tariffs are applied to Mexican goods, it could harm the Mexican economy and lead to higher prices for consumers in the US.
China’s Options
- China can try to negotiate with Trump to avoid tariffs or reduce their impact.
- China has a trade surplus with the US, but it is also vulnerable to retaliation from other countries if it does not comply with Trump’s demands.
- The best option for China might be to wait and see what the impact of the tariffs will actually be.
Countervailing Forces
- The countervailing forces within the US system may manage to assert themselves and prevent Trump from following through on his tariff threats.
- Any suspicion of a sudden leap in gas prices or a more serious stock market sell-off might persuade Trump to reconsider his plans.
Conclusion
- The best option for Canada, Mexico, China, and other trading partners is to wait and see what the impact of the tariffs will actually be.
- Economic modeling suggests that retaliation by countries targeted by Trump’s tariffs might make the damage to their economies worse.
- Companies have managed to keep supply chains going around restrictions in recent decades, so it would be premature to rule out their ability to cope with these tariffs as well.
