By the time this article is published, the U.S. will have an old regime back in power with a new agenda of policies, especially tariff policies.
Donald Trump has promised to increase tariffs by 60% on all imports from China, and 10-20% on imports from other countries. Trump has also threatened tariffs on companies that are considering offshoring their manufacturing. The president also wishes to impose tariffs on Mexico and Canada for them to address migration and drug trafficking, which could potentially violate theUnited States-Mexico-Canada Agreement (USMCA), which replaced the North American Free Trade Agreement (NAFTA) in 2020. Alongside these tariffs, Trump wishes to impose 100% tariffs on any member of BRICS—India, Brazil, South Africa and Russia.
Trump believes that the increase of tariffs could help with diplomatic conversations and help leverage the global stage towards America’s favor. In Congress, protectionist ideology has begun to infiltrate its way into the core of both parties. There have been proposals which propose to eliminate the World Trade Organization benefits towards China, and proposals to invoke “reciprocal tariffs” at the same level as foreign countries assigned to specific products.
President Trump has several motivations on why he would enact tariffs of this scale. There is a hope that with higher tariffs on imported goods, this will lead to an incentive encouraging companies to onshore their manufacturing facilities, since it will become cheaper to make their products more affordable. As well, tariffs would protect U.S. manufacturers. In 2017, Trump imposed steel tariffs which enabled U.S. steel producers to raise their prices and keep operations running without restructuring. This is because there would be less undercutting from foreign companies in the U.S. market. Another hope from tariffs is to weaken China’s position in the global political stage.
However, the World Bank warns that these tariffs could lead towards worsening the global economy. The global economy is expected to flatline this year, with global growth of only 2.7%, the weakest it has been since 2019. The stagnating growth is still at the growth which the global economy can live with, but it will not be enough to help improve living standards in either developed or developing countries.
The prospect of higher tariffs in one of the world’s largest economies has created anxiety amongst the world leaders, since it will be harder to sell in the U.S. The U.S. leads the world, as the largest importers, especially amongst China, Mexico and Canada who all will be impacted by the increase of tariffs. If the tariffs were imposed, this would reduce the global economy by 0.2% if the other leading economies didn’t retaliate, though if they were to then it would affect the global economy in a larger way.
The U.S. is trying to compete with several other leading economies and global powers. Tariffs could be seen as a diplomatic tool to keep certain countries in line, however those countries with just as much stake could decide not to play ball and impose their own tariff on the U.S. This situation could isolate U.S. based companies to only the U.S. market. Either way, the world is watching as the first 100 days take place for the new Presidency.
