T is for Tariffs
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“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” reads a tweet from President Trump in March 2018. That philosophy is still in place, but tariff threats seem to be expanding in areas like border security and policy, on top of the focus surrounding deficits and unfair trade practices during his first term in office.
Plans for Day 1: “As one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States,” unless the nations “stop this Invasion of our Country” with “Drugs, in particular Fentanyl, and all Illegal Aliens,” Trump wrote on Truth Social. An “additional 10% Tariff” will be applied to all Chinese imports unless the country resolves the “massive amounts of drugs, in particular Fentanyl.” Trump also detailed that, “representatives of China told me that they would institute their maximum penalty, that of death, for any drug dealers caught doing this but, unfortunately, they never followed through,” while “both Mexico and Canada have the absolute right and power to easily solve this long simmering problem.”
The plans follow the appointment of Jamieson Greer as the U.S. Trade Representative, who will be tasked with implementing Trump’s economic agenda and conducting negotiations. Complicating the matter is that many of these challenges deal with security as much as they do trade, which is a sensitive topic for nations like Mexico, which hasn’t yet been able to confront the powerful cartels that control a sizable part of the country and shadow economy. It has also called into question the USMCA trade deal brokered under Trump, which can be reopened for review starting in 2026.
“One tariff will be followed by another in response, and so on until we put common companies at risk,” Mexico President Claudia Sheinbaum responded, as investors sent down shares of major exporters – from Mexico to the U.S. – like Ford (F), General Motors (GM) and Stellantis (STLA). “No one will win a trade war or a tariff war,” Chinese Embassy Spokesperson Liu Pengyu added in a statement. In contrast, Canada’s Prime Minister Justin Trudeau struck a more conciliatory tone, saying, “this is a relationship that we know takes a certain amount of working on, and that’s what we’ll do.”
Brace for impact? Seeking Alpha subscribers are somewhat divided on Trump’s tariff plans, with 61% seeing them as a tax on the consumer and upending trade, and 39% viewing them as necessary to bring back U.S. manufacturing and protect domestic industries (per 1,414 responses to Wall Street Breakfast’s November Sentiment Survey). Any renewed price spikes could threaten to reignite inflation, though others cite the relatively low rate during Trump’s first term despite tariffs on steel, aluminum, solar panels and washing machines, as well as the broad tariffs placed on goods from China. While the latest threats shook some sectors on Tuesday, it didn’t keep the benchmark S&P 500 (SP500) from reaching new highs, notching its 52nd record close of 2024.