When it comes to trade policy, the second President Trump will likely be even more contentious, just like the first. President-elect Trump didn't hide his cards during the campaign. bragged about imposing high tariffs on Chinathen raised its hand by proposing a flat tariff on all imports from the United States.
In fact, two months ago, President Trump mentioned tariffs:the most beautiful words” Some argue that the president will use these proposed tariffs as a bargaining chip, but in a world where supply chains play a critical role, U.S. trading partners, whether friendly or unfriendly, Some point out that they may start looking for more reliable alternative partners.
The president's most recent trade policy was a threat to raise tariffs on Canada and Mexico to 25% to control illegal immigration and the movement of drugs across the U.S. border. Both countries have already responded. Canada's response was more modest, but Mexico threatened to impose retaliatory tariffs.
These developments are all the more concerning, especially given the approaching USMCA review schedule in 2026. The renegotiation of the original trade agreement, NAFTA, took nearly three years from start to finish and was difficult to watch given the important economic ties between the three countries. countries. Canada and Mexico remain at the top of the list. Top 2 trading partners Its importance to the United States and the fragile Sino-American relationship has increased.
Both President Trump's and President Biden's actions toward China generated reciprocal actions by China. Most recently, China declared a ban on the export of critical minerals, which are key raw materials for high-tech industries, in response to additional export restrictions imposed by the United States on its chip industry. Years of U.S. actions, particularly toward China's chip industry, have increased China's motivations. self-sufficient There has been a lot of press coverage in the semiconductor industry. important progress In Chinese industry, despite US actions.
China's recent embargo on critical mineral exports highlights the importance of having alternatives, especially if the United States intends to continue its tariff policy toward China, and at least one USMCA partner has already addressed this issue. We are working on this.
For example, after the passage of CHIPS and Science Act in the United States, Canada; launched The $1.5 billion Canada Critical Minerals Infrastructure Fund has been established to support the 2022 Critical Minerals Strategy with a budget of approximately $4 billion. of joint effort The agreement, established in 2020 to support $95.6 billion in bilateral trade, is another component of a relationship that has flourished under trade agreements.
Another of President Trump's campaign promises is to develop oil and gas production in the United States, and Canada and Mexico are important partners when it comes to importing and exporting energy. For example, in 2023, Mexico was the largest export market for U.S. petroleum products. As a major trading partner, the country will be critical to the success of President Trump's energy policy.
And then there's the auto industry. President Trump and his then-chief trade negotiator, Ambassador Robert Lighthizer, were very enthusiastic about new auto provisions during NAFTA renegotiations, and recent reports suggest that report“Automakers and component suppliers are investing billions of dollars in new production, and the U.S. International Trade Commission (USITC) is estimating vehicle productivity.” [rules of origin requirements] It has been positive for U.S. jobs, wages, capital investment, production, and profits. ”
These are just a few examples that highlight the importance of the two trading partners to the U.S. economy. If the president's goal is to increase the country's economic growth, jobs, and investment and lower the cost of living for Americans, then keeping friendly countries like Canada and Mexico on his side rather than against them is a good move. Maybe. The world is becoming increasingly uncertain.
Dr. Pinar Chebbi Wilbur is Chief Economist and Executive Vice Chairman of the U.S. Capital Formation Council.
