By AFP
January 25, 2025
Donald Trump campaigned on a platform of tariffs and import duties - Copyright AFP/File Angela Weiss
Beiyi SEOW with Erwan LUCAS
President Donald Trump’s threats to impose punishing tariffs on Canada and Mexico may be part of a strategy to gain leverage ahead of new negotiations on a regional trade agreement, experts said.
Hours after his inauguration on Monday, Trump told reporters he may implement a 25 percent levy on all Canadian and Mexican imports starting February 1. He had previously promised to sign documents imposing the duties first day of his new term.
Trade experts note that while Trump may make good on his threat, the posturing could be a way for Washington to gain an upper hand ahead of a 2026 deadline to review the United States-Mexico-Canada Agreement (USMCA).
“What’s going to happen here is, it’s just going to create a lot of pressure on the parties to come back to the negotiating table,” said Kathleen Claussen, a law professor at Georgetown University.
Trump inked USMCA in 2020, during his first term. As recently as last year he called it “the best trade deal” ever made.
But on the 2024 campaign trail and since winning the November election, he has taken aim at North American trade, insisting the United States is getting a bad deal.
Mexico’s auto industry has been a target, with Trump threatening 200 percent tariffs on its vehicle imports.
For Canada, Trump’s recent main gripe has been a trade deficit.
“We’re not going to have that anymore,” he told leaders at the World Economic Forum this week.
– ‘Renegotiation’ –
The United States imposing 25 percent tariffs on Canadian and Mexican imports would be “equally incompatible” with USMCA and World Trade Organization rules, said Columbia Law School professor Petros Mavroidis.
“No one can unilaterally raise duties that have been capped unless there is a good reason to do so,” he told AFP.
When Trump initially made the tariff threat after winning the election, he said the duties were necessary to force Canada and Mexico to stem the flow of migrants and illegal narcotics like fentanyl into the United States.
Canada has countered that less than one percent of undocumented migrants and fentanyl that enters the United States comes through its northern border.
Mavroidis said that under existing trade rules, Washington would have to prove its case on drugs, for example, before retaliatory measures could be justified.
Trade deficits are likely Trump’s primary target, Mavroidis added, noting that China and the European Union — which also have notable trade gaps with the United States — have also faced tariff threats.
“In my view, he does what he does because he firmly believes that through tariffs he will reduce trade deficits and will claim victory to the American people,” said Mavroidis.
Arturo Sarukhan, a former Mexican ambassador to the United States, said Trump may be trying to get ahead of a USMCA review in July 2026.
“I think that he’s trying to force not a review, but a renegotiation,” Sarukhan said.
– Autos in focus –
Rather than reopening the full agreement, Sarukhan believes Trump has the rules on auto parts and vehicles in his sights.
North America’s automobile industry is highly integrated, with vehicle parts crossing borders between the three countries several times during the manufacturing process.
Sarukhan suggested Trump wants to address the issue of electric vehicles and China’s potential business footprint in Mexico.
While China does not make a significant number of vehicles in Mexico, the possibility that it could do so or that it could export intelligent components for cars to US buyers has raised concern in Washington, he noted.
It remains unclear if Canada and Mexico will agree to renegotiation. Analysts note both are major importers of US goods.
About half of Canada’s imported goods came from the United States in 2023, according to a Congressional Research Service (CRS) report.
Canada has also been the biggest supplier of US energy imports including crude oil, natural gas and electricity, the CRS added.
Mexico is a key trading partner as well, ranking second behind China among suppliers of US imports, a separate 2023 CRS report said.
But Sarukhan warned of “a real asymmetry of power” between Mexico and the United States, in particular due to its dependence on exports of US natural gas.
For these ‘Made in America’ CEOs, Trump’s tariffs won’t change the game
ByAFP
January 28, 2025
Tariffs under US president Donald Trump loom as an obstacle for China's economy.
— © AFP STR
Thomas URBAIN
Entrepreneurs running small and medium-sized businesses that manufacture and source exclusively in the United States have learned to cope with globalization, and do not expect major changes from Donald Trump’s tariffs threats.
The US president is threatening several key trade partners with potential tariffs, aiming to drive corporations to shift manufacturing to the United States to avoid them.
“I’ve heard it for 25 years, manufacturing coming back to the US,” said Stephen Liquori, the chief executive of clothing maker Goodwear, likening the recent attempt at so-called “reshoring” of supply chains to “a little speck of sand.”
“It’s nowhere near the scale of what would turn things around,” he told AFP.
Hundreds of thousands of textile jobs disappeared after China joined the World Trade Organization in 2001 and export quotas were lifted.
In 1999, “we used to have seven factories making goods for us,” Liquori recalled.
“Every one of those factories is gone today,” he said, adding that the closures had forced him to find new suppliers through the Americas Apparel Producers Network (AAPN).
Far from the world of “fast fashion,” Goodwear has found its niche in offering quality products at “a reasonable price,” Liquori said, noting that the company’s T-shirts, which start at $36, can last for more than two decades.
“We’ve had some customers for 25 and 30 years, and so the loyalty, the level of trust, if you will, for deliveries and quality, all those things keep a relationship healthy,” he said.
“As long as we’re doing the right thing, we’re going to get the business.”
American consumers may have to pay more for their clothes if Trump follows through on his threats to impose additional tariffs.
Donald Trump has threatened tariffs on China, the European Union, Mexico and Canada since taking office – Copyright AFP Mandel NGAN
Trump “is not going to solve inflationary pressures anytime soon,” Liquori said. “In fact, he’s going to add to it, unfortunately.”
– Relocating production –
This concern is shared by Shuyler Mowe, head of Nicks Handmade Shoes, based in Spokane, Washington, which hand makes high-quality utility shoes from American leather for firefighters among others.
“I think maybe in the short term, it could be helpful,” he said of Trump’s tariff threats, adding that they could drive inflation in the long run and raise production costs.
As for Trump’s stated ambition of bringing production back home, Mowe warned there is little to expect in the short term.
“It’s not quite as simple as just starting a factory,” he said. “If we are serious about having more domestic manufacturing capacity, it’s going to take years.”
“There’s really only four or five tanneries left in the United States…that make what I would call really good footwear leather,” he added, referring to facilities where leather is produced.
Liquori from Goodwear agreed: “We’re kidding ourselves if we ever think we’re going to make iPhones… We can’t even make Nikes here.”
– ‘Made in the USA’ –
Jim Barber, of toy maker Luke’s Toy Factory, said that he is contacted “every couple of months” by businesses wanting to move their manufacturing back to the United States.
“There are plenty of people that can do these things,” said Barber, whose company is named after his son Luke. “But you’re going to pay more money.”
This could be something of a paradigm shift for large companies used to squeezing costs by offshoring their production to satisfy their shareholders.
But Barber doesn’t expect consumers to be willing to pay more.
“There’s a point of view among people that if you make something in the US, you can charge more for it,” he said. “That’s not true. Anyone who tells you that is not studying the market.”
“It’s these companies own fault, because they have trained people to think this toy costs this much,” added the Connecticut-based executive.
“There’s definitely a subset of the customer base that’s very passionate about making sure things are ‘made in the USA,'” said Shuyler Mowe. “I get the sense of that as maybe not as important as it was even like 10 or 15 years ago.”
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