After much dithering, President Donald Trump’s administration announced the date on which 30 percent tariffs will be imposed on most goods entering the United States from Mexico and Canada. T-Day is set for April 1 when some retaliatory measures from its neighbors will also take effect.
Americans are now bracing for what they expect will be higher prices on imported goods. So far, the US media have focused mainly on cutesy examples like tequila, avocados and beer, so there is a tendency to underestimate the effects of the tariffs. However, American households will inevitably be hit hard well beyond their alcohol and groceries.
Indeed, imposing tariffs in a region where trade is so deeply integrated is a recipe for disaster. Let us take the case of US-Mexico relations. Mexico is the largest commercial partner for the United States with more than $1.2m worth of goods passing across their shared border every single minute. Yet Mexico’s economic significance is underestimated at every turn because the country is constantly being portrayed to the American public as an impoverished failed narco-state. Indeed, this depiction is exactly the one Trump needed to invoke the emergency powers required to trigger these tariffs.
The US president couldn’t be more wrong when he says the US doesn’t need Mexico. He’s so wrong that by implementing the tariffs, not only will he trigger inflation – because Americans will pay more for the goods the US doesn’t produce – but he will also undermine the very industries he wants to protect. Whatever retaliatory measures the Mexican government decides to pursue will make this even worse for US consumers and various industries.
Even some of the products that the rather superficial analyzes on US media focus on – such as beer – demonstrate just how disruptive this irrational move will be. Mexico is a big producer and exporter of beer, but to maintain this industry, it buys 75 percent of US barley exports. Any disruption in beer production in Mexico due to lower demand from its biggest buyer – the US – will inevitably hit US barley producers. The situation is similar for thousands of other products that depend on cross-border supplies.
A Trump supporter might rebut: “Suck it up and drink American. Disrupted supply chains will recover.” This is easier said than done, but assuming it were possible to relocate everything to the US, Americans would still be faced with a disastrous situation.
Ultimately, Trump is right about one thing. When it comes to North American trade, one side has been subsidizing the other. But it hasn’t been the US subsidizing Mexico or Canada, as he says. It has been Mexican workers who have been subsidizing the US, its corporate profits and its consumers.
