Subscribe
Donald Trump has made a new announcement anticipating one of the first decisions – if not the very first – he will make as soon as he takes office in the White House on 20 January. He did it once again through social networks, in this case using Truth and not X (formerly Twitter) by Elon Musk. In recent weeks other announcements of this kind turned the spotlight on American politics. In particular, the tycoon has already informed and commented extensively on some of the appointments he intends to make once he gets to sit in the Oval Office again. Compared to his first term in office, Trump will try to surround himself with people of absolute loyalty to his design, even if, in some cases, they won’t win the favour of the public. Also, with regard to tariffs, the decision anticipated by The Donald is one that is and will certainly be discussed, so much so that just by talking about it, the international markets have given the first signs of reaction.
THE EXECUTIVE ORDER
The threat issued by the tycoon concerns three countries in particular: China, Mexico and Canada. It has been explained as a form of countering drug and human trafficking through the phenomenon (very present, especially on the border with Mexico) of illegal immigration. The President-elect announced that he would sign an executive order, already on his first day in office, to extend an additional 10% tariff duty on products from China (a duty is already in place and weighs 10% on the final price) and 25% on what is imported from Mexico and Canada. This, the tycoon said via his social accounts, until the trafficking of drugs (especially Fentanyl) and illegal migrants from these countries comes to an end. In this way, President Trump announced that he wanted to hit hard at the countries that he currently considers to be most responsible for these two dangerous phenomena. Naturally, this position could not go unnoticed. In addition to the financial sector already in turmoil, as we will see below, analysts also did not fail to weigh in with their comments. In fact, this move would, in a very short time, risk putting a strain on the global supply system, also imposing enormous costs on companies – and there are so many of them in the United States – that rely on trade relations with the economies of the countries subject to the new duties announced by Trump. Costs that, it seems superfluous to say, will affect the entire supply chain all the way to the pockets of US citizens and beyond. A situation that in the medium term could become more difficult to sustain, with the GOP electorate siding with those who have promised not to go back to demanding economic efforts from citizens. Obviously, this announcement made several commentators and reporters jerk in their chairs, but the new President’s intention may be deeper.
THE FREE TRADE TREATY AND THE DRAGON
Among the possibilities put forward in this context, one sees the announcement and the threat that the new tariffs will be implemented as early as January 20 with an executive decree by the President, as a way to review the North American Free Trade Agreement. This announcement, in fact, seems to be in stark contrast to the USMCA, the free trade treaty between the US and its two neighbouring countries, signed by Trump himself in 2020 when he was still in the White House. The most accurate and commercially shocking announcement made to date since election day could, therefore, be a political move by the tycoon. The date included in the treaty to initiate the review of its contents, in order to change it, is set for July 2026. The announcement of tariffs against Mexico and Canada could, therefore, be a way of applying pressure to obtain an earlier and possibly more favourable renegotiation of the terms for the US economy. On the eastern front, on the other hand, Trump’s position not only has its basis in the trade and economic dynamics between the two superpowers, but also has ideological reasons. Much of his campaign, in fact – almost always when it came to foreign trade and international policy – focused on the dynamics of countering the advance of Beijing’s economy.
THE NUMBERS BEHIND THE ANNOUNCEMENT
It only takes a few calculations to realise how, behind such an announcement, there must be a precise strategy on the part of the tycoon, and not just an ideological or moral stance against the phenomenon of illegal immigration and drug trafficking. On the other hand, it cannot be forgotten that trade with the three countries covered by Trump’s announcement alone is worth more than a third of what the United States exchanges with the rest of the world, including the European Union. On the occasion of Trump’s announcement, the Italian economic newspaper Il Sole 24 Ore relaunched some interesting data that can give an even greater understanding of the value of trade with the three countries that are at risk of being covered by the new duties. Just think of the impact these could have on the trade with Mexico, given that more than 83% of the products exported from this country ends up in the US market. A figure that for Canada stands at 75% of exports. Naturally, after Trump’s posts, the US dollar strengthened against the currencies of Mexico, Canada and China. In particular, the peso reached its lowest level in a year, while for the Canadian dollar the thud touched a low reached only in May 2020. Of course, Trump’s threats, as he is certainly well aware, also had repercussions on the international stock markets. In Europe there was a drop, a clear sign that the President-elect’s announcements have held the transitions on the old continent in check. Even EU High Representative Josep Borrell, on the sidelines of the G7 summit in Fiuggi, after US President-elect Donald Trump’s announcement of new tariffs on China, Mexico and Canada, emphasised that this ‘is not good news’. He added that these decisions ‘will not help the world economy and will create many difficulties’.
THE ISSUE OF FENTANYL AND IMMIGRATION
However, one must consider the issues that President Trump brought up as justification for this decision: illegal immigration (mainly from the southern and northern borders) and drug trafficking (from Mexico and China), with a focus on Fentanyl, a synthetic drug that has quickly become one of the top substances to cause overdoses in the United States. The situation has greatly irritated Beijing, especially the measures taken to combat drug trafficking after the agreement reached in 2023 between US President Joe Biden and Chinese President Xi Jinping. Indeed, Chinese diplomacy has been quick to point out that there has been progress in bilateral cooperation to stop the illicit trade in chemicals used to synthesise drugs. Some concrete initiatives, evidently not enough for Trump, had already been announced last June with China’s chief prosecutor urging law enforcement agencies to focus on drug trafficking, while Beijing and Washington spoke of a joint investigation into this phenomenon, which in August would lead China to tighten controls on three chemicals essential for the production of Fentanyl. On the illegal immigration front, the tycoon pointed the finger at Mexico and Canada, speaking of ‘ridiculous’ borders and stating that the duties he announced could remain in place until these phenomena cease.