- White home spokesperson Karoline Leavitt confirmed on Friday that president Donald Trump decided to impose duties of 25% on goods from Mexico and Canada. 10-percent fee will besides cover all products from China
- “The consequences can be severe for the full continent,” said Kenneth Reinart, an economist and an expert in commercial affairs from George Mason University, Virginia.
- He adds that industry, including the automotive industry, will be most affected by the duties
- Customs duties can affect not only industry, but besides food prices in the US as well as oil
- “Trump may think another countries will not take revenge, but they will. China in particular, the expert concluded
- More crucial information can be found on the Onetu homepage
When before president Donald Trump announced the imposition of a 25% work on goods from Mexico and Canada — the 2 largest US trading partners liable for 30% of all US imports — Not all commentators believed he would carry out his threat.
Although Trump justified his announcements to force neighbouring countries to halt smuggling fentanyl and illegal migration, the “Wall Street Journal” wrote that it was in fact an effort to renegotiate the USMCA Treaty early, an agreement which was a slight modification of the earlier NAFTA agreement. Trump deposed these reports the same day and reiterated his announcement to impose duties on 1 February.
Among the president's amazed actions is prof. Kenneth Reinart, economist and trade expert with George Mason University, Virginia. As he noted in the interview, if Trump actually introduced the announced duties on all products from Mexico and Canada on Saturday, The consequences can be severe for the full continent.
— We all know what kind of changeable and unpredictable president Trump is, but I am amazed at what he's doing due to the fact that the supply chains on the North American marketplace are highly integrated. And the imposition of a 25% tariff on 2 major players in this production system, the North American production system, is simply a very extremist move, says the expert.
The US imposes duties on 3 countries. What does that mean?
As he adds, industry, including the car industry, will be most affected by the duties, which is based on the free movement of parts and components, i.e. intermediate products between plants in those countries.
— This will have a very crucial impact on cross-border trade in intermediate products, which could yet lead to closure of production facilities. The problem with Trump's administration is that they think everything is simply a trade in final products. They do not realize the fact that a large part of trade is intermediate products and that they are the action of global value chains “ Reinert explains.
As he adds, This will translate not only into the prices of final goods but besides the prices of their production. — When you charge tariffs, it's actually a production tax. In many cases it is simply a final consumer tax, but it is besides a production tax, so it increases production costs. And this is bad even for the manufacturing sector, which is expected to support these duties, due to the fact that parts go across the border back and forth, sometimes repeatedly for a given final product and each time they should be taxed, so this accumulates, he adds.
Customs duties can affect not only industry, but besides food prices in the US as well as oil. 20% of oil processed in American refineries comes from Canada. Reinert admits that duties may encourage abroad companies to decision production to the United States, but this process takes years, and the eventual consequence is higher prices for consumers.
Duties on China. ‘This is simply a lower rate’
According to the prof. similar distortions will consequence in duties on Chinese goods, although smaller — 10% tariffs. Reinert pointed out that in practice these duties would mean removing the Most Favored Nation from China, which entails its membership in the planet Trade Organisation (WTO).
— This is simply a lower rate than the 60% initially announced by Trump, but it's inactive a very large tariff increase that will disrupt the global value chains based on China. It will be a large change," Reinert said.
According to the economist, alongside the increase in prices of many products, the consequences will besides be retaliation duties on US producers and exporters.
— He (Trump) may think another countries will not take revenge, but they will. Especially China, which did it in a very meaningful and thoughtful way last time. So the thought that we can win any trade war we start is wrong,” the expert said.
Canada, Mexico and China are the 3 largest trading partners of the United States that are liable for more than 40% of all abroad trade in the USA. Mexico and Canada, however, are peculiarly dependent on exchanges with the US, as America is simply a marketplace for more than 3 quarters of the goods exported by these countries. For China, this proportion is 16 percent.
