Increasing tariffs, from an economic perspective, aims to protect domestic industries, enhance the competitiveness of domestic goods, and improve labor productivity. It seeks to improve trade balances, reduce deficits, and decrease reliance on imports of key industries.
The additional tariffs will impact both Mexico and China, and repeated increases in tariffs will raise costs. Mexico's exports account for 40% of GDP, with 80% going to the U.S. The data shows a heavy reliance on the U.S., making it difficult to quickly adjust through global reallocation. A conservative estimate suggests that Mexico's GDP will decline by 2%, which will be a significant blow.
If an additional 10% tariff is imposed on China, exports will relatively decrease, resulting in significant losses, with Mexico being affected even more severely.
Let's outline the timeline:
In 2016, Trump threatened to impose a 30% tariff on Mexico, leading to a new agreement - the USMCA.
In 2019, Trump threatened to impose a 5% tariff on Mexico, stating that it would gradually increase to 25% unless illegal border crossings were stopped.
However, none of these have materialized.
The original plan was to review the USMCA in 2026, but if it happens earlier in 2025, Mexico and Canada will need to make some concessions in the agreement to avoid tariff increases from the Trump administration.
It may also adopt aggressive strategies in negotiations, presenting unrealistic demands as a starting point to pressure other countries, achieve political goals, and gain political and economic concessions. Tariffs may be seen as a means; if concessions cannot be made, then threats will be implemented to make the other party understand the consequences of refusal.
Changes in U.S. policy will have some impact on global trade, and Europe is no exception. If threats are truly implemented, global trade will decline. Europe may take countermeasures and appropriate concessions, and strengthen ties with U.S. interest groups.
The U.S. tariff increases have a comprehensive impact on the global landscape, reshaping trade and international relations. While the U.S. seeks to protect its industries and improve its balance of payments, it faces risks of industrial restructuring and consumer welfare losses. Affected countries and regions are actively responding to adapt to the new trade order.