Reading tea leaves is one of the favorite methods amongst the people in the west for making predictions. The world seems to be engaged today on what new tariffs on America’s neighbours and China would mean for them, the rest of the world, and the people in the US itself. Will it result in triggering an all new regional and global trade war.
US President Donald Trump has threatened imposition of tariffs on Saturday–the 1st of February 2025– of up to 25% on Mexico, 25% on Canada and 10% on China.
As I sit down to write this, it is Saturday the 1st of February in India. Why should India be talking about this? India could be Trump’s next target on tariffs. He has referred to India with epithets like ‘tariff kings’ in the past.
But let’s stick to Mexico, Canada, and China for the moment.
AN IDIOT’S GUIDE TO TARIFFS
Tariffs are import taxes on goods that are produced on foreign shores.
Taxing items coming into a country would result in locals likely buying less of those goods as they become more expensive. This boosts the sale of locally manufactured goods, in turn boosting a country’s economy.
But the cost of tariffs on imported energy really passes on to businesses and consumers, which increases the prices of everything from petrol to groceries.
In the case of America, close to 40 percent of crude that runs through US oil refineries is imported, and the vast majority of that comes from Canada.
President Trump’s animosity towards his neighbours goes beyond oil.
One: according to a statement from White House’s press secretary Karoline Leavitt the tariffs really are in response to “the illegal fentanyl that they have sourced and allowed to distribute into our country, which has killed tens of millions of Americans”.
What’s fentanyl?
It is a potent synthetic opioid drug. It is approved by the Food and Drug Administration for use as an analgesic–pain relief purposes in hospitals–and and anesthetic. Reports suggest that it is approximately 100 times more potent than morphine, and 50 times more potent than heroin as an analgesic.
Two: a large number of undocumented migrants that have been allowed to make their way across US borders from both Canada and Mexico.
Three: the only economic reason. In order to meet the trade deficit conserns with its neighbours.
THE TROUBLE WITH CHINA
During his election campaign, Donald Trump had threatened to hit Chinese-made products with tariffs of up to as much as 60 percent.
The volume and value of US goods imports from China has flattened out since 2018. This can be attributed to the fact that a series of escalating tariffs had been imposed by the Trump administration on Chinese good during Trump’s first term in office.
Chinese officials have been warning against protectionism, even as Trump’s return to the presidency renews the threat of a trade war between the world’s two biggest economies.
China, Canada and Mexico happen to be the top US trading partners, accounting for 40% of the goods imported into the US in financial year 2024-25. Little wonder then that fears are on the rise of a major trade war as well as a big push up on prices of goods and services in the US. The US Fed has been on its wit’s end fighting inflation over the last few years.
Canada and Mexico have responded with statements alluding to retaliatory measures of their own. For the US it would been more inflation.
If this much were not enough, President Trump has also threatened imposing tariffs on the European Union in the times to come. According to him, the EU bloc has not treated the US well in the recent past.
The world was living in extremely testing times before President Trump took office for a second term. The times have just gotten even more interesting. Time to decant the teacup…
Reading tea leaves is one of the favorite methods amongst the people in the west for making predictions. The world seems to be engaged today on what new tariffs on America’s neighbours and China would mean for them, the rest of the world, and the people in the US itself. Will it result in triggering Business Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
