Canada, Mexico, China and soon the EU: 5 minutes to understand why Trump draws customs weapons

At the risk of triggering a new economic war, Donald Trump emerges one of his favorite economic levers: customs duties. Canada and Mexico, and to a lesser extent China, became the very first victims of this commercial weapon brandish this Saturday by the American president, who hopes to impose his wishes by thus forcing hands on his partners.

This Saturday evening, Washington therefore formalized to Canada, Mexico and China the increase in customs duties on their products, wanted by Donald Trump. Thus, they will climb 25 % on Canadian and Mexican products, and 10 % on products from China, beyond those already existing. For Canada, this taxation will come into force on February 4.

Why are these countries targeted?

Donald Trump justified these measures by accusing the three countries of playing a role in the fentanyl crisis, a powerful opioid who has been wreaking havoc in the United States for several years. According to him, China exports active ingredients to Mexico then allowing the manufacture of fentanyl by Mexican cartels, which pass it through the border. The American president also criticizes these three nations for not sufficiently fighting illegal immigration to the United States.

What economic consequences?

For the two close American people, this decision could prove to be particularly violent. “In such a scenario, Canada and Mexico can expect to see their GDP fall by 3.6 % and 2 % respectively,” said AFP Wendong Zhang, professor at Cornell University. Beijing also “would suffer from an escalation of the existing trade war, but would benefit at the same time (tensions between the United States), Mexico and Canada, ”he continues.

The American economy would be affected, ensure the experts. “The increase in customs duties triggers loan increases, which generates in fact An inflation that the American consumer will suffer, ”predicts Stéphanie Villers, an economic advisor to the PWC consulting firm, according to whom the protectionist wars never benefit any of the belligerents. In addition, the United States imports from the two neighboring countries a long series of agricultural products, poultry lawyers, at the prices already up. The impact could also be real on cars, while Canada and Mexico represent 22 % of vehicles sold in the country.

“Trump has nothing to do with the established world order”

Canadian Prime Minister Justin Trudeau replied that his country was “ready for an immediate response”. For her part, Mexican President Claudia Sheinbaum assured that “agreements are found every day” with the Trump administration. But, for lack of arrangement to date, “we have a plan A, B and C,” she tried to reassure, without bringing details.

How, therefore, could the countries considering themselves injured organized their response? “The usual mechanism first consists in increasing your own customs duties yourself, or finding other tariff barriers, then seizing the WTO dispute settlement body (World Trade Organization) or aceum (Canada Agreement-United States-Mexico) ”, Exhibits Marie Fernet, lawyer in customs law. Main problem to this last recourse: “Trump has nothing to do with the established world order and respect for international organizations like the WTO”, points out Stéphanie Villers.

The measure could also open the door to legal appeals from affected American companies. “Those who provide raw materials outside the country will have to reorganize their entire supply chain, an extremely expensive process,” notes Marie Fernet.

The European European Union

The American president is already preparing the next phase of his trade war. “Will I impose customs duties on the European Union?” Do you want the real answer or the diplomatic answer? Absolutely. The EU has treated us very badly, “he threatened.

On the old continent, the task may however be more difficult for the tenant of the White House. “Trump is wary because the balance of power is different: if the European Union manages to unite in its response, it can do a lot of harm to the American economy,” presages Stéphanie Villers. For this, the 27 will have to overcome their commercial fears, differences of interests and internal political crises …