“The American economy has entered a new era”. The Wall Street Journal writes it, according to which the duties of 25% on goods from Mexico and Canada and those of 20% on Chinese imports that entered into force today, “have put an end to decades of free trade between the three countries and risk upseting entire industrial sectors”.
In response to the move of Donald Trump, Canada said that it immediately intends to impose duties of 25% on almost $ 100 billion of goods imported from the United States in two waves. And China has quickly announced retaliation rates on US food and agricultural products and other measures against American companies.
“Economists – reads the WSJ – say that American importers and companies will probably transfer the cost of duties on consumers, which means that private citizens could see higher prices in supermarkets and car dealers”. In addition, as the newspaper notes, if the duties remain in force, they have the potential to deeply remodel the relationships between the United States and two of its major commercial partners, abruptly reversing the ten -year project of America to expand free trade with its allies.
The three countries had operated on a revised free trade agreement, mediated by Trump during his first term. Uncertainty is already influencing the economy by slowing down company orders and making it more difficult for companies to plan.
“Tariff threats and uncertainty are extremely destabilizing”, observed a US entrepreneur, interviewed with the February Manufacturing survey of the Dallas Fed, published last week. “This is a period of uncertainty for producers, it is very difficult to process business plans,” said another interviewee.
Among the comments included in the February report of the Institute for Supply Management we read: “Customers are suspending new orders due to the uncertainty relating to rates. There is no clear direction by the administration on how they will be implemented, so it is more difficult to predict how business will influence”.
The automotive industry, with supply chains that extend in all three countries, is particularly at risk. In the conference call on the earnings of the Ford Motor last month, the CEO Jim Farley warned that the prolonged duties of 25% against Canada and Mexico “would have a huge impact on our sector, with billions of dollars of profits of the sector swept away”.
Some companies are planning to take charge of costs, at least for now. However, economists warn that if the duties remain in force, they could make inflation rise in March, April and May, since companies will increase prices to compensate for the highest import costs, notes Michael Feroli, an American chief economist of JPMorgan Chase.
The duties could also damage US exporters if the economies of Canada and Mexico suffered a blow and if they responded with their duties. “If those countries enter the recession, this alone is a reason to expect that US exports to those countries slow down,” he said.