The United States stands to gain the most from the tariff war. Tax revenues will increase significantly, and tariffs will serve as a tool for economic coercion. However, China is a special case.
U.S. President Donald Trump has imposed 25% import tariffs on goods from Mexico and Canada, while energy products from Canada will face a 10% duty. All Chinese imports will be taxed at 10%.
A large-scale tariff war will reshape global supply chains, redistribute markets, and increase prices in the U.S., as Mexico, Canada, and China account for 40% of total U.S. imports.
According to Trump, tariffs were imposed to curb immigration and eliminate synthetic drug trafficking from Mexico, Canada, and China. However, there is an unspoken but obvious motive behind these measures.
During his election campaign, Trump promised tax cuts and even plans to eliminate the federal income tax. This would create a budget shortfall exceeding $2.4 trillion, adding to the existing $1.8 trillion deficit.
To offset these losses, the U.S. government aims to collect $1.4 trillion in tariffs—and a similar amount is expected from future tariffs on EU imports.
Additionally, higher wages due to inflation will increase payroll tax revenues, further boosting the treasury.
Yes, inflation in the U.S. will rise, but the Federal Reserve is likely to raise interest rates again. This will encourage Americans to save more in banks, invest in stocks, and buy U.S. bonds, improving corporate liquidity while reducing bond yields and lowering the cost of servicing national debt.
In the long run, as excess money is drained from the market, inflation will stabilize.
Beyond economics, tariffs serve as a political weapon. Washington will use them to intimidate and pressure other nations into compliance—Colombia has already fallen into line.
The winners in this scenario? Countries with minimal trade with the U.S. – for example, Russia, which only does a modest $4 billion in annual trade with America.
For Canada and Mexico, the consequences will be devastating.
These two countries supplied 71% of U.S. oil and petroleum products in 2023. Trade with the U.S. accounts for 25% of their GDP.
If the U.S. replaces Canadian and Mexican oil with supplies from Venezuela and Brazil, where will Canada sell its oil? Shipping across the ocean is too expensive, and heavy Canadian crude has limited demand outside the U.S..
The same applies to other Canadian and Mexican exports—they will pile up in warehouses with nowhere to go. As a result, their economies will stagnate, and government budgets will suffer.
China is a special case. In 2023, the U.S. trade deficit with China reached nearly $1 trillion. However, since China exports far more to the U.S. than it imports, Beijing will not engage in a tit-for-tat tariff war – such measures would be as insignificant to the U.S. as a mosquito bite.
Instead, China will adapt, just as it did during Trump’s first term.
When Trump previously imposed tariffs on Chinese imports, China responded by shifting production to Latin America and Southeast Asia. Goods returned to the U.S. through third countries, often at even lower prices due to cheaper labor in Mexico and Vietnam.
This process accelerated the globalization of Chinese companies, leading to their dominance in global markets. Today, China’s industrial supply chain is:
In some high-tech industries, China has even surpassed global competitors. Many products simply have no viable alternatives outside China – leaving the U.S. without an effective replacement strategy.
The core problem behind America’s opioid epidemic is not foreign drug trafficking but domestic issues, including:
According to U.S. judicial statistics, 86% of individuals convicted for fentanyl trafficking in the 2023 fiscal year were American citizens.
Instead of collaborating on drug control, Trump is scapegoating other countries. But this approach is flawed – it will only lead to:
Trump’s short-term gains will ultimately result in long-term geopolitical setbacks for the United States.
A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and policy that taxes foreign products to encourage or safeguard domestic industry. Protective tariffs are among the most widely used instruments of protectionism, along with import quotas and export quotas and other non-tariff barriers to trade. Tariffs can be fixed (a constant sum per unit of imported goods or a percentage of the price) or variable (the amount varies according to the price). Tariffs on imports are designed to raise the price of imported goods and services to discourage consumption. The intention is for citizens to buy local products instead, thereby stimulating their country's economy. Tariffs therefore provide an incentive to develop production and replace imports with domestic products. Tariffs are meant to reduce pressure from foreign competition and reduce the trade deficit. They have historically been justified as a means to protect infant industries and to allow import substitution industrialisation (industrializing a nation by replacing imported goods with domestic production). Tariffs may also be used to rectify artificially low prices for certain imported goods, due to 'dumping', export subsidies or currency manipulation.
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