DDonald Trump, a self-proclaimed “big believer” in tariffs on foreign goods, has promised to use them to boost the U.S. economy, revitalize America’s industrial centers and reward tens of millions of voters. who sent him back to the White House.
“Come make your product in America,” the president told top officials gathered at the World Economic Forum in Davos this week, promising lower taxes for those who take him up on the feast. “But if you don’t make your product in the U.S. — which is your prerogative — then, quite simply, you have to pay a tariff.”
While Trump has repeatedly asserted that ‘tariff’ is the “most beautiful word” in the dictionary, economists and US importers have warned that the consequences of his plan – if implemented – Will be ugly.
With the new administration threatening to impose massive new tariffs as soon as next month, exporters around the world are bracing for a period of disruption and uncertainty.
China
Philip Wayne
The Canadian industry was more or less able to ride out the wave of tariffs it faced during the first Trump administration.
The construction products company makes industrial coatings and metal sheets in Dongguan, a southern Chinese industrial hub sometimes called the “factory of the world” for its role in the manufacturing boom when China revitalized its economy in the late 1980s. was opened to the world. The 1990s
The surge in Chinese exports helped make the country a global economic force. Tariffs, Trump and his allies insist, could reverse this extraordinary growth – and make America rich again.
When Trump imposed a 25% tariff back in 2018, however, ComPin’s products were still cheaper than their closest competitors in South Korea and Thailand. US property developers continued to buy – just at a higher price.
Things are less rosy now. Its U.S. orders have dried up this year, according to owner and managing director Danny Lau, amid declining demand in the residential and commercial building markets. China’s own economy is also in trouble.
“This year is really poor,” Lau said. Maybe it’s going to get worse.
Trump has threatened an additional 10% tariff on Chinese goods, which would bring the cost level to parity with South Korea.
An additional 25 percent domestic would also make U.S. manufacturers more competitive on price, Lau says. “Of course, any increase in tariffs will affect any product from China. It will certainly affect us.”
The president threatened Beijing with steep tariffs on the campaign trail, spreading uncertainty over businesses like ComPin. “He can change at any time,” Lau said.
There is little companies can do to mitigate the impact of the actions taken by Trump and his allies. “Even if you move your production line to Southeast Asia,” Lau said, “he can start raising revenues in those countries.”
Mexico
Mie Hoejris Dahl
Trump has threatened 25 percent tariffs on Mexico and Canada unless those countries stop drug transit and trafficking into the United States.
“There is a lot of fear and uncertainty right now,” said the chief executive of one of Mexico’s largest automobile companies, who asked not to be named because “businessmen, we don’t get involved in politics.”
But politics often gets involved in business. If Trump implements his threatened tariffs on Mexico, the major car firm has calculated that overall Mexican car sales could drop by as much as 12 percent.
The auto industry is expected to suffer the most, said Diego Marroquin-Batar, a North American scholar at the Wilson Center. “The more connected you are, the more exposed you are.”
When a car is manufactured, auto parts may have to cross the border several times – and pay tariffs each time.
Some sectors are less worried. “We don’t think about 90 percent of its exports go to the U.S.,” said Andrea Arroqueza Rose, chief executive of Zima Fresh, a Mexican pepper and blueberry exporter.
In 2019, Trump threatened Mexico with blanket tariffs starting at 5%, which were averted after negotiations. Such experiences have led some business leaders to doubt Trump’s commitment. Urquiza sees Trump’s threats as empty, and believes that even if agricultural tariffs are imposed, they will not last long due to America’s inability to meet domestic demand.
In addition, Urquiza said, the agricultural sector is accustomed to uncertainty, from weather to exchange rates and interest rates. “Last year, the exchange rate hit us hard. These tariffs will be much higher. I lost about 30 percent.
Both the car executive and the fruit exporter are cautiously optimistic. “I think we’ll be fine,” Urquiza said.
But this time Mexican lawyer Luis Manuel Pérez de Acha warned that Mexico could misunderstand the situation. Trump only needs a signature to withdraw from the USMCA, he said, referring to the trilateral trade agreement between the US, Mexico and Canada.
“This could strangle the Mexican economy,” he said, noting that about 80% of Mexico’s exports go to the United States.
UK
Sarah Butler
Last time Trump was in office, London’s Civil Row became the target of his administration’s tariffs.
In October 2019, a 25% tax was imposed on every bespoke suit sold from the UK to the US – products targeted with duties in return for the EU subsidizing aircraft manufacturer Airbus. is part of the list. The tariffs were in effect until 2021, with the Covid pandemic, by which time tailors, and many other businesses, were struggling with many other issues.
Huntsman, a Savile Row tailor founded in 1879 and an inspiration for the Kingsman films, with an outlet in New York as well as London, chose not to charge its customers for duty.
According to the firm’s managing director, Taj Phool, there has been no drop in sales. “We had to absorb it so it wouldn’t show up on our customer,” he said. “It had an impact on operating profit in New York.”
Phil said the business was partly saved by the ease of travel between New York and London before the pandemic, when American visitors to the UK were able to claim VAT on their take-home goods and “customers Wanted the Savile Row shopping experience”. .
“When you need a suit, we are a destination, not an impulse buy,” he added. “It’s a thoughtful process for many customers, whether an aspiring product someone has saved up for, or a longtime customer.”
In 2019, however, sales in the U.S. accounted for only a quarter of Tailor’s business. Now they are as high as 40%, so such a tariff would have a greater impact.
Still, Phil hopes the industry isn’t in Trump’s sights as a target for future tariff hits. “It was a strange thing when the Airbus tariff came out,” he said. “And I don’t see it being brought up again.”
Canada
Leland Seiko
For months, Trump has threatened Canada with tariffs — and suggested a way out that could avoid them. “You can always be a state,” he said during an appearance in Davos last week.
Canadian businesses dependent on US exports are taking emergency measures. One owner told the Guardian that his firm – which ships pet products to the US – was likely to mark up raw production costs incorrectly. This will enable them to pay less tax on the basis of low-value inputs rather than being forced to increase prices.
“I’ve run the numbers and we just can’t hit,” Malik said. “Is it dangerous? Sure, but we’re backed into a corner here.
The threat of tariffs has sent Canadian politicians and businesses scrambling to respond. Most of the country’s trade is with the United States, and exporters fear the tariffs will hurt their prospects.
A recent survey by the Canadian Federation of Independent Business found that 65% of small businesses in the country would be forced to raise prices to offset the impact of the trade tax. A new reality that an industry group called “disastrous.”
In sectors where price hikes can be devastating to business margins, some are willing to cut corners – sometimes, illegally – to avoid the worst of the tariff pain.
