Trump paused tariffs on Canada and Mexico

Trump’s tariffs on Mexico and Canada aren’t going to hurt the U.S., but they do threaten cooperation in the WTO

The tariffs on Mexico and Canada have been put on hold for at least a month after last minute negotiations led to both countries agreeing to boost border security.

Canada and Mexico are crucial trade partners. There has been a lot of interest in the auto industry. Carmakers built a complicated supply chain with parts crossing back and forth across borders in the manufacturing process.

Bernstein Research estimates that 25% tariffs on both countries would hurt the Detroit 3 disproportionately, costing them $110 million per day. Analysts at Jeffries project that the investment bank would add 4% to the average US vehicle price for car shoppers.

“We urge all parties to reach a swift resolution in order to provide clarity and stability for the entire U.S. auto industry,” Jennifer Safavian, President and CEO of Autos Drive America, a trade group representing international automakers, said in a statement Saturday. The Alliance for automotive innovation claimed that seamless trade between North America and U.S. supports $300 billion in auto industry.

MEMA, a trade group representing companies that make auto parts and components, wrote in a memo on January 31 that the tariffs “would have severe consequences” for suppliers, workers and consumers alike.

He told reporters on Monday that the U.S. is not dependent on Canada, despite concerns about the economic impacts of tariffs. “We don’t need them to make our cars,” he said.

One significant challenge for automakers — and their surrounding ecosystem of suppliers, dealers and repair shops — is Trump has always said these particular tariffs are meant to motivate policy changes, and are not intended to be permanent. That is in contrast to long-term tariffs on China, which are meant to help U.S. companies compete with subsidized Chinese competitors, or to the prospect of large-scale across-the-board tariffs for the federal government.

China is a major source of the precursor chemicals to make fentanyl, and Beijing says it has gone out of its way to help curb the flow of the synthetic opioid into America. After Trump announced his latest tariffs, China warned that they would damage prospects for future cooperation and vowed to launch a case against them in the WTO.

“[T]he underlying economic and political grievances between China and the U.S. run far deeper than those between the U.S. and its neighbours,” he said.

In a note, the head of China economics at Capital Economics said that the measures were “fairly modest.” It is estimated that the targeted goods represent only a small portion of China’s total imports from the U.S.

The Commerce Ministry of China placed two U.S. firms on a list of “unreliable entity” for violating market principles and discriminating against Chinese companies. Tommy Hilfiger and Calvin Klein are brands that are a part of the company’s portfolio.

In addition, China’s market regulator announced an anti-monopoly investigation into Google. And the commerce ministry and customs administration jointly announced fresh export controls on a handful of rare metals, including tungsten, indium and molybdenum. The announcement didn’t mention the US tariffs.

Those include 15% tariffs on American coal and liquefied natural gas and 10% tariffs on crude oil, farm equipment and certain other vehicles. The Chinese counter-tariffs are slated to take effect on Feb. 10.

In a statement, the Chinese finance ministry said the U.S. tariffs “severely violate World Trade Organization (WTO) rules, and not only fail to address [America’s] own problems but also disrupt normal economic and trade cooperation between China and the United States.”