News Briefs | Web Exclusive: Geopolitics
A Pause In the Trade Crisis
There is no guarantee that Trump will not try and replicate his way with the same threat of tariffs and measures against other countries
Siddharth Singh
Siddharth Singh
04 Feb, 2025
Justin Trudeau has relented. On Tuesday, Canada’s Prime Minister took to X and said that he had a “good call” with US President Donald Trump and that Canada’s “proposed tariffs will be paused for at least 30 days while we work together.” Three days earlier, on 1st February, Canada had increased tariffs on US imports worth $155 billion with 25% tariffs kicking in immediately on goods worth $30 billion while duties on goods worth $125 would set in after 21-days to allow Canadian companies to find alternative supplies. This was done in a blustering fashion in the course of a televised speech by Trudeau, his trademark arrogant fashion to handle sensitive bilateral issues with other countries.
Mexico, always reasonable in contrast, understood the concerns highlighted by Trump and President Claudia Sheinbaum announced a series of steps on X. These included an immediate reinforcement of its Northern Border, the one it shares with the US, by sending 10,000 troops of the National Guard there. This is to prevent drug trafficking from Mexico to the US, particularly Fentanyl, Sheinbaum said in her message.
The contrast between the approaches of the two countries is remarkable. Mexico, always willing to negotiate from the start, understood the importance of curbing flows of Fentanyl. This is the drug responsible for the “deaths of despair,” an evocative phrase used by the Nobel Prize-winning economist Angus Deaton to describe the havoc caused by Fentanyl among poor whites in areas “left behind” by the march of globalization in the US.
Economists have rue that Trump’s approach will cause immense disruption to world trade and its prospects. They fear—and rightly so—that this will only lead to higher consumer prices for most goods that are imported by the US. This, however, is only one way to look at the situation. The Fentanyl crisis has its roots in the harsh economic landscape of the US hinterland, a place that suffered the most beginning with the North American Free Trade Agreement (NAFTA) in 1994 and later the era of “hyperglobalization.” On paper this was supposed to be a “win win” for everyone in the world: consumers would get cheap goods, inflation and prices would remain stable and the world could consume itself to growth and glory. There was just one hitch, however: the distributional consequences of this rearrangement of who produced and who consumed were not thought through. In the absence of meaningful work and jobs, consumption is just a mirage.
Trump is responding to that crisis. The response is bound to be chaotic. But it is instructive to note the differing reactions to what Trump is doing. Canada, an arch liberal haven of freedom (but miserable economic conditions) first responded by a series of counter-measures. The Canadian intellectual elite supported Trudeau but did not think through the situation. It would have been much better to negotiate with Trump or at least listen to his concerns. The end was predictable: Trudeau folded within days. Mexico responded wisely as its leader knows what can and what cannot be done.
There is no guarantee that Trump will not try and replicate his way with the same threat of tariffs and measures against other countries. He has threatened the same treatment to the European Union. There may be other countries in his sights. What matters are the negotiating tactics of the countries in question and what they can offer in return. It is not a one-sided affair as many assume it to be.
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