Throughout the campaign trail, Donald Trump used tariffs as a centerpiece of his campaign, going so far as to state that he would implement a 10 percent universal tariff and a 100 percent tariff on all foreign made cars. While these statements have been largely panned by economists, they were undoubtedly a part of the image Trump had built for himself that ultimately helped win him the election in November. While his statements while running were often taken as rhetoric to drum up support, Trump went further as President-Elect, openly floating a number of sweeping tariffs, including:
- A 25% tariff on both Canada (which Trump wants to make the 51st state) and Mexico due to concerns over illegal immigration and drug trafficking
- A 10% tariff on all goods coming from China by February 20th
- A 100% tariff on all BRICS nations if they attempt to compete with the US dollar
While these plans would undoubtedly start a trade war that would collapse the global economy if actually put in effect, many, including myself, believed that Trump was simply saying this to gain leverage in future international disputes and trade negotiations. I believe we saw the first example of this strategy this Sunday.
As part of the Trump administration’s new deportation policy, the President has ordered military helicopters to fly illegal immigrants to countries in Latin America like Mexico, El Salvador, and Colombia. However Colombia denied these military flights (after allegedly accepting them), saying that the people being returned should be treated with “dignity and respect”. In response Trump hit Colombia with a travel ban on all government officials, a 25 percent tariff on all goods (with an increase to 50 percent next week), and sanctions. This was a completely unexpected move, especially as Colombia was thought to be an American ally in the War on Drugs and fighting terrorism, and that Colombia is designated an ally of NATO. Although the move by Trump generated much controversy, with Colombia even strengthening a 50 percent tariff, by day’s end the Colombian government had caved and started to allow US military flights for illegal immigrants. This is almost certainly because of Colombia’s dependence on the US as a trade partner (trade with the United States makes up 24 percent of all imports and 27 percent of all exports). Trump’s first use of his strategy of using tariffs as leverage seems to have worked, however it is not clear if it will continue to in the future. Just a few days ago, President Trump recently posted on his social media platform TruthSocial that if Russia and President Putin don’t come to the negotiating table and “make a deal” he would introduce sanctions and tariffs on all goods coming from Russia and its allies. Another country I believe Trump might threaten to levy tariffs on is Denmark due to its vehement opposition to giving Greenland to the United States, and Panama due to its opposition to giving up the Panama canal, however right now these are mostly speculative. To conclude, I think we can group Trump’s strategy of using tariffs as leverage into three groups. The first group is countries that are very dependent on the United States for trade like Mexico, Colombia, and Panama (though Panama is arguably more reliant on the Panama canal), where Trump threatening tariffs would likely get tangible concessions from nations like these. The second group consists of countries like Canada and Denmark, which Trump has major disagreements with but at the end of the day are still allies. Due to them being allies of America, I do not believe that Trump will put major tariffs on Canada or Denmark. However even if he does, the blow to their economies would likely be lower due to the two countries NATO membership and great relationship with other European economies. The third and final group contains nations like China and Russia. While Trump has threatened sanctions and tariffs on Russia to try to force Putin to the negotiating table on the Ukraine invasion, due to the heavy US pressure that has already been placed on Russia, it likely won’t make a difference. Also, a potential tariff and trade war with China would probably end in a stalemate, due to America and China having around the same influence in the Global Economy today. In short, while Trump’s strategy with tariffs might work well for smaller nations, he will almost certainly have trouble carrying it out on a larger scale.