Background on Trump’s Trade Policies
On April 2, Donald Trump imposed a base tariff of 10% on all imports entering the U.S., along with additional charges ranging from 10 to 104% on 57 countries with which the U.S. maintains a trade deficit.
Following this, on April 9, Trump announced a 90-day truce for affected countries to negotiate agreements and avoid or reduce tariffs. This truce was set to expire soon, but official letters with new tariffs—10% for “friendly partners” and up to 70% for others—are set to be sent starting August 1.
Reasons for the Delay
The delay might be due to a legal basis: a federal appeals court could annul the tariffs by July 31, following a trade court’s declaration of their illegality in May.
Additionally, Trump has not achieved the promised success. He claimed in April that he would sign 90 agreements in 90 days, later lowering expectations to 50-70, and asserted to Time that he had “200 treaties secured.” However, only three agreements were achieved: with the UK, Vietnam, and a temporary one with China. Other countries have only announced their intention to negotiate without clear timelines or terms.
Trump’s Recent Actions and Warnings
Trump warned that any country aligned with the “anti-US policies of BRICS” would face an additional 10% tariff. The BRICS group comprises Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, Saudi Arabia, the UAE, and Indonesia. Although Mexico is not a member, its Foreign Relations Secretary, Juan Ramón de la Fuente, attended the BRICS summit recently, which might be misinterpreted in Washington.
Trump sent letters to the leaders of 17 countries, reminding them to reach an agreement by August 1 to avoid the tariffs’ implementation. Japan, South Korea, Malaysia, and Kazakhstan will face a 25% tariff, while South Africa will see a 30% tariff. Laos and Myanmar will be subjected to a 40% tariff. Trump warned that any increase in their tariffs on U.S. products would directly add to the already announced percentage.
Potential Global Impact
According to the IMF and World Bank, these measures could lead to a 1% decrease in U.S. GDP by 2025-2026, with inflation potentially rising by 1 to 2 percentage points globally. The global trade is expected to slow down by 1 to 2%, affecting developing countries that rely on the U.S. market.
Impact on Mexico
Mexico avoided retaliatory tariffs through the USMCA, but it is not exempt: it pays a 10% base tariff, an additional 25% for rules of origin, 25% for fentanyl, 25% for steel and aluminum, and might add another 1% if Trump considers it aligned with BRICS.
The effects of tariffs are already visible: U.S. auto exports to Mexico fell by 6.3% between January and May.
Key Questions and Answers
- What is the new trade war about? The U.S. is imposing tariffs on various countries to address trade deficits, with a new round of tariffs set to begin August 1.
- Why the delay? The delay might be due to legal challenges and Trump’s failure to secure the promised trade agreements.
- What are the potential global impacts? The tariffs could lead to a decrease in U.S. GDP and increased global inflation, slowing down global trade and affecting developing countries.
- How will Mexico be affected? Although Mexico avoided retaliatory tariffs through USMCA, it still faces various tariffs and has already experienced a decline in auto exports to the U.S.
