Interpretation of Trump's 25% Tariffs on Canada and Mexico
1. Reasons for Imposing 25% Tariffs on Canada and Mexico
Before the election, Trump publicly stated that he would impose 25% tariffs on Canada and Mexico, and he has indeed followed through with this.
- This is aimed at blocking circumvention export routes through Canada and Mexico.
- China exports semi-finished goods through Canada and Mexico, which are then transformed into final products and re-exported to the US.
- Since Canada and Mexico benefit from duty-free exports to the US, the reality is that China profits from this arrangement.
2. Why Were Only Initial 10% Tariffs Imposed on China?
Instead of imposing 60% tariffs on China from the start, a strategy was implemented to start with 10% and gradually increase them.
- The 10% tariff on China is a negotiating strategy that leaves room for maneuver.
- If 60% were imposed from the beginning, China would consider there to be no room for further negotiation.
- This is calculated to increase fear within China and lead negotiations in a favorable direction in the long run.
3. Economic Impact of 25% Tariffs on Canada and Mexico
When Canada and Mexico are affected by 25% tariffs, the following outcomes are likely:
- Economic recession and currency depreciation are inevitable.
- Some factories will close, and investment returns will drop sharply.
- As Mexico and Canada's export competitiveness weakens, indirect links with China will also be severed.
This is interpreted not only as blocking China's circumvention export routes, but also as the US trying to increase the economic dependence of Canada and Mexico.
4. Issues with Promises Between Mexico and the US
The reason Mexico is not following US demands well stems from political conflicts with the new Mexican president.
- Mexico is being passive in addressing the Fentanyl problem, and Trump is likely to apply pressure on this issue.
- If an economic recession continues, Mexican citizens will become dissatisfied with the new president, raising the possibility of a change in government.
Trump is likely to demand the resolution of the Fentanyl problem or pro-US policies in Mexico in exchange for US capital investment.
5. Trump's Economic Strategy and Historical Perspective
Trump's tariff policy goes beyond simple economic aspects, reflecting a historical and political vision.
- Under the US MAGA (Make America Great Again) strategy, he is trying to bring factories back to the United States.
- However, due to increased production costs and rising prices, it is difficult to achieve complete success.
This shows an intention to restore tariff policies that have been frequently used throughout history.
6. Impact on Korea and Other Countries
Following the case of Canada and Mexico, Trump's tariff policy could spread to other countries.
- In particular, South Korea, Japan, Germany, Taiwan, and Vietnam may be targeted next.
- In the case of South Korea, major industries such as semiconductors, secondary batteries, and automobiles are likely to be targeted.
- However, South Korea is also a country that the US needs to keep China in check, so it is necessary to create room for negotiations by leveraging this.
7. Considerations for the Future
An important lesson from the tariff issues with Mexico and Canada is that "the relationship with the United States must be approached strategically."
- Other countries are actively showing friendly attitudes to avoid provoking Trump.
- However, South Korea has not announced such response measures, making it urgent to prepare countermeasures.
< Summary >
- Trump is imposing 25% tariffs on Canada and Mexico to block China's circumvention export methods.
- China was initially subject to only 10% tariffs, but this is a strategy to leave room for negotiation.
- Due to tariffs, Canada and Mexico's economic dependence on the US is increasing.
- Other countries like South Korea could also be subject to future tariff policies, requiring strategic responses.
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*YouTube Source: [Jun’s economy lab]
– Why Trump Imposed Tariffs (ft.China,Mexico)
