The weeks leading up to Donald Trump’s inauguration marked the return of the usual indications of a Trump presidency: controversial cabinet selections, executive order speculation, claims of inaugurating Canada AND Greenland into the United States, etc.. Everywhere you looked, Trump was making headlines as he has been for the past eight years. However, amid the expected chaos from a Trump transition to power- his most significant political maneuver went relatively unreported.
Trump touted his plan to weaponize tariffs to fulfill his administration’s foreign and domestic agenda, namely constricting immigration and spurring the American economy. While many of Trump’s promises fail to come to fruition or are made in jest—see once again the claim to make Canada the 51st state—his tariff threat was deployed just five days into the 47th president’s reign.
On January 23rd, Trump began his campaign to deport “millions and millions” of people through a series of executive orders and ‘dead letters,’ including the Alien Enemies Act of 1798, allowing the president full power to deport anyone who is not a citizen and is from a country that is attempting “invasion or predatory incursion.” The vague wording in the archaic statute has allowed the president to enact a large-scale deportation attack of people he characterizes as “murderers,” many of whom never receive their day in court.
Colombia was the first country to respond to the United States’ swift immigration action. Trump reported on his Truth Social platform that Colombian President Gustavo Petro refused to allow planes sent by the US containing deported Colombians to land. Trump quickly threatened a 25% tariff on all Columbian goods which would increase to 50% if President Petro did not overturn his order within a week.
The economic magnitude of this threat would have been hard to comprehend. According to the Office of the United States Trade Representative, trade between Colombia and the United States accounted for $53.5 billion in 2022, with imports to the United States totaling $24.8 billion. These imports to the US include essentials, such as crude petroleum (38.8% of imports) and coffee (11.5% of imports) as well as cut flowers (10.5% of imports) – which would have led to some interesting Valentine’s Day dilemmas.
However, Colombia, realizing the magnitude of this impending trade war, quickly went from threatening retaliation to accepting the US demands. While Colombia is a relatively small partner for the United States, the US is Colombia’s largest trading partner. The nation, already kneecapped with inflation and stagnating economic growth, would have been facing a death knell by entering a trade war with the United States. Despite their original resistance to Trump’s hubristic deportation policy, President Petro has “fallen in line.” According to Colombian Foreign Minister Luis Gilberto Murillo, the government will accept deported citizens, “guaranteeing them dignified conditions as citizens subject to rights.”
However, while the Trump administration may celebrate this victory in the short run, their recent actions set a disturbing tone concerning the potential of these trade wars. While the administration’s actions against Colombia set their intentions for the world to notice, Trump has now calibrated his economic offensive to target more significant players in the world economy. Trump announced that starting February 1st, his administration would impose a 25% tariff on Canada and Mexico and a 10% conditional tariff on all Chinese imports, an attempt by the administration to control immigration and fentanyl entering the United States.
This triad of tariffs would undoubtedly spell severe economic consequences for the United States. While Colombia’s relatively minimal impact on the US economy poised the two nations’ confrontation comfortably in Washington’s favor- the battle lines for this new set of tariffs are far more obscured. According to the Council of Foreign Relations, “Nearly half of all US imports—more than $1.3 trillion—come from Canada, China, and Mexico.” While the proposed tariffs could generate 100 billion dollars in federal tax revenue annually, the trade-off would include disrupted supply chains, increased job loss, and rising costs. PwC has calculated that the tariffs from Mexico’s imports would increase from 1.3 billion dollars to an astounding 132 billion dollars a year- while Canada’s tariffs would rise from 440 million dollars to 107 billion dollars a year.
The implications behind these tariffs are particularly damaging to middle America, many of whom voted for Trump strictly on economic policy. Projections estimate that tariffs could lead gas prices to increase as much as $0.50 a gallon, as Canada and Mexico provide more than two-thirds of crude oil imports to US-based refineries. Grocery costs are expected to follow a similar upward trajectory, as Mexico supplies more than 60% of fresh produce in the United States. These rising costs are duly noted by industry leaders, as retail giants, including Walmart, AutoZone, Best Buy, and Dollar Tree, have drafted statements warning customers of impending price hikes if these tariffs come to fruition. The canary in the coal mine came from Tesla’s CFO Vaibhav Taneja, stating that tariffs “would impact” Tesla’s profitability and business.
The implications above fail to mention the counterpunch of tariffs on US exports from the Mexican and Canadian governments. Canadian Prime Minister Chrystia Freeland stated, “Our counterpunch must be dollar-for-dollar — and it must be precisely and painfully targeted: Florida orange growers, Wisconsin dairy farmers, Michigan dishwasher manufacturers, and much more.” Mexican President Claudia Sheinbaum said that while the US and Mexico should see themselves as trade allies rather than trade adversaries- Mexico is prepared to retaliate against US tariffs and has been prepared to do so for months.
While increased production costs and decreased distribution, especially concerning North American trade, have left some industry leaders uneasy with the White House’s direction- many other figureheads maintain a neutral, if not optimistic, position on the president’s economic platform. Jamie Dimon, CEO of Chase Bank, stated that tariffs can be an economic weapon and asserted that discussions regarding the inflationary pressure of this policy are less relevant than increasing national security.
In an interesting twist, the stakes of this economic battleground are particularly relevant with their ability to worsen tensions on the geopolitical stage. In 2018, Trump and his administration signed the United States-Mexico-Canada Agreement (USMCA), a document scheduled for review and potential renegotiations in 2026. The start of these new negotiations is fast approaching, as experts anticipate they will begin in the summer of 2025. The defining doctrine of one of the world’s largest free trade zones impacts over 510 million people and consists of nearly 31 trillion dollars of GDP. The Trump administration has consistently pushed an “America First” trade policy agenda, including a substantive focus on trade deficits and increased oversight of immigration policies. However, even though President Trump signed the USMCA into law during his first administration, his recent actions may be instrumental in its downfall.
According to trade analysts, tariffs at the Trump Administration’s proposed levels would unravel the agreement, potentially freezing the North American economy in a “Tariff Winter.” While the tariffs could be a potential bargaining chip in renegotiations, with the removal of tariffs serving as a reward for Mexico and Canada agreeing with the Trump administration’s plan for the USMCA, there’s an equally high probability that sour tensions lead to little economic progress and strained diplomatic relations between the three countries.
As the USMCA renegotiations loom, the Trump administration’s high-stakes tariff strategy risks unraveling North America’s economic stability, potentially triggering retaliatory measures that could cripple key industries. While some view these tariffs as a bold move to reinforce national security and in line with the president’s ‘America First’ vision, others warn they could backfire, burdening the same American consumers and businesses that Trump’s economic platform was designed to help.
In the shroud of ambiguity of the economic ramifications of these tariffs, one thing is for certain: only time will tell if this aggressive economic strategy will pay off.
