Alicia Nicholls
What a time to be an international trade analyst! That was my first thought after reading the latest memorandum dated February 1, 2025, announcing sweeping tariffs on America’s three biggest trading partners—Canada, Mexico, and China. Well-known for using tariffs as a tool for geopolitical ends, President Donald J. Trump is justifying these latest measures as part of a national emergency he declared against illegal immigration and drug trafficking under the International Emergency Economic Powers Act (IEEPA). This Act, signed in 1977, allows the President broad powers to regulate commerce after declaring a national emergency.
These aggressive trade moves, the latest in Trump’s America First Trade Policy 2.0, are in fulfillment of promises he made on the campaign trail and expand on his first-term tariffs on China (which President Biden largely maintained). In his first term he had also announced 25% tariffs on steel imports and 10% on aluminum imports from the European Union (EU), Canada and Mexico. Canada and Mexico are not just the US’ largest trading partners, but are its treaty partners under the U.S.-Mexico-Canada Agreement (USMCA), the agreement that replaced the North America Free Trade Agreement (NAFTA) during Trump’s first term and which is due for review in July 2026 under its review clause.
What do these new tariffs involve?
Yesterday, President Trump announced a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China, and has also vowed to increase these tariffs should these countries retaliate.
This move will of course hurt those countries, affecting manufacturers and also jobs. But Trade 101 is that tariffs also mainly hurt consumers in the country imposing them – the US in this case! Billions of dollars in trade occurs among USMCA countries each year, with tightly interwoven supply chains, especially in the automobile, agriculture, textiles and other industries. Indeed, U.S. goods and services trade with USMCA totaled an estimated $1.8 trillion in 2022, according to the Office of the US Trade Representative (USTR). This means that many of the goods on American shelves come from these countries or were made with inputs sourced from these countries. Therefore, American manufacturers will pay higher costs for raw materials and intermediate goods sourced from these countries and higher business costs which they will likely pass on to consumers. The end result is that American shoppers and businesses will pay higher prices for everyday goods, an ironic state of affairs given that reducing these costs was said to be one of the reasons the American public voted for President Trump.
For their part, both Canada and Mexico have announced retaliatory measures of their own yesterday. Outgoing Canadian Prime Minister, Justin Trudeau, announced in a press conference last evening a 25% tariff on 155 billion (Canadian dollars) of US goods, while Mexican President Claudia Sheinbaum indicated that Mexico will be implementing retaliatory measures as well.
Trump has also again threatened to hit the EU with tariffs, and Colombia following a row over Colombia’s insistence that its deportees be returned with dignity. Trade wars among the world’s major powers threaten global economic stability, as the International Monetary Fund (IMF) warned in October last year, even before Donald Trump was re-elected but in the amidst of tariff threats he made on the campaign trail.
They’ll Hit Caribbean Consumers too
Caribbean manufacturers, which depend on US inputs, will likely face higher prices and business costs, while we end consumers might spend more for American-made food, cars, electronics and the like. However, there are ways in which we could seek to combat this to the best that we can. Caribbean manufacturers should, to the extent possible, continue to explore alternative suppliers to mitigate against these possible price hikes. This state of affairs also makes the case for more intra-Caribbean sourcing. After all, instead of sourcing so much of our fresh fruit from Florida, we could be sourcing these from within the region more.
Final Thoughts
Trump’s tariffs may be aimed at Canada, Mexico, and China, but the ripple effects will be felt far beyond in the possible form of higher prices and business costs, supply chain disruptions and economic uncertainty. Our jobs as trade analysts have never been more important as we help the Caribbean businesses and governments we advise to stay informed, and ready to adapt in an increasingly unpredictable global trade landscape.
Alicia Nicholls, B.Sc., M.Sc., LL.B. is an international trade specialist and the founder of the Caribbean Trade Law Blog. Learn more about her work at http://www.caribbeantradelaw.com.