In a surprising reversal, U.S. President Donald Trump just announced plans to drop retaliatory tariffs on European products. He recently turned his sights on Mexico, China, and Canada. This step ahead of the November 2024 presidential election would help Trump squeeze positive returns out of public investments to improve the U.S. economy. The President’s strategy is to not only support American producers but come to a solution for trade imbalances with America’s key trading partners.
Trump’s comments are a reflection of the increasingly protectionist trade climate. In the process, Mexico has become the US’s leading exporter, with a record export value of $466.6 billion, according to the U.S. Census Bureau. Combined, Mexico, China, and Canada are 42% of all U.S. imports—highlighting just how vital these three countries’ roles are in American trade.
Economic Perspectives on Tariffs
The recent use of tariffs has sparked a significant amount of thumb wrestling debate amongst economists. There are two dominant perspectives on how well they work. First, many economists still make the claim that tariffs protect domestic industries. By making imported goods more expensive, tariffs push consumers toward American-made alternatives. Even free trade critics concede that, as with most tariffs, they mainly increase prices paid by consumers. They additionally decry the prospect of retaliation from other countries.
Trump’s campaign for the 2024 election is already following his trailblazing strategy. He intends to target his tariffs more narrowly, first targeting goods from Mexico, China, and Canada, while lifting (or reducing) tariffs for European countries. This approach could help calm transatlantic relations and adjust to changing trade patterns nearer to home.
Greenland Deal Framework
Besides his tariff strategy, Trump had one other bombshell on the agenda—his Greenland gaffe. The President stated that the United States and NATO have “formed the framework of a future deal with respect to Greenland.” This announcement comes after the unrelenting campaign by Trump to purchase the territory, which was met with loud rebukes from European countries.
Despite the pushback, Trump’s administration seems determined to explore possibilities for collaboration regarding Greenland’s resources and strategic position. The framework outline indicates a willingness to engage diplomatically rather than through unilateral decisions.
Implications for International Relations
Trump’s tariff plans and the discussion about purchasing Greenland are rooted in domestic policies, yet they have huge international ramifications. The President’s trade approach will have a profound impact on U.S. relations with our NATO allies. As we discussed last fall, European nations have already demonstrated their distaste for his previous suggestions concerning Greenland.
By refocusing on trade with Mexico, China, and Canada, Trump aims to solidify economic ties with these countries while maintaining an open dialogue with European counterparts. Such a change would minimize unnecessary antagonism and provide an opening for more positive negotiations elsewhere, such as with public contracts in defense and international trade agreements.