US President Donald Trump during his visit to Abu Dhabi on Friday made some of the most momentous proclamations concerning worldwide commerce. To that end, he disclosed that his administration has already landed trade agreements with the United Kingdom and China. Moreover, he used his first address to Congress to lay out plans to impose tariffs designed to protect the American economy and help American producers.
This time, the US Dollar Index (DXY) lost ground, albeit modestly with a 0.13% decline. It ended around 100.70 the day of Trump’s announcement. This fluctuation in the dollar’s value comes at a time when the president’s trade policies are poised to impact key trading partners, including Mexico, China, and Canada, which together accounted for 42% of total US imports in 2024.
Trade Deals with Key Partners
During his address, Trump emphasized the importance of the newly reached trade deals, stating, “We reached a fantastic trade deal with the UK, and we reached another with China.” These new agreements seek to enhance US economic ties with these countries and further promote their economic integrity and security alongside that of the US. In turn, we can expect to see greater exports and improved balance of trade.
The trade agreement with China is particularly remarkable considering the backdrop of these continually swirling and complicated US-China relations. By making significant investments, the agreement directly addresses a range of economic issues. It smartly reinforces America’s competitive edge in global commerce. The UK deal does have crucial details that haven’t been fully released. All this said, it’s a signal improvement compared to previous substantive moves in the UK’s post-Brexit trade negotiations.
Economic Implications of Tariffs
The central plank of Trump’s plan to “make American great again” is the imposition of tariffs on America’s three largest trading partners—Mexico, China, and Canada. He plans to use tariffs as both a stick and a carrot to aid the overall US economy while protecting American producers. The president’s focus on tariffs has sparked debate among economists, with two predominant schools of thought emerging regarding their efficacy.
Other economists have long asserted that tariffs offer essential shelter for nascent or fledgling domestic industries, allowing them the opportunity to better compete with foreign adversaries. Critics argue that tariffs result in higher costs for consumers and a damaged reputation with international trading allies. No matter what these varying interpretations may be, one thing is clear—Trump’s administration is hell-bent on using tariffs to further its economic goals.
In 2024, Mexico became the new number one exporter to the United States. For those keeping track, that’s the 2nd highest export value ever recorded, according to the US Census Bureau. This figure highlights the necessity of defending strong trading ties with Mexico at the same time that you commit to a strategic tariff.
Future Trade Initiatives
Alongside the discussion of these agreements in the works Trump shared how he intends to continue to engage with international partners. He stated, “his officials will send letters out soon to countries for trade deals,” indicating a proactive approach to expanding trade opportunities.
This move is part and parcel with Trump’s larger dream of revamping the face of trade in America. Then, the administration proactively engages other countries to seek out opportunities to negotiate favorable deals. This initiative is intended to help develop long-term, mutually beneficial relationships that increase economic opportunity and create jobs in the United States.