President Donald Trump has made rethinking international trade policy a centerpiece of his second administration. While Congress generally has the authority to regulate international trade, it has also delegated some of this authority to the president. On Feb. 1, Trump announced he would be imposing 25% tariffs on imports from Canada and Mexico, with a 10% tariff on Canadian energy. Days later, he reached an agreement with Canada and Mexico to pause these tariffs for 30 days. He also announced a 10% tariff on imports from China, which went into effect on Feb. 4. China has since imposed retaliatory tariffs on U.S. goods.
On Thursday, Feb. 13, Trump signed a memo instructing his staff to calculate new “reciprocal tariffs.” He argued these new tariffs would compensate for tariffs and other trade practices by foreign countries that he views as unfair.
Tony Barrett, emeritus professor of economics at the College of St. Scholastica in Duluth, Minn., told the Duluth News-Tribune that if the trade dispute with Canada and Mexico isn’t resolved shortly, “nothing economically positive will come from it.” He predicted that if the U.S. ends the pause and imposes a 25% rate on Canada and Mexico, it could increase the price of a new car by $3,000. According to the Milwaukee Journal Sentinel, tariffs could increase home prices in Wisconsin.
The Ambassador Bridge, which connects Detroit to Windsor, Ontario, has the largest trade volume of any border crossing in North America. But even if the threatened tariffs aren’t imposed on Canada, other trade policies could spell trouble for the auto industry, which employs 1 out of 5 Michigan workers. Trump has imposed a 25% tariff on steel and aluminum imports. Industry analyst Sam Fiorani told the Associated Press that steel “is among the most important components of the vehicle,” and an increase in steel prices could result in higher car prices for consumers. However, most steel used by the Big Three automakers comes from North America. According to a General Motors executive, 90% of the steel used by GM comes from the U.S.
Another sector that could be affected is agriculture. Mexico, Canada, and China are among the U.S.’s largest agricultural trading partners. Bob Hemesath is a corn and hog farmer in Iowa and president of Farmers for Free Trade, an advocacy group. He told Investigate Midwest that trade wars could reduce export opportunities for U.S. farmers. Also, Chinese tariffs on farm equipment could hurt U.S. manufacturers like Caterpillar, which employs 12,000 people in Peoria, Ill.
As for the 10% levy on goods from China, “any equipment or construction components that are sourced from Asia definitely will be affected,” Tom Cuculich of Chicagoland Associated General Contractors told public radio station WBEZ.
The Minnesota Star Tribune spoke to the co-owner of Hibbing Fabricators, which makes aluminum, steel and copper products. They get their metals from the U.S., but some of their customers buy their products before shipping them to Mexico for assembly work and then bringing them back to the U.S.
On the other hand, the CEO of Minnesota-based textile manufacturer Faribault Mill told TV news station KMSP that his company’s supply chain is “tariff-proof.”
This situation is developing rapidly. Great Lakes Now and our partners will work to keep you up to date on how the latest news in international trade policy will affect our region.
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Featured image: Sign atop the Ambassador Bridge, US-Canada border crossing between Detroit and Windsor. (Photo Credit: iStock)
