Mexico-US trade

The Trade Conflict Widens: Drawing in the EU, Canada and Mexico

While our primary focus has been on the evolution of the trade battle between the US and China, the conflict has widened.  Late last week, the Trump administration announced the end of a temporary stay on the imposition of steel and aluminum tariffs for the European Union, Canada and Mexico.  Starting at midnight on June 1, steel exports to the United States were slapped with 25% tariffs, and aluminum with 10% tariffs. US National Economic Advisor Larry Kudlow argues that the tariffs are simply a matter of a “family quarrel,” the imposition of new barriers on trade into the US shows the spread of conflict.  There are at least four reasons why this is absolutely not just a minor issue. Kudlow has said that tariffs with Canada “may go on for a while or they may not.”  For the firms that are suddenly paying significantly higher prices for imported steel and aluminum, it probably doesn’t much feel like a small argument.  A 25% price hike overnight is sufficient to drive firms out of business entirely.  Finding new sources of supply takes time, effort and probably escalated costs.