The Latin American Report # 433

Donald McKinley

President Trump has made good on his promise to order the imposition of hefty 25% tariffs on imports from Mexico and Canada and an additional 10% on those from the Asian giant. We are in an era of interesting economic experiments in the hemisphere with inflation as a key category, first with Milei in Argentina and now with Trump back in the White House. The head of the Pink House advances an orthodox economic liberal plan that understands the fiscal deficit and the issuance of money as the main causes of inflation, a problem that, once solved—on the macro dimension—will "naturally" allow reflourishing the economy also on a micro-scale. Trump for his part posits that imposing heavy tariffs does not tribute by default toward an inflationary environment, but rather signifies “success” and rather reinforces the identity and strength of the U.S. economy. “Nobody can compete with us because we have by far the biggest piggy bank,” he said haughtily on Friday.

Science backing that narrative? 👇

The 47th president is “punishing” Mexico, Canada, and China for "not doing enough" on fronts apparently sensitive to him, such as inbound fentanyl smuggling, illegal immigration, and the “trade deficit” with those countries. In the latter case, from Trump's perspective, buying too many goods and services from one country poses an insecure situation, he sees a threat in that dynamic, and so he is quick to lash out at that commercial node that is “taking advantage” or “abusing” the US wallet in the market. The Reuters analysis argues that these measures by the busy Republican administration “could dent global growth and reignite inflation.” In the Canadian case, energy imports are taxed at 10% due to concerns about the effects that the full, general tariffs' imposed value on Mexican and Canadian goods could have on the U.S. energy industry.

Interesting data below 👇, especially with regard to Venezuela.

Justin Trudeau, on the other hand, remembered his "partner" how Canada helped in foreign military adventures or provided assistance to face certain catastrophes in the United States, and responded with retaliatory 25% tariffs against over $150 billion-worth U.S. imports like beer, wine, lumber, and fruits. Ottawa will coordinate with Mexico more answers to Washington's trade onslaught. President Claudia Sheinbaum rejected with an active narrative the controversial red move, highlighting in her diatribe annoyance at the alleged collusion between Aztec authorities and organized crime. “If the United States government and its agencies wanted to address the serious fentanyl consumption in their country, they could fight the sale of drugs on the streets of their major cities, which they don't do, and the laundering of money that this illegal activity generates that has done so much harm to its population,” said the first woman running the business in the Zócalo Square and AMLO's political heir. Economy Secretary and former Foreign Minister Marcelo Ebrard claims that tariffs are a “flagrant violation” of the United States-Mexico-Canada Agreement.

The U.S. leader has threatened to stick the knife deeper if affected countries, including China, retaliate. Except for the Trump social army—which includes virtually the entire Republican Party machine, surrendered to his overwhelming influence and convening power—, the reactions from industry, politics, and pundits are alarm and in many cases furious rejection. Nova Scotia's Premier ordered the withdrawal of all U.S.-origin alcohol from commercial establishments in his province, a measure replicated in British Columbia. “Historically, most of our tariffs on raw materials have been low because we want to get cheaper materials so our manufacturers will be competitive ... Now, what's he talking about? He's talking about tariffs on raw materials. I don't get the economics of it,” complained an expert working with a renowned think-tank.

From AP in the same vein 👇.

And this is all for our report today. I have referenced the sources dynamically in the text, and remember you can learn how and where to follow the LATAM trail news by reading my work here. Have a nice day.