On November 25 local time, President elect Donald Trump of the United States announced in a high profile that he would impose a 25% tariff on all goods of Mexico and Canada, and impose an additional 10% tariff on Chinese goods.
As soon as the news came out, it was like dropping a heavy bomb, which not only shocked North American allies, but also made the global market uneasy.
Why does Donald Trump’s tariff policy go online ahead of schedule when there are more than 50 days before he takes office? What profound impact will this decision have on the US and even the global economy?
Today, the author will analyze the main considerations and potential consequences of Donald Trump’s “tariff stick” in advance.
The first sword on the shore, first slay your own people?
Reduce trade deficit and protect local industries.
Although Mexico and Canada are strategic allies of the United States, Donald Trump clearly does not intend to be lenient.
Donald Trump has always regarded “the United States first” as the core of his economic policy. The imposition of tariffs on Mexican and Canadian goods is undoubtedly a continuation of this strategy.
The imposition of tariffs on Mexico and Canada is aimed at forcing up the prices of their goods in the US market, suppressing imports, protecting the competitiveness and market share of local industries, increasing domestic employment opportunities, and reducing the US trade deficit with Mexico and Canada.
Reshaping trade rules and consolidating dominant position.
During Donald Trump’s first term of office, the United States, Mexico and Canada reached a new North American Free Trade Agreement, which was later renamed the United States Mexico Canada Agreement.
Donald Trump made it clear in his statement that the imposition of tariffs will continue until Mexico and Canada take stronger measures on immigration and drug smuggling.
This statement shows that Donald Trump hopes to use tariff collection as a bargaining chip to force Mexico and Canada to accept terms more favorable to the United States in the follow-up implementation and future revision of the US Mexico Canada Agreement, so as to reshape the trade relations between the three countries and further consolidate the trade dominance of the United States in North America.

Strive for voter support and consolidate the foundation of governance.

Imposing tariffs on Mexico and Canada is not a simple economic strategy. Donald Trump’s move has deeper political considerations.

As President elect, Donald Trump urgently needs to consolidate the support of basic voters with a tough foreign policy.

By imposing high tariffs on Mexico and Canada, Donald Trump can not only show voters in the “rust belt” their determination to reduce external competition and defend local employment, but also further gain support from voters in the Midwest of the United States who are critical of globalization.

60% to 10%, are you showing mercy or feeling guilty?
Compared with the high-profile promotion of imposing 60% tariffs on China during the election campaign, Donald Trump only proposed to impose 10% tariffs this time. This obviously shrinking figure reflects the multiple concerns of Donald Trump’s team.
To avoid triggering supply chain crises and disrupting economic recovery.
Suddenly imposing excessively high tariffs on Chinese goods is likely to immediately trigger a supply chain crisis, causing devastating damage to American businesses and consumer markets.
At the same time, high tariffs will further push up prices, exacerbate inflation, force the Federal Reserve to adopt a tighter monetary policy, and weaken the momentum of economic recovery.
The imposition of 10% tariff is obviously a compromise plan designed by Donald Trump’s team to avoid this chain reaction, which shows Donald Trump’s cautious attitude towards economic risks.
Reduce public opinion pressure and leave enough room for negotiation.
Trump understood that if a high tariff of 60% was imposed on China directly, it would inevitably cause strong reactions at home and abroad, and then be accused of extreme trade protectionism.
The imposition of a 10% tariff is relatively mild, demonstrating a tough stance while leaving ample room for negotiation.
In the future, Donald Trump can use this as a bargaining chip to exert pressure on China in geopolitical, international affairs and other aspects, forcing China to make concessions on key issues, and thus gain multiple benefits in political, economic and other aspects.
Afraid of China’s manufacturing strength, dare not launch a rash attack.
China has a complete industrial chain and strong supply chain resilience, making it a global manufacturing center.
Recently, China has lowered the export tax rebate rates for some refined oil products, photovoltaics, batteries, and some non-metallic mineral products, indirectly pushing up the prices of such goods in the international market.
Despite the price increase, China remains the largest supplier of such goods in the international market, and the United States can hardly shake off its dependence on China.
In Donald Trump’s first term of office, he imposed tariffs on China wantonly. After taking office, Joe Biden continued his policy of high tariffs on China. However, in reality, due to the strong competitiveness of Chinese goods, these tax burdens were ultimately passed on to the consumer end in the United States, with consumers and businesses bearing 92% of the tax burden, resulting in increased inflation in the United States.
Therefore, Donald Trump should also carefully consider the tariff policy towards China. Although it is still tough on the surface, it is obviously lack of confidence.
The American people ultimately bear the cost of treating internal diseases externally.
Donald Trump wields the “tariff stick”, ostensibly to protect American interests, but the actual cost is borne by ordinary Americans.

Although Trump has repeatedly stated that the additional tariffs will be borne by the exporting countries, in reality, these costs are paid by American import companies.
This means that these costs will ultimately be passed on to American consumers.
Extreme tariffs will significantly increase the cost of purchasing daily necessities for the American people, especially for goods that have not yet been subject to high import taxes, such as clothing, toys, furniture, travel supplies, etc.
According to the estimation of the National Retail Federation, Donald Trump’s new tariff sanctions will make American consumers spend more than 78 billion dollars every year, which will increase the cost of payment and reduce the consumption ability of residents.
Inflation has reached a new high.
High inflation has dealt a serious blow to consumer confidence in the United States, and the addition of tariffs will further exacerbate this situation.
Most mainstream economists said that Donald Trump’s overall tariff plan may push the US import tariff back to the level of the 1930s, which also means that a new round of inflation may be triggered.
Bloomberg analysis suggests that the additional tariffs will push up the current inflation rate in the United States by at least one percentage point.
The burden of treasury bond has increased.
High inflation may also prompt the Federal Reserve to enter the interest rate raising cycle again, causing the interest cost of treasury bond bonds to soar, adding to the federal financial pressure.
According to the prediction of the United States Department of Finance, in 2024, the federal government will pay $882 billion to repay the interest on treasury bond, and the implementation of Donald Trump’s tariff policy may accelerate the growth of this figure, further worsening the federal debt crisis.

Behind Donald Trump’s wielding of the “tariff stick”, there is both the need for political games and the ambition to reshape the global trade order.
However, there are no winners in the trade war.
The economic and trade relations between China and the United States are close, and China is an important export market and import source country for the United States. In 2023, the total economic and trade volume between China and the United States will exceed 660 billion US dollars, not including the trade volume entering the US market through third country detours.
The excessive imposition of tariffs on Chinese goods is at best equivalent to ‘killing one thousand enemies and self harming eight hundred’, and ultimately the United States itself will inevitably become a loser.
In addition, under the threat of Donald Trump’s “tariff stick”, trade relations and communication among China, the EU, ASEAN, Japan and South Korea, as well as countries and regions in the “Global South” are significantly increasing, and the space for promoting free trade among them is also expanding.
If Trump continues to act stubbornly and backtrack on the issue of tariffs, he will one day find that the “iron curtain” he has built will isolate the United States from the world.