When the United States signed a free trade agreement with Canada and Mexico more than 30 years ago, the premise was that the partnership would also benefit America with two other flourishing economies.
This week President Trump scraped this idea abruptly. He imposed a comprehensive tariff from 25 percent to around 1 trillion US dollar on imports that Mexico and Canada send to the United States as part of this North American trade every year. These tariffs are expected to increase the costs for Canadian and Mexican exports considerably, undermine their economy and probably lead to recession.
Mr. Trump's decision to process decades of economic integration raises great questions about the future of North America and the industries that have developed on the idea of ​​an economically integrated continent. While some factories in Canada and Mexico could move to the USA to avoid tariffs, the levies will also increase the costs for American consumers and manufacturers that rely on materials from their North American neighbors.
“This is a day when the United States have hired the trade as strength for mutual benefits and regarded this as an instrument of the economic war management,” said Edward Alden, Senior Fellow on Council on Foreign Relations. He added that the taxes were “a fundamental attack on the economic well -being of our closest neighbors.
Mr. Trump proposed on Wednesday that this agreement could be durable because he was only a one-month merger to prepare for the tariffs. Trump officers said that the president would probably spend more tariffs for Canada and Mexico next month than he announced, which he describes as “mutual” tariff measurements.
Mr. Trump defended his tariffs in a speech to the congress on Tuesday evening and said it was not just about protecting American jobs – they are about protecting our country's soul.
“Customs is about making America rich again and making America great again, and it happens and it will happen pretty quickly,” he said. “There will be a little fault, but we agree. It won't be much. “
Economists argue that the tariffs in Canada and Mexico could lead to considerable disorders because they are dependent on the US economy. The commercial fund accounts for about a quarter of the US economy, compared to around 70 percent for Mexico and Canada. Kanada and Mexico both send about 80 percent of their exports to the United States, while only about a third of US exports go to Canada and Mexico together.
Tony Stillo, Director of Canada Economics at Oxford Economics, estimated that this year dip the Canadian economy into a recession that would increase consumer prices to almost 4 percent above the previous year and cause discharges that would increase the unemployment rate by over 8 percent.
“Trump's trade war will seriously hinder relationships between the USA and Canada and significantly improve the highly integrated production and supply network of North America, possibly with permanent effects on both economies,” he said.
Marcus Noland, Executive Vice President and Director of Studies at the Peterson Institute for International Economics, estimated that a tariff of 25 percent could reduce Mexic's economic growth by about two percentage points, which may lead to large factory closures and job losses.
The tariff threats have already convinced some companies to look beyond Mexico.
Randy Carr, the managing director of World Emblem, which produces labels and emblems, including for US military uniforms, Fedex drivers and the National Football League player, said the tariffs in addition to a factory in Mexico, to set up a secondary factory in the Dominican Republic.
Mr. Carr said that he would consider bringing production to the United States if the tariffs stayed in place, but it would take time and increase the costs of its products considerably. But the threats also prompted him to rethink his plans for the next three years and to withdraw all expenses for extensions and settings.
“We are sitting in many projects that we can not only do with the risk of tariff,” he said.
As a larger economy, the United States is more isolated for trading than Canada and Mexico. But slowing down the largest export markets in America will affect growth in the United States and will cause more acute pain between communities that depend on these markets. Canada and Mexico are the largest export markets for many American farmers.
US industries that depend on raw materials from neighboring countries will also increase, and some of these companies could close if the tariffs extinguish their profit margins. Analysts from S&P Global Ratings said on Thursday that they expected the tariffs to reduce 0.6 percent of the US gross and the Canadian and Mexico BIP 2 to 3 percent from their earlier forecasts in the next 12 months.
The tariffs also effectively break a trade agreement that Mr. Trump himself signed in his first term. When he signed this trade agreement in 2020, Mr. Trump called it the “largest, fairest, most balanced and most modern trade agreement that has ever been achieved” and a “colossal victory” for farmers and factory workers. Followers of the pact say that Mr. Trump's willingness to ignore him, determine the company investments and transform some of the essential investments that they previously made as part of the pact.
On Wednesday, America's large car manufacturers spent explanations that thanked the president for the one -month break in Zöllen. At a telephone conference on Tuesday, however, they announced Mr. Trump that the tariff for cars and parts from Canada and Mexico would effectively make all their companies' profits by imposing billions of dollars of new costs, according to a person who was informed on the call.
The tariffs have also decimated every trust between the governments involved. In response to US inquiries, Canada tightened its visa rules and a used staff, devices, helicopters and drones along the border. Mexico sent troops to the border and sat on drug cartels, including the handover of cartel companies in US care.
Border crossings sank. In the end, none of this was important.
Prime Minister Justin Trudeau from Canada said in a press conference on Tuesday that Mr. Trump's reason for the tariffs “completely wrong, completely unjustified, completely wrong”. Mr. Trudeau said he had to assume that Mr. Trump was really “a total collapse of the Canadian economy” to achieve a goal that the president had repeatedly spoken about: Canada annexed.
But he said these movements would also pull down the US economy. “A fight with Canada will not have any winners,” said Trudeau.
Some groups had supported Mr. Trump's tariffs precisely because they wanted to handle economic integration. The United Auto Workers, who mainly represent American workers, said in a statement that it had seen “the devastating effects of so -called free trade in the working class” for 40 years.
“We are pleased that an American president took aggressive measures to end the free trade disaster that has dropped like a bomb in the working class,” said the union. “The working class has suffered the pain of NAFTA and we will not suffer the pain of NAFTA's repayment.”
However, other industries have complained that separating these ties will backfire Mr. Trump's goals by affecting American production and destroying jobs.
The National Council of Textile Organizations, a trading group that represents US textile manufacturers, which speaks out for stricter import restrictions for imports from China, said that the impression of tariffs for Canada and Mexico China and other Asian countries will benefit and the US textile industry, which has lost 27 plants in the past 20 months, would harm.
US textile makers send more than half of their global textual exports to Mexico and Canada, and these materials will often return to the USA to the USMCA that destabilizes this North American production chain, “only tighten migration and the fentanyl crisis,” said the group.
A North American trade agreement was a controversial concept when negotiations began in the nineties. The United States and Canada already had a free trade pact, but no country had signed a contract with a poorer nation like Mexico.
Supporters believed that the agreement would increase Mexico's economic growth, offer a destination for investments and a market for US exports and at the same time help to discourage illegal immigration. Critics said it would steal US manufacturing jobs.
Gordon Hanson, an economist at Harvard Kennedy School, who examined the effects of NAFTA and worked in Mexico, said his creators were right that the deal would create efficient industries. But they were wrong about what workers benefited with lower incomes, he said, either not working with college with college workers in the USA or in the poorer, less industrialized south of Mexico.
Overall, economic studies show that the NAFTA expanded the US economy. But it created losers and winners. Many of those who were cheated by a democratic party at the end of the loss who fought for free trade agreements rather than workers at work, and ultimately supported Mr. Trump and his trade policy.
Mr. Hanson said that NAFTA was “very annoying in the textile industry and in some other labor -intensive sectors,” as parts of automotive production, and led to job losses in these sectors. “The political effects were probably so large or larger than the economic,” he added.
Ironically, Mr. Hanson said that Mr. Trump's efforts to handle free trade agreements could cause the kind of economic transfers that have caused these agreements primarily when they destroyed and then reproduced new supply chains.
Even if the jobs in the United States increase as a whole, certain factories could be closed because they depend on supply chains that run through Canada and Mexico.
“The regional economies will give significant disorders,” he said. “I would worry about the places that are disturbed by these and the durable adverse effects.”
Jack Ewing has contributed to the reporting.