Navin Girishankar and Philip Luck
Talk has finally turned into action and the first shots of the 2025 trade war have been fired. President Trump has used the International Emergency Economic Powers Act (IEEPA) to place 25 percent tariffs on products from Mexico and Canada (10 percent on Canadian “energy resources”) and 10 percent on all products from China. For all three countries, the rationale for these measures is to motivate action to address the fentanyl crisis in the United States—a pressing economic security priority that deserves immediate attention. However, counter to their intended goal, the tariffs on Mexico and Canada (which have since been delayed by one month) in particular risk undermining U.S. economic security by their direct economic repercussions; their inadequacy in motivating policy change by our partners, and their likelihood of degrading partnerships essential to countering global threats, in particular from China.
Direct Economic Impacts
Over several decades, as a result of the USMCA, signed by President Trump, and NAFTA before it, the North American economy has evolved into a deeply interconnected network, fostering economic integration and prosperity for all three countries. This integration has led to the development of complex, cross-border production processes, particularly evident in industries such as automotive manufacturing, electronics, and agriculture.
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