{"id":15916,"date":"2025-02-05T00:55:02","date_gmt":"2025-02-05T00:55:02","guid":{"rendered":"https:\/\/financialrush.com\/?p=15916"},"modified":"2025-02-05T00:55:02","modified_gmt":"2025-02-05T00:55:02","slug":"donald-trumps-72-hours-of-tariff-chaos-signals-high-stakes-second-term","status":"publish","type":"post","link":"https:\/\/financialrush.com\/?p=15916","title":{"rendered":"Donald Trump\u2019s 72 hours of tariff chaos signals high stakes second term"},"content":{"rendered":"

\n<\/p>\n

\n

On Monday afternoon, Donald Trump was holding court in the Oval Office, enjoying a moment of calm after days of turmoil in which he had brought Canada and Mexico to the brink of a trade war. <\/p>\n

Over the previous dizzying 72 hours, the US president had unveiled 25 per cent tariffs on imports from his biggest trading partners, triggering turmoil in the markets, howls of protest from business groups and new doubts about the reliability of the US among its allies. Alongside this was a 10 per cent levy on Chinese imports. <\/p>\n

Hours before the measures were due to take effect, Ottawa and Mexico City were given a month-long reprieve<\/a>; Beijing was not. <\/p>\n

Flanked by Scott Bessent, his newly-minted Treasury secretary, and Howard Lutnick, his pick to be commerce secretary, Trump savoured the effect of the opening salvo in the trade battles<\/a> he promised to fight in his second term in the White House. <\/p>\n

\u201cTariffs are very powerful, both economically and in getting everything else you want,\u201d he remarked. \u201cWhen you\u2019re the pot of gold, the tariffs are very good.\u201d <\/p>\n

Return to trade wars <\/h3>\n

The chaos unleashed by Trump\u2019s demands brought back memories of the trade battles during his first term in office.<\/p>\n

The hardline trade hawks within the new administration, led by Peter Navarro, Trump\u2019s manufacturing and trade adviser, are setting the agenda, with the voices of more cautious officials such as Bessent muted \u2014 for now. <\/p>\n

While Trump would rather reach deals than plunge markets and the global economy<\/a> into a tailspin, he is more willing than during his first term to use economic coercion to achieve his goals. <\/p>\n

This raises the possibility of high-stakes negotiations not only with Canada and Mexico but also with China, the EU and others, that could easily veer off course. <\/p>\n

Trump \u201cwants to rebalance trade, onshore production, and raise revenue. He thinks that the only way to do that is by imposing tariffs\u201d, said Michael Smart, a former US trade official now at consultancy Rock Creek Global Advisors, a consultancy. <\/p>\n

Tariff hardliners prevail<\/h3>\n

Navarro, who was released from jail during the Republican convention last July, has emerged as a key White House figure and the biggest champion of hitting the US\u2019s trading partners with large tariffs, said people familiar with his thinking. <\/p>\n

A trade hawk who served four months for contempt of Congress after refusing a subpoena in the probe of the January 6 2021 attack on the US Capitol, Navarro was in the Oval Office on Inauguration day, when Trump first vowed he would slap Canada and Mexico with tariffs in February. <\/p>\n

A person familiar with the situation said: \u201cNavarro gets what he wants, he has been more emphatic than he was in Trump 1.0. He is now a major figure and Trump refers to him as \u2018my Peter\u2019.\u201d<\/p>\n

Another person said Trump would often put Navarro out in public to \u201cscare\u201d people with his maximalist take on tariffs and trade. <\/p>\n

Behind the scenes, Navarro has been working closely with Lutnick and Jamieson Greer, Trump\u2019s pick for US trade representative, as they begin to build the president\u2019s trade policy.<\/p>\n

Lutnick, who has emerged as a proponent of tariffs despite his Wall Street background, has played a starring role in the back-channel talks with Canadian and Mexican diplomats and officials in recent weeks, meeting Canada\u2019s foreign minister M\u00e9lanie Joly at Trump\u2019s Mar-a-Lago resort in December, and Justin Trudeau, Canada\u2019s prime minister, in Poland in recent weeks. <\/p>\n

Speaking at an event hosted by Politico on Tuesday, Navarro praised Lutnick and Bessent, calling them the \u201cnew blood\u201d of Trump\u2019s economic team. <\/p>\n

He also insisted the president\u2019s recent actions were not as \u201cchaotic\u201d as they seemed. \u201cWhat we\u2019ve seen is a lot of pearl clutching when this was announced, but we\u2019ve also seen immediate results from Mexico and Canada,\u201d Navarro said. <\/p>\n

The backlash<\/h3>\n

As it became clear over the weekend that Washington intended to impose sweeping levies without exemptions \u2014 apart from a lower rate of 10 per cent for Canadian oil \u2014 the backlash began.<\/p>\n

Some of the US\u2019s biggest business groups lined up to warn a North American trade war<\/a> would push up prices on consumer goods ranging from groceries to petrol and cars.<\/p>\n

Almost immediately Canada threatened tit-for-tat tariffs on $107bn worth of US goods, including alcohol, clothing and lumber. <\/p>\n

The move caused Trump to double down on his plans. Between rounds of golf in Florida, the president posted social media messages arguing that the US was paying \u201chundreds of Billions of Dollars to SUBSIDIZE Canada\u201d, adding: \u201cWe don\u2019t need anything they have.\u201d<\/p>\n

On Sunday and Monday, Canadian and Mexican diplomats and finance ministers scrambled to hold calls with their US counterparts. <\/p>\n

Meanwhile, markets started to show signs of strain. US equity futures plunged ahead of the market opening in New York on Monday. <\/p>\n

Kevin Hassett, chair of the National Economic Council, appeared on CNBC that morning and sought to reframe Trump\u2019s tariffs as an effort to rein in immigration and drug trafficking, rather than an all-out trade war. <\/p>\n

\u201cPresident Trump was absolutely 100 per cent clear that this is not a trade war,\u201d Hassett said. \u201cThis is a drug war.\u201d<\/p>\n

The dealmaking phase of Trump\u2019s first big trade confrontation was under way. <\/p>\n

The dealmaking<\/h3>\n

When a White House fact sheet on Saturday accused President Claudia Sheinbaum\u2019s administration of having \u201can intolerable alliance\u201d with drug cartels and providing traffickers a \u201csafe haven\u201d, Mexico\u2019s leader did not rise to the bait. <\/p>\n

Instead she accused the US of peddling its own lethal trade to Mexico by flooding her country with high-powered weapons but then pivoted to proposing dialogue. <\/p>\n

After a phone call between Sheinbaum and Trump on Monday morning a deal emerged that was remarkably similar to one reached during the first Trump administration in 2019: Mexico would send troops to the border to stem migration and drug trafficking and the US would drop the tariff threat.<\/p>\n

\u201cShe did the very best she could, having been dealt a very bad hand,\u201d said former Mexican foreign minister Jorge Casta\u00f1eda, citing the unequal nature of the bilateral relationship and the reluctance of the Trump team to engage. <\/p>\n

Mexico also scored a propaganda victory by being assigned a call with Trump on Monday morning, allowing Sheinbaum to announce an agreement at 9.21am local time just after local markets opened. <\/p>\n

The temporary pact with Canada took slightly longer to hatch, but the dynamic was similar. <\/p>\n

Politicians in Canada have noted Trudeau offered relatively minor concessions to the US president, including C$200mn (US$139.5mn) in fresh funding and the appointment of a \u201cfentanyl tsar\u201d on top of a C$1.3bn border plan already announced.<\/p>\n

\u201cYou spend C$1.3bn on the border, which is not even a rounding error. You throw in a couple hundred million, which is less than not even a rounding error,\u201d said John McKay, a senior MP in Trudeau\u2019s Liberal party and co-chair of the Canada-US Inter-Parliamentary Group.<\/p>\n

\u201cIf you put that in the context of daily trade, which is something like C$2bn a day. It is not really much of a concession.\u201d<\/p>\n

But in Windsor, Ontario, a hub of the Canadian car industry linked by a bridge to Detroit, Michigan, tens of thousands of workers still fear their jobs are at risk.<\/p>\n

\u201cI don\u2019t feel relief,\u201d said John D\u2019Agnolo, president of Unifor, a union representing Ford workers who build the engines for popular pick-up trucks. \u201cI just worry. It\u2019s only 30 days reprieve, this only means more turmoil for workers and families.\u201d<\/p>\n

Where next?<\/h3>\n

The temporary agreements with Canada and Mexico have a very short lifespan, and Trump could demand new concessions ahead of the March deadline that may be harder to satisfy. <\/p>\n