King’s gambit: What Trump’s threats of big tariffs on imports from China, Canada and Mexico tell us

It has been interesting to watch Donald Trump back in action. Sitting in India, Trump’s thumping win over Kamala Harris – that seems to have sapped the Democrats of their energy and pushed them into a maelstrom of blame-shifting despair and self-doubt – has almost a theatrical quality to it. It is the very best reality TV. A show that cannot be replicated by production houses.

If his win was Season 1, Season 2 is already upon us, nearly two months before the president-elect moves into the Oval Office. Trump’s threat of piling tariff on Canada, Mexico and China – America’s three largest trade partners – and his promise of enacting the executive order on Day 1 of his return to office has sparked a tsunami of reactions. Besides entertainment, the show provides valuable lessons. New Delhi will be observing closely, maybe feeling a little hot under the collar.

The president-elect of the United States, who will assume office on January 20, has said that his decision to levy 10 percent tax on Chinese goods over and above the duties already in place are to stop fentanyl flows into the US. China produces precursors for the synthetic opioid that is the primary driver of overdose deaths in America and Trump accused China of doing nothing to stop the shipping of illegal drugs to American shores. The former president ran on a promise to ‘fix’ the fentanyl crisis.

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Similarly, his move to impose a staggering 25 per cent tariff on Canada and Mexico, the two neighbours with whom the United States enjoys deeply integrated supply chains, are for what Trump says is their “inability” to stem the flow of narcotics and illegal migrants through the US border.

A lot has been written/will be written about whether Trump intends to implement the tariff or whether he is bluffing, using the levy as a gambit to force countries into making concessions. It is perhaps more instructive to watch how the countries, politicians, market forces, organisations, industry groups and trade bodies are already shifting positions due to Trump’s threats.

The Canadian prime minister, Justin Trudeau, picked up the telephone within two hours of Trump posting the threat on his social media platform. The Mexican president issued an immediate rejoinder and followed it up with a phone call couple of days later. Beijing remained officially tightlipped but let its state-controlled media do all the talking.

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In each case, however, the posturing from US trade partners have been conciliatory even though Trump’s threats were, strictly speaking, unprovoked and some may argue even unwarranted. In other words, their reactions were defensive, even though it is quite apparent that if Trump goes through with his threats, it will cause misery all around and hit even American consumers.

Canadian and Mexican economies would be heavily impacted for sure, but such in the nature of the integration of the North American market that it will have a grave impact on American industries as well.

New York Times points out that Trump’s tariffs would impose costs that could be “particularly high for the industries that depend on the tightly integrated North American market, which has been knit together by a free-trade agreement for over three decades. Adding 25 per cent to the price of imported products could make many too costly, potentially crippling trade around the continent. It could also invite retaliation from other governments, which could put their own levies on American exports… That, in turn, could cause spiking prices and shortages for consumers in the United States and elsewhere, in addition to bankruptcies and job losses.”

Yet the very fact that Trump goes ahead with these threats (or negotiating tactics if you will) indicates a certain risk-taking ability that puts his targets off guard. Trump’s appetite for taking chances and displaying a kind of recklessness introduces volatility and randomness during negotiations that leaders find off-putting.

Trump has little respect for America’s vaunted exceptionalism and does not get the tenets of strategic altruism. He also refuses to buy into the myth that America is a uniquely virtuous nation that abides by the rule of law and rules-based order. That makes him a hyper-realist, if cynically so. The flip side of this position, for nations dealing with Trump, is that he is harder to be shamed into a grand bargain.

When Joe Biden defeated him in 2020, the then new administration went to town declaring that “adults are back into the room”. That’s a euphemism for saying that others always expect Americans to be reasonable, to take a long view, to adopt a philanthropic posture on trade negotiations. This idea has received an utter rejection in the mandate that saw Trump return to power.

The recently concluded presidential elections have confirmed that vast majority of Americans except the urban, educated, middle-and upper-middle-class lot are tired of ‘leading’ the world. They want to retreat.

As Andrew Byers, military historian, and professor Randall L. Schweller of Ohio State University write in Foreign Affairs “…many Americans are turning away from presidential candidates who embrace a muscular, expansive foreign policy. They see the compelling structural reasons to demand a shift. And so many of them have embraced a candidate who has called for global restraint, retrenchment, and narrow self-interest: Trump.”

Trump is a change agent. He is a disruptor. He loves upending the applecart. Trump revels in chaos and seems to draw energy from disorder. His belief in the power of the American market (while being aware of the limits of American power), the attraction of it for countries around the world who want to profit from the largesse offered by the world’s largest and booming economy, goes side by side with his willingness to use the market as a gambit for achieving a set of objectives.

A man who seemingly refuses to play by the rules, who doesn’t get intimated by the threat of disruption and chaos is a hard man to nail down. Trump makes China uncomfortable, because he surpasses the CCP regime in risk-taking abilities. He is unafraid of triggering a trade conflict with China which sells more than $400 billion worth of goods annually to the US, and understands that Beijing still needs to tie itself to American economy to become stronger.

Through his posturing, Trump is heaping pressure on China, flipping the power dynamic between the two superpowers unlike Biden’s tenure when the American president repeatedly impressed upon Xi Jinping the need for ensuring that “that the competition between our countries does not veer into conflict, whether intended or unintended” and why both countries should “establish some commonsense guardrails, to be clear and honest where we disagree, and work together where our interests intersect…”

It is China that is now calling for guardrails and reminding Trump (through state media) that “there are no winners in tariff wars. If the US continues to politicise economic and trade issues by weaponising tariffs, it will leave no party unscathed.”

This isn’t to say that Trump is always right, or that his tactics will work every time. But since he departed from office in 2020, Biden largely continued with the core tenets of Trump’s China policy. As a foreign policy heretic, Trump charts uncharted territories. It will be fun to watch him at work.

Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.