ARE TARIFFS A TRUMP NEGOTIATING TACTIC?

06.02.2025 Over the weekend President Trump announced 25 percent tariffs on Mexico and Canada. However, by Monday they had been postponed. Below we look at how the Trump tariff rhetoric should be interpreted.

President Trump was elected on a promise of higher tariffs. Since his election victory, in November, it has been whether this represented a serious attempt to raise American production of a range of manufactures or a negotiating tool to further American interests.

After this week’s events the balance has swung in favour of the latter. Last weekend Trump announced 25 percent tariffs on all imports from Canada and Mexico. However, by Monday, after he had extracted concessions from both parties, their implementation was postponed for a month to allow for further negotiation.

If Trump had been serious about implementing a long-term tariff, he would have surely adopted the suggestion of his Treasury secretary of starting with a small tariff and gradually increasing it over time. This approach would have minimized the disruption to commerce. Suddenly imposing 25 percent tariffs in a region that has benefited from free trade since 1994 would have been very unsettling.

So, on the assumption that most countries will be able to cut a deal with Trump the dominant theme will be a global economy slowly recovering from a sharp rise in interest rates, post pandemic destocking and a Chinese real estate slowdown.

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This post was written by Robin