Ricardo Pascoe Pierce
It is reasonable to expect that Donald Trump will impose tariffs on Mexico and other countries in April. The underlying reason is contextual, not even economic. If his reasoning were economic, the sensible thing would be not to apply them because, as the Chairman of the US Federal Reserve, Jerome Powell, recently said, the mere threat of tariffs generates uncertainty, which triggers inflation and depresses GDP. Tariffs raise fears of trade wars and the specter of a global economic recession, starting with the United States.
But Trump knows all that, and he doesn’t care. He has already imposed a 25% tariff on aluminum and steel entering the United States. Canada, China, and the European Union have all imposed reciprocal tariffs on the United States in response to its first round of tariffs. Threatening to impose tariffs and then postponing them makes markets adjust to the idea of tariffs even before they are applied.
Financial markets and value chains have been preparing for tariffs’ imposition before they have arrived. So, by the time the tariffs arrive, assimilating a pre-anticipated reality will already be more orderly. There will be disappointment but no surprises.
Context is what drives Trump. His behavior as President is based on past anger and future claims to royalty. On the one hand, he decides his actions based on the grievances he harbors against those he considers despised, ignored, or betrayed him. Judging by the number of actions he takes, he has a very long list. Democrats, Republicans, former associates, judges, journalists, news channels, leaders of other countries, and, in all these cases, their relatives are targets of persecution, criminal accusations, negative publicity campaigns, and public ridicule. He will use all the power of the state to annihilate his detractors.
In terms of future royalty, Trump is moving quickly to establish himself as the world’s “greatest politician” who will resolve the wars in Ukraine and the Middle East in record time. He also wants his legacy to be one of having shaken up the global political landscape, initiating a cultural revolution, and destroying the “unrealistic” pretensions of Woke equity and non-discrimination. Hence, his empathy for Putin and any conservative authoritarian leader in the world. Human rights and any LGBTI issue are headed for the dustbin of history.
He wants unusual business opportunities. To achieve this scenario, he needs to cause disruption in global economic processes and traditional value chains. He thinks like a businessman looking for new opportunities to acquire real estate. Hence, with a justification of “national security”, he promotes the “acquisition of new properties” for the country: Greenland, Canada, and the Panama Canal, for starters. As a developer in New York, Trump promoted the expulsion of people with low incomes from certain areas to buy their land or properties, to make modern developments, and to gentrify new neighborhoods. Now he aspires to do the same, but with entire countries. In that sense, he is perfectly consistent with his way of seeing reality and his behavior before becoming president.
This shapes his view of the world and what he considers his acquired right as President of the United States. Disturbance is his classic offer to achieve his objectives. His idea for governance can be summed up as follows: in turbulent and confusing times, whoever has a clear idea of what they want has a good chance of achieving it.
The need, then, is to create confusion and turbulence, which is exactly what he is doing. He wants to emerge from the chaos with a Nobel Prize for achieving peace in Ukraine and the Middle East. He also wants to reindustrialize US manufacturing and dismantle the system of peace inaugurated after World War II, such as the United Nations, and usher in a new era of global economic, political, and military balances between world superpowers (the United States and China) and some regional powers, such as Russia, Israel, and the European Union.
In this context, Mexico is considered part of the secondary manufacturing production of the United States. Trump wants the entire automotive industry of Mexico to move to his country. On Trump’s world map, Mexico is relegated to being an economy of essentially primary and tertiary activities. It is no accident that the US president Trump admires the most is Polk, who invaded Mexico and seized a significant portion of its territory in 1847-8. He placed his photograph in the Oval Office. Polk promised to expand US territory, and he achieved this with the invasion of Mexico. And he achieved it in the scant four years he governed his country. He became President in 1845, and by 1847, he had ordered the invasion of Mexico, concluding the war in 1848. He left the presidency a year later.
Trump believes he has the time necessary to leave an indelible mark on his country’s history by taking decisive action against other territories. In this context, Mexico is an appetizing morsel and, in his opinion, easily accessible due to its structural weakness and questionable governance.
It is a mistake to think that Trump can be manipulated with flattering words and condescending behavior. He has said what he wants from Mexico. He believes he has the right to order change in our country, according to his opinion, and is protected by a concept of national security imported from his country. For that reason, the ground is being prepared for action with a psychological war in Mexico, tariffs are being postponed so that industries take their precautions, and a social environment of resignation is being promoted. But there is no doubt that he is coming with everything, including tariffs. We must be aware that he is coming to create a great disturbance in Mexico, which he believes will benefit him in achieving his objectives. He has announced it, and he intends to do it. The difficult economic costs will have to be borne by the citizens of his country, but we Mexicans will resent it even more.
We must assume that he will apply tariffs in April. In fact, he has already applied tariffs on aluminum and steel at 25%, and we have not responded with reciprocal tariffs, as the Canadians and Europeans have. It is unclear whether the strategy of moderation and kindness has sent the right message. How does Trump take it? As moderation and kindness, or as an expression of fear and weakness? Canadians responded with billions of dollars in tariffs on the United States and a “buy Canadian” campaign.
Mexico would have been strong but moderate, applying tariffs of 25% to aluminum and steel imports without going further. And inviting all the people of Mexico to the town square, not just the members of Morena.
The hardest part is yet to come. It’s coming soon.
@rpascoep
Further Reading: