A cargo ship full of shipping containers is seen at the port of Oakland as trade tensions escalate over US tariffs, in Oakland, California, US, on March 6, 2025. Photo: IC

 
Editor's Note:

US tariffs continue to rise, altering Washington's trade ties with its competitors, allies and neighbors alike. Can these tariffs really make the US "rich again," as argued by US policymakers? How are US neighbors reacting to the tariffs? In the latest episode of Global Times' Global Minds Roundtable (GT), Daniel A. Sumner (Sumner), distinguished professor in the Department of Agricultural and Resource Economics at the University of California, Davis, Radhika Desai (Desai), professor of the Department of Political Studies of University of Manitoba in Canada, and Eduardo Tzili-Apango (Tzili-Apango), associate professor in the Department of Politics and Culture at Metropolitan Autonomous University and member of the Mexican Council on Foreign Affairs, share their views.

GT: Beyond the complex motivations driving this policy, what do you anticipate will be the most immediate impact of these US tariff impositions? 

Sumner: Immediate impacts are probably more political than economic. Almost every economist looks at the current implementation in the US and says that it adds uncertainty to business. Even the tariffs that haven't yet been applied but are threatened, cause uncertainty, and uncertainty is almost always bad for business.

Here, in my state of California, a lot of dairy farmers routinely feed a product called canola to their cows. It's an oilseed grown in western Canada. It's a good feed. We have had free trade for many years, making this the natural choice. Now, farmers are not quite sure. They have to make an investment decision. It might not sound like much to you and me, but if my friend has 1,000 cows, he is trying to make a good decision economically for his farm. It raises uncertainty, which is a problem. Even if the tariff on canola hasn't been imposed yet, the uncertainty itself is already causing damage. They said they would impose it, then they didn't, then they might, and now they say they will in April. We'll see.

In everyday life, we buy lots of avocados from Mexico. At some point, those avocados might become more expensive. Many of these things haven't happened yet, but in other cases, things are already getting a little more expensive.

A lot of the wine produced in California is shipped to Canada - our biggest export market. But now, Canadians have become angry over public statements made by the US government. So they've said, we don't like California wine anymore. We'll buy our wine from France, Italy, Spain, Chile... There are lots of other places they can get their wine from, and that hurts California producers, even without a tariff. It's a kind of self-isolation - where we make people annoyed with us. Canadians are nice people; it takes a lot to get them annoyed. And now, some of them are saying, we'll just buy Canadian products or European products. 

That's not good for our businesses, for normal people here in California or the rest of the US - this is just standard trade economics. This is not a surprise. It's basic, old-fashioned economics.

Desai: The motivations are really not worth talking about because, quite frankly, practically all of them are questionable. Imposing such tariffs is not going to revive industry. It's going to increase inflation. It's going to make life more expensive for ordinary Americans.

If you look at the big picture, its effects are going to be to marginalize the US in world trade.

Already, the role of the US in world trade has been declining. Today, depending on which measure you're looking at, the US accounts for between 10 and 16 percent of world imports. This is not a small figure, but it is not overwhelming either. What that tells you is that the overwhelming majority of the world can deal with this shock.

On the other hand, Canada and Mexico are particularly vulnerable. They have been imposing some retaliatory tariffs. But in the case of Canada, they are tiny in comparison with the tariffs that the US administration is imposing or threatening to impose. But really, even with this back-and-forth on tariffs - impose them one day, not going to impose them the next, soften them the third day - the uncertainty it creates has already created a lot of disruption in Canada.

For Canada and Mexico, the long-term strategy must be to restructure their trade and reduce their reliance on the US. Historically, in both countries, particularly since Canada decided to go for a free trade deal with the US in 1988, with the Canada-US Free Trade Agreement, and then beginning in the early 1990s with the advent of North American Free Trade Agreement, there have always been prominent economists who have said that this level of reliance on such a gigantic economy is not a good idea. Canada and Mexico must diversify trade. This has now become a more urgent question. 

In both Canada and Mexico, there will be a fair amount of short-term pain. However, if - and this is a big if - the leaders take the opportunity to start overhauling, in a fundamental way, the trade relations between these countries and diversify their trade, it will take a long time, but it can be done. If they do that, then, in the long run, they will come out of it better than their current abject dependence on the US market.

GT: US policymakers defended their tariff moves by claiming that the US was at its richest when it was a tariff country around the 19th century. Does this argument hold up today?

Sumner: A lot of things have changed. And the best historians would not agree that high tariffs were good for manufacturing growth in the US.

It is certainly true that, in the past, a substantial part of government revenue in almost every country came from tariffs. It was hard to do taxes. However, today, governments have alternative tax systems. As most people buy goods from grocery stores, online retailers like Amazon, or other businesses, governments impose sales taxes, which serve as one source of revenue. In the EU, they have value-added taxes; in the US, we rely on income taxes. Today, when I receive my paycheck - whether by mail or electronic transfer - taxes are already deducted automatically. We no longer need to rely on tax at borders for revenue.

Some claim that if you place a tax on importers through tariffs, consumers don't pay for it. That's simply not true. Whether the exporter or the consumer pays, data show that mostly the consumers pay. You can't find a credible economist who believes this is a great idea for economic reasons. 

Tzili-Apango: In the 21st century, with the trend of globalization and rising interdependence, it's hard to see how a protectionist foreign policy will make America great again.

On the contrary, you can make America great again by deepening your economic and political ties with the entire world, especially with your main trading partners. 
Another way to make America great again is to focus on strengthening its own industrial complex, rather than targeting the industrial complexes of other countries.
There is a reason why these industries, factories and firms decided to move out of the US in the first place. There is a more favorable economic environment for these industries to develop elsewhere. There are many reasons why these firms decided to leave, and the bully attitude of the US government is not only affecting China or Mexico, but also their own industries. The US government doesn't leave room for these industries to decide what economic decisions are in their best interest.
One might say that US isolationism is a doctrine that characterized US foreign policy in the 19th century.  

However, back then, isolation could be afforded or pursued without any significant consequences. But now, with globalization on the rise, and the trends of interdependency and more connected markets and economies, isolation is a very poor option. So, deciding to go after isolationism, I believe, is a result of poor judgment, as it shows a lack of awareness of current world politics and trends.

Desai: Historically, all developing countries have had tariffs, so did the US during its initial development. The US is regarded as having benefited not only from enormous natural protection - being bounded on both sides by two great oceans - but also from imposing tariffs. This was part of an industrial strategy. But you can't turn back the clock to the late 19th and early 20th centuries. 

GT: Considering the current escalation of the trade war, what policy recommendations would you suggest for your country?

Desai: Unfortunately, Canada is not in a very strong position. The real issue is not whether you can respond in a tit-for-tat manner - in this game, Canada cannot win. Canada can only win by restructuring its trade.

Some people have pointed out that the response to these tariffs has been very low. 

Even if you look at how much Canada buys from the US, it's a small fraction of the goods Canada purchases that have been affected by Canadian tariffs against the US.
To some extent, at the end of the day, tariff policies will harm your own people. You are increasing inflation in your own country. What Canadians have to do is prepare to protect the most vulnerable parts of the economy, the most vulnerable sections of the population, while restructuring trade.

The government needs to undertake a plan to strategically reorient the Canadian economy toward other trading partners, both within the region, in the Americas, and around the world, especially with China, which has so much to offer.

Sumner: Most economists, including myself, follow a particular approach: We don't suggest policies, because there are many considerations involved. What we do is talk about the economic consequences of alternative policies.

Like most economists, I begin with free trade as the standard, a concept that dates back 250 years, when international trade was very little compared to now. I told my students that my favorite trade agreement is the US Constitution.

More than 200 years ago, we wrote into our founding documents the principle of free trade between states, which has significantly contributed to causing the US to become rich. If we expand that free trade to include Mexico and Canada, it'll create prosperity for all of us.

Now, if some politicians say: "I really think we should have more steel manufacturing in the US, so we'll keep out steel from other countries, people will have to manufacture steel here in the US," I would say: "If your goal is to keep steel out from everywhere, that is costly for the economy."

GT: How will the rising US tariffs impact your country's relationship with China?

Tzili-Apango: There was once a time when China and Mexico shared similar industrial structures. Both economies focused on intermediate- to high-value products. China has now made a leap forward in innovation and technology. 

I think Mexico could learn a lot from the experience of a country that was once a partner in the same industrial situation.

Of course, I want to reiterate that China is our second-largest trade partner and a very important source of many goods that we consume and re-export in Mexico. I believe we have a win-win relationship, and that kind of relationship should be deepened, not reduced.

Desai: Strengthening relationships with China, to me, is a no-brainer - it's the logical thing to do. However, I think that the path to better China-Canada relations is strewn with a lot of obstacles. 

Unfortunately, this has become a bit of a political football between the Liberals and Conservatives, with both accusing each other of being soft on China, thus creating a dynamic in which both parties are competing to show who can be tougher on China. I hope that something will interrupt this extremely destructive political dynamic that has found its way into Canadian politics

Canada has a lot to gain from better relations with China, including on things like agricultural exports, and industrial collaborations. The path to that can only be cleared once this destructive dynamic is interrupted. I hope this will happen in the near future.