The world reacts to Donald Trump’s latest trade plans

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In today’s big story, the world reacts to Donald Trump’s latest trade plans, which could be a massive negotiation tactic.

What’s on deck:

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The big story

Tough trade

Trump plans to make changes to the Affordable Care Act during his second term.

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The man who dubbed himself a master negotiator is upending the global trade market with his latest tactic.

The world is reacting to President-elect Donald Trump’s new trade proposals targeting China, Mexico, and Canada. There’s a lot to unpack, so let’s break it down:

So, Trump finally gave us an update on his tariff plans. Wasn’t this expected? He’s telegraphed his plans for hammering Chinese imports, but a 25% tax on Canadian and Mexican goods was a shock. It’s the first time Trump has singled those countries out, although he promised 10-20% tariffs on imports across the board while campaigning. (Another interesting wrinkle: Trump negotiated the current trade deal between Canada, Mexico, and the US.)

Ok, but what does the US even import from our neighbors? Simply put: Oil (Canada) and autos (Mexico). More broadly, Mexico exported $475 billion worth of goods to the US in 2023, and Canada sent us $419 billion in exports.

What’s Wall Street got to say about all this? The US stock market didn’t really flinch Tuesday. The same couldn’t be said for the rest of the world. Mexico and Canada’s stock markets declined, their currencies dropped relative to the US dollar, and the fear spread to European and Asian markets.

Wait, why didn’t the US market react if this was a surprise? Some investors believe the latest proposal is a negotiation tactic by Trump. His Truth social post positioned these taxes as a punishment for both countries’ handling of the borders they share with the US. “This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” Trump wrote.

Will that work? It definitely got a reaction. Canadian Prime Minister Justin Trudeau said he had a “good” conversation with Trump. Mexican President Claudia Sheinbaum’s response was mixed, as she floated retaliatory tariffs. But there’s an incentive for both to find a solution. The US received 83% of Mexico’s exports and 75% of Canada’s last year.

So there’s a chance none of this even happens? Maybe, but it’s a high-stakes gamble. Some executives have made clear they’ll have to raise prices if the tariffs are enacted. Best Buy’s CEO recently said “the customer ends up bearing some of the cost of the tariffs.”

Isn’t there something they can do in the meantime? Companies could reroute shipments or stock up on supplies ahead of time, but changing your supply chain on the fly (especially during the holiday season) doesn’t come cheap or easy. And then there’s the risk that none of this comes through, and they wasted those resources for nothing.

News brief

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