Why NAFTA Tariffs Hurt Americans

We’ve hit a new low.

First, China is slapped with tariffs. Then, the EU gets hit in the midst of Italy’s political turmoil.

Now, the US’ closest allies are feeling the sting.

As of May 30th, the Mr. Trump imposed tariffs on Canadian and Mexican steel and aluminum imports. The hope, as with previous tariffs, is to entice Canada and Mexico to sign a NAFTA deal that neither are happy about.

Unfortunately for Mr. Trump, things haven’t turned out quite as planned.

Instead of conceding, both Canada and Mexico have taken steps to impose their own tariffs on US imports. Prime Minister Justin Trudeau has cancelled his next US visit, and Mexico’s Economy Minister Ildefonso Guajardo has noted that this “is a sad day for international trade,” pointing out that NAFTA’s southern neighbors are prepared to act.

While we’ve seen Mr. Trump throw tariffs around like water balloons on a hot day, targeting some of the US’ closest allies is quite a different thing.

Now the question is, what effects will this round have on the US, and what makes this different from all of our other trade woes?

Globalization

This might seem a bit silly.

When we think of globalization, we generally think of a shrinking planet, with far-off places coming together as technology makes them more accessible. It’s not as hard to drive to Mexico or Canada than to hop over an Ocean to France or Morocco.

Globalization is about international relations, and connecting with those other nations in hopes of bettering relationships, sewing political ties, and making the world a better place to live in.

If we can’t get along with the countries that we touch so frequently, some literally at our borders, how can we expect to play nice with everyone else?

More than a negotiation tactic, these newly-imposed tariffs are an extension of protectionist policies at the heart of the current administration.

America-First, and many other more controversial moves from the administration, have just reinforced the insulation and introversion of the US since 2016.

Can we really blame Mr. Trump? The US is seeing economic growth across the board, unemployment is at an all-time low, and businesses are more confident and optimistic than ever.

While these numbers could deflate, there’s no denying their relevance.

But, as with everything, there’s more to the story of protectionism, and more consequences.

Relationships

Remember that international relations thing from earlier? Economics clearly works its way into those conversations, but there’s a lot more that goes into it.

Mr. Trump is also currently negotiating with North Korea and Iran, who possess and have threatened to use nuclear weapons.

Not that it would go that far, but the US and Canada share membership in NATO (The North Atlantic Treaty Organization), as founding members.

With rising tensions around the world, it might not be in the US’ best interest to upset countries it has historically allied with during international altercations.

But, back to trade.

Canadian and Mexican consumers and businesses will inevitably have to go elsewhere for their goods and services if these trade barriers stand.

It might seem like the the world needs the US, but in fact, the opposite is true.

Depending on how this all shakes out, the US automakers may see a spike in pricing and manufacturing costs without access to Mexican autoparts, the country’s largest import to the US by far.

For Canada, the US may lose out on cheap wheat, lumber, and crude oil.

While this will surely affect the currently thriving US economy, there’s an often forgotten group that these changes affect more directly: businesses.

Stalled

What lawmakers and economists seem to forget too easily is the major effect tariffs on global imports has on domestic and international business.

Higher tariffs means paying out of pocket for imports and exports, and potentially losing out on business with businesses large and small from two of our closest allies.

But, more importantly, these tariffs may ultimately stifle small business expansion into the global economy.

Canada and Mexico are often seen as stepping stones for small businesses. They cost less to import from and export to, there’s a long-held political and cultural relationship, and NAFTA has helped ease legislation and taxes since it was introduced in 1994.

Added to that are recent EU tariffs, another trading partner that has historically been “safe” for US businesses to begin their global journey with.

While this might be good for further isolating the US economy, the world doesn’t work like that, and businesses can’t survive in such a hostile environment.

Globalization is here, whether we like it or not. Technology has made sure of that, and shifts in consciousness around the global have perpetuated international endeavors.

Tariffs and feuds can’t stop the inevitable. But, without a change of heart from global leaders, many could still suffer.

We can only hope that our allies don’t decide we need them more than they need us.

This content was originally published on the Veem blog. Check it out for more information and exclusive articles.