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Fast Thinking February 4, 2025

Where do the Trump tariffs go from here?

By Atlantic Council

GET UP TO SPEED

He’s hitting the pause button—for now. On Monday, US President Donald Trump announced that he was pausing the proposed 25 percent US tariffs on goods from Mexico and Canada after those two countries’ respective leaders agreed to strengthen border security and invest more in counternarcotics initiatives. However, the 10 percent tariffs on all Chinese goods went into effect at midnight on Tuesday, with Beijing quickly retaliating. What’s next for the United States’ tariff policy on its North American neighbors and China? And what other countries might Trump threaten tariffs against next? Our experts offer their insights below. 

TODAY’S EXPERT REACTION BROUGHT TO YOU BY

  • Josh Lipsky (@joshualipsky): Senior director of the Atlantic Council’s GeoEconomics Center and former adviser to the International Monetary Fund
  • Reed Blakemore (@reed_blakemore): Director of research and programs at the Atlantic Council’s Global Energy Center
  • Jason Marczak (@jmarczak): Vice President and senior director of the Atlantic Council’s Adrienne Arsht Latin America Center
  • Barbara C. Matthews: Nonresident senior fellow at the GeoEconomics Center, former US Treasury attaché to the European Union, and founder/CEO of BCMstrategy, Inc.

China’s muted response

  • China’s overnight retaliatory actions against the tariffs were “a muted response” that was meant to prevent further escalation, Josh tells us. For example, China excluded primary imports from the United States, such as soybeans, from its countermeasures. “What they’re hoping is that Trump stops here,” he says.
  • China is “keeping its powder dry,” Josh notes, as it hopes for negotiations along the lines of the phase one trade agreement Beijing struck with the Trump administration in 2020. Meanwhile, he adds, China’s launching of an antitrust investigation against Google was a surprise move showing that Beijing could further target US tech companies if trade tensions persist.
  • “The trend to watch” will be actions on critical minerals, says Reed, noting that China placed restrictions on exporting tungsten and indium to the United States on Tuesday. China is “very aware of where it can poke at the United States on these mineral supply chains,” Reed notes.

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Canada and Mexico’s continued concern

  • Even with the thirty-day pause, Jason points out that the dispute will still affect North American trade, as there is now “significant fear and concern” in both Canada and Mexico.
  • Jason says that wait times for cross-border traffic “will likely increase over the next thirty days” as Mexico cracks down on illicit shipments to the United States and that this slowdown will “have an impact on the US economy.” Over the longer term, he expects Mexico to continue diversifying its supply chains away from the United States; Mexico notably just struck a trade deal with the European Union (EU).
  • The same goes for north of the border, where Reed says there are growing “conversations around de-risking from the US economic relationship,” and this question will feature heavily in this year’s Canadian elections.

Europe’s caution

  • European leaders “have played this entire situation very well, very cautiously,” says Barbara, who notes that there hasn’t been much of a public response from the continent to Trump’s tariff threats. She adds that in the last month alone, European policymakers expanded their global footprint with economic and strategic partnerships in Japan, Mexico, and Malaysia. 
  • However, Barbara points out a number of “very significant pressure points” that are “guaranteed to generate friction and headlines over the next couple of years.” These include the United States’ and EU’s vastly different views on climate issues, energy policy, and digital currencies. “I believe we will work our way through with our strategic partners, but they will be bumpy years,” says Barbara.

Who could be next?

  • Europe could be a prime target. Barbara points to a United Nations Conference on Trade and Development report indicating that the countries most at risk for tariff tussles with the United States will be those that have both trade imbalances and high tariffs. For example, she says, “European tariffs on US imports are already higher than US tariffs on European imports, even before Europe’s Carbon Border Adjustment Mechanism goes fully into effect.”
  • But it’s not just Europe. Given Trump’s threatened tariffs on the cars and auto parts from Canada and Mexico, “it doesn’t make sense strategically” to tariff those countries and not major auto exporters South Korea and Japan, Josh says. Otherwise, he notes, the North American auto tariffs would create “a very strange sort of dynamic” that would benefit South Korea and Japan “at the expense of American manufacturers.”
  • Jason, meanwhile, thinks Nicaragua could become a target of Trump’s tariff measures because of the Nicaraguan government’s role in facilitating illegal migration to the United States. Tariff measures against Nicaragua, says Jason, “would be fairly in line with what he has been doing on the migration front.”

Further reading

Related Experts: Jason Marczak, Josh Lipsky, Reed Blakemore, and Barbara C. Matthews

Image: Container ships enter the Port of New Jersey in New Jersey, United States, on February 3, 2025. U.S. import products could increase by 25% in tariffs from Canada, Mexico, and China. Mexico faces a 25% tariff, while Canada is charged 25% on its imports to the United States and 10% on its energy products. China faces an additional 10% tariff because of its role in the manufacture and sale of fentanyl, according to Trump's White House. President Donald Trump confirms that planned tariffs on Mexico are suspended for 30 days. (Photo by Deccio Serrano/NurPhoto)NO USE FRANCE