What’s Happening?
Less than two weeks after taking the presidential office, Donald Trump announced new trade barriers, including a 25% sweeping tariffs on imports from Canada and Mexico and 10% on imports from the People’s Republic of China (PRC). In response, the Mexican president and Canadian prime minister immediately announced reciprocal countermeasures, while the leadership of the Chinese Communist Party (CCP) took a few days to respond. However, less than 48 hours later, following a series of negotiations with leaders of both neighboring countries, Trump delayed the implementation of the announced measures by 30 days. In the meantime, Trump has used similar tactics against Panama, which subsequently decided not to extend its Belt and Road memorandum with China beyond 2027. Meanwhile, Beijing has been watching all these developments from the sidelines.
What is the broader picture?
As reasons for the newly announced tariffs, the White House cited illegal migration and fentanyl trafficking into the US. Both U.S. neighbors, referring to the postponed tariff implementation, have announced further efforts to strengthen border security. However, the actual impact of such tariffs on illegal migration and drug trafficking is highly questionable. After all, drug cartels and illegal immigrants do not typically pay tariffs when crossing the U.S. border. Trump’s goal of reducing fentanyl flows into the U.S. would be unlikely achieved solely through these measures, while the economic consequences for all North American countries could be severe. Therefore, it appears that Trump is using the tariff threats primarily as a tool to pressure his counterparts, engaging in a high-stakes game of chicken in which he aims to emerge as the one who does not yield first. It isn’t just America’s economic ties with other countries at stake; it is also Washington’s reputation and credibility as a cornerstone of the current international order based on the rule of law and free trade principles. Trump is, at the very least, playing a perilous game.
The White House’s current actions are being closely watched from Europe and especially from Beijing, who seem likely to become his following targets. Therefore, the outcome of the North American trade dispute will be crucial. The key question is how each side’s actions will be interpreted and what concessions—if any—will be made. Beijing, which is Trump’s biggest adversary in this trade battle, has been preparing for another round of trade war for years. As a result, it’s far less vulnerable to U.S. trade restrictions than it was in the past. Moreover, it appears that Trump may have been the first to yield in this North American game of chicken.
The United States is no longer the sole primary market for Chinese goods. Today, China controls a significant portion of global supply chains, is the largest trading partner for over 120 countries, and has been aggressively diversifying and expanding trade with Asia, Latin America, and Africa. It is also shifting its economic model toward strengthening domestic demand and consumption to enhance its resilience against external financial shocks. Recently, in preparation for another potential confrontation with the Trump administration, China has even sought to mend strained relations with regional powers like India, Japan, and Australia.
However, experts see China’s retaliatory measures against the newly imposed tariffs as relatively mild but strategically well-calculated. Beijing seems to be creating room for further negotiations without losing face, as a full-scale tariff war could further harm its already weakened economy despite years of preparation. However, this is likely the opening salvo in a broader confrontation between the world’s two largest economies. Has the Chinese dragon been intimidated by the madman of the White House, or has it learned from past confrontations?
Why is it important?
It is well known that Donald Trump cultivates an image of an unpredictable leader, capable of anything—making his threats in disputes seem potentially serious. However, if it turns out that Trump does not entirely mean his threats and fails to extract significant concessions from Mexico and Canada, his carefully crafted image could be seriously harmed. This, in turn, could weaken his credibility in future negotiations with states that represent a much more significant strategic challenge—particularly the PRC. Other countries, including the Czech Republic and EU members, can learn from this situation. Trump will likely insist on maximalist demands in defense spending commitments and other concessions in economic and security matters. The way his current trade confrontations unfold will provide valuable insights into how these future negotiations might play out.
