White House Reviews Trade Policies with Mexico and Canada
What has President Trump said this week?
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What has President Trump said this week? 〰️
1. Trump threatens 25% tariff on Mexican and Canadian goods
During his campaign last year, President Trump pledged to issue an Executive Order on January 20th to authorize “all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States”, as a response to illegal immigration and drug flow into the United States. While the tariff was scheduled to take effect on February 1st, upon taking office last Monday, Trump instead signed a Memorandum on Trade, instructing officials to review trade and tariff policies to address what he described as “unfair and unbalanced trade.”
An economic model created to project the potential damage of such tariffs determined that they would cause a reduction in the GDP and an increase in inflation, especially making cars, car parts, gas, food, and alcoholic beverages more expensive to the American consumer.
2. Trump says he will ‘demand’ that interest rates come down and has pledged cheaper prices
Since the start of his campaign, President Trump has made a bold promise to reduce inflation. At this year's World Economic Forum in Davos, Switzerland, Trump pledged to lower oil prices, and then, “I’ll demand that interest rates drop immediately, and likewise, they should be dropping all over the world.”
Trump later explained that reducing energy costs would help lower inflation, which would, in turn, “automatically bring the interest rates down.” When asked if he expects the Fed to listen to him on rates, Trump confidently replied: “Yeah.”
The fact is, it's not that simple. While lowering oil costs, as he demanded in Davos last week, and deregulation could help bring inflation down, other policies may counteract his intended effects on prices. For instance, lowering interest rates and imposing or increasing goods from Mexico, Canada, and China could drive prices up by increasing domestic demand and making it harder for businesses to source inputs from abroad. Similarly, stricter immigration laws and large-scale deportations could impact industries like agriculture, construction, and hospitality, leading to higher wages and rising costs. (TWP, 2024)
3. Trump’s Stargate Project, a $500 billion investment in AI infrastructure
“The largest AI project by far in history.” - Trump
Last Tuesday, President Trump, alongside OpenAI CEO Sam Altman, SoftBank chair Masayoshi Son, and Oracle founder Larry Ellison, announced the formation of Stargate, a new $500 billion American company. Funding would come from the technology arm of the UAE’s sovereign wealth fund. $100 billion was allocated for AI infrastructure in the United States during the first year, “creating 100,000 American jobs almost immediately” by building data centers, boosting electricity capacity, chip production, and other resources as part of an effort to “maximize access to AI" and to prevent capital flow to China. The announcement came just days before DeepSeek, a China AI startup, launched its AI model, shocking the market and disrupting the Artificial Intelligence industry by claiming it can compete with other established models like ChatGPT, at a fraction of the cost.
4. Deportation Dispute Escalates into Trade War: 25% tariff increase to Colombia
Last Sunday, Colombian President Gustavo Petro denied the entry of US military planes carrying Colombian immigrants back into his country arguing that “the United States cannot treat Colombian migrants as criminals” and that he would only take citizens back with dignity and in civilian planes. President Trump responded by imposing 25% tariffs on all Colombian goods coming into the U.S., which would go up to 50% in one week; President Petro retaliated with a respective 25% increase on US products. Washington’s tariff measures are now on hold due to a reached agreement and Colombia is now accepting deportation flights back into the country.
“The Government of Colombia has agreed to all of President Trump’s terms, including the unrestricted acceptance of all illegal aliens from Colombia returned from the United States, including on U.S. military aircraft, without limitation or delay… Today’s events make clear to the world that America is respected again. President Trump …expects all other nations of the world to fully cooperate in accepting the deportation of their citizens illegally present in the United States," a White House statement said.