The world's reaction to Trump's tariffs is what matters next.1916.jpg
Trucks in Ciudad Juarez, Mexico, wait in line at the Zaragoza-Ysleta border bridge to cross into the United States.
Mexican goods entering the United States will be subject to a 25% tariff.
It was no bluff, the tariffs are here — and this is just the first from the Oval Office.
The global trading system has never been in this situation before. A slide into a broader trade conflict is entirely possible as President Trump prepares similar tariffs first against Europe and then at a lower level around the world.
But what matters as much as the US's actions is how the rest of the world reacts.
This, in turn, requires a judgment about what the president is really trying to achieve. Trump regularly changes his arguments for tariffs, whether to force diplomatic change, address trade imbalances, or increase tax revenue.
These policy goals cannot all be achieved simultaneously.
For example, learning from the experiences of the "China deal" in Trump's first term, Western diplomats have tried to find lists of American products that they could buy more of, to give the White House some victories.
Europe could say that it is increasing its purchases of American shipments of liquefied natural gas, weapons, or specialized magnets for wind farms.
It does not matter that these trends are already underway, as long as the US president can be allowed to achieve a "victory." But is the measure really intended to change the trade deficit figures?
Officially, the reason for Trump's decision is to crack down on the synthetic opioid fentanyl, but it is widely seen as a legal pretext for "emergency" actions that would normally require a decision by Congress.
Canada has signaled it will take a tough approach to Trump, best expressed by the country's nominee to be the next prime minister, Mark Carney.
"We will fight ... dollar for dollar," he told the BBC, echoing the fentanyl logic and saying Canada "supposes tyranny."
This will matter whether or not Carney succeeds Justin Trudeau and ends up chairing the G7, the group of the world's seven largest economies, known as "advanced." As a former Bank of England governor, Carney has watched Trump on the international stage at the G20 and G7 meetings and concluded that the American leader respects only force.
He issued a coded warning to any nation that tries to keep quiet and avoid drawing the president's attention: "Good luck."
In my recent conversations with European trade negotiators, they emphasized cooperation and partnership, as well as agreements with the United States. When pressed, they avoided direct criticism, including the extraordinary suggestion of using tariffs against NATO ally Denmark over the fate of Greenland.
Reuters Tesla CEO Elon Musk wears a black T-shirt and black leather jacket, standing next to US President Donald Trump, who is wearing a blue suit, purple tie and red hat with the words Make America Great Again in bold letters on the hat Reuters
Countries could take action against Elon Musk, a close associate of Donald Trump
The real question here is whether the rest of the world, even if it is silent, is coordinating retaliatory tariffs on, say, high-profile political supporters of President Trump, such as Elon Musk, which is a typical feature of past smaller-scale conflicts.
Tesla, the electric vehicle maker led by Musk, warned last week about the impact of retaliatory tariffs. All of this is intended to raise concerns among the rival courts around the Oval Office and congressional interests about the impact on global exports from American factories.
All of this is without mentioning the impact on domestic US prices.
This could also happen, in a more roundabout way, through the application of a tax on carbon trade planned in various jurisdictions.
Exactly how this will happen will depend on the perception of America's residual power.
Some nations may conclude that there are other options in the world today. As tariff threats increase daily from many directions, the world finds itself in uncharted territory.
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