Just after having negotiated a revised NAFTA, Mexico is slapped with new tariffs. Trump feels they're not doing enough to stem the flow of refugees and illegal immigrants.
The US is also taking on China, Japan and Europe with trade issues. With the US, Mexico and Canada economies so intricately linked, especially in supply chains for manufacturing, could this be a bridge too far? That is, could this cause a contraction in economic growth that outweighs the impact of the tariffs themselves?
Many US manufacturers are currently altering their supply chains so as to exclude China or suppliers at home (that are impacted by the tariffs). So if Mexico was Plan B, now they will looking at Plan C, probably on the other side of the world in South Asia, to supply components.
Also, the effect of tariffs hasn't fully impacted on consumers yet. Higher prices and delays will occur throughout 2019. Some futures markets indicate they expect a contraction for the rest of 2019, then a bounce back in 2020, the election year.
Which makes sense, doesn't it? Trump is creating these tensions, so all he has to do is stop in early 2020 and there should be a great 2020 bounce just in time for him to get re-elected.
But in pulling so many economic levers so fast, it's hard for US companies to keep responding. Prices won't drop for consumers even after tariffs disappear, and a global downturn and trade embargoes on US companies will impact on exports.
A bridge too far?
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