Trump Tariff Threats: To What End?

A post on Truth Social by President Elect Donald Trump shattered the calm that had fallen on Washington DC in the days ahead of the Thanksgiving holiday when the U.S. Congress was in recess. The post read:

“As everyone is aware, thousands of people are pouring through Mexico and Canada, bringing Crime and Drugs at levels never seen before. Right now a Caravan coming from Mexico, composed of thousands of people, seems to be unstoppable in its quest to come through our currently Open Border. On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders. This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country! Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem. We hereby demand that they use this power, and until such time that they do, it is time for them to pay a very big price!”

The language is straightforward, and most analysts have focused on the threatened tariffs and their potential impact on trade and integrated cross border supply chains. This leads to assessments of whether the threat could be acted upon legally, by what mechanism and with what exceptions, and what might happen if the threats are implemented.

Before addressing these worst-case scenarios, the question that we should be asking about these threats is: what are they intended to achieve?

During the first Trump administration the president first threatened to withdraw from the North American Free Trade Agreement (NAFTA).  Though often overlooked, he added a qualifier: he would withdraw the United States from NAFTA unless Canada and Mexico agreed to a renegotiation of the agreement. Both countries agreed and by March 2017, the US Trade Representative notified Congress that it would begin renegotiations.

Trump's post makes clear what he wants: improvements to border security to counter irregular migration and illicit drugs -- human trafficking and drug trafficking. Ottawa and Mexico City are unlikely to refuse to talk about either topic with the Trump administration, making the threat of tariffs unnecessary, but the threat has signaled the president-elect's intention to voters in all three countries loud and clear.

Linking talks on borders and migration to trade is not unprecedented: George W. Bush and Barack Obama had separate talks on both. Bush launched the Security and Prosperity Partnership for North America after his re-election in 2005, and Obama pursued cooperation through the Beyond the Border Working Group with Canada and the 21st Century Border Management Commission with Mexico.

Migration is a growing concern for all three countries. The United Nations Refugee Agency estimates that as of April 2024 there were 120 million stateless and displaced people looking for a place in countries prosperous enough to give them the opportunity to rebuild their lives. Strife in Gaza, Haiti, Lebanon, Myanmar, Nicaragua, Sudan, Syria, Ukraine, Venezuela - to name just a few of the worst cases - are putting pressure on the immigration systems of countries around the world, and those that are accepted need more help to settle than immigrants coming with advanced degrees and some wealth through normal immigration channels.

It would not be unprecedented for border and migration cooperation be part of the 2026 USMCA review and for commitments in these areas to be included in a revised agreement. The Canada - United States Free Trade Agreement had no specific environmental or labor provisions and these topics were not part of the NAFTA negotiation during the George H.W. Bush administration, but they were added by the Bill Clinton administration in side agreements to help secure congressional support for ratification. The USMCA brought environmental commitments into the main body of the agreement. So, having been managed through side agreements thus far, border security and migration management provisions could be on the agenda for a renegotiated USMCA.

Two days after his tariff threat post, Trump posted again on Truth Social following a call with Mexican President Claudia Sheinbaum:

"Just had a wonderful conversation with the new President of Mexico, Claudia Sheinbaum Pardo. She has agreed to stop Migration through Mexico, and into the United States, effectively closing our Southern Border. We also talked about what can be done to stop the massive drug inflow into the United States, and also, U.S. consumption of these drugs. It was a very productive conversation!"

Sheinbaum was quick to respond that she did not agree to anything formally on the call, but was willing to talk with the United States about borders and migration, and hoped to find a way to avert the threatened tariffs.

Journalist Salena Zito noted during the 2016 election campaign that Trump supporters took his bombastic rhetoric "seriously, but not literally" and that strikes me as good advice here. The president-elect's means have grabbed our attention, but his ends are not incomprehensible. Take the threats as a prelude to negotiations and the 53 days until the first day of Trump's second term will be ample time to develop bargaining positions and set panic aside.