Trump takes swift action on economic campaign pledges. 💲 The US is running huge deficits — meaning the US Treasury spends more money than it makes. President Donald Trump has been quick to exercise his presidential privilege, proposing (then pausing some) tariffs that could inject billions back into America — enabling him to deliver on promised tax cuts.  

‘Trump has used and promised to employ tariffs for three primary purposes: to raise revenue, to bring trade into balance and to bring rival countries to the negotiating table. He predicted … that the tariffs would bring in hundreds of billions of dollars — perhaps trillions of dollars — into the US Treasury.’ — David Goldman, executive editor, CNN Business

Trump has signed executive orders for a 25% tariff on imports from Canada and Mexico, with a 10% tariff on Canada’s energy resources, and a 10% tariff on imports from China. China tariffs exclude goods up to the value of US$800 from its behemoth retailers, Temu, owned by PDD Holdings (PDD-ADR), AliExpress owned by Alibaba (BABA-ADR), and Shein (which has filed papers to IPO on the US markets in 2025).

‍Tariffs are a tax on imports. 💸 And this week, steel and aluminium joined the lineup, with a proposed blanket global 25% tariff. This landed Aotearoa New Zealand in the US firing line, and according to Trade Minister Todd McClay, may cost Kiwi exporters up to NZ$5 million.

It’s hoped proposed US tariffs could grow a resilient American economy through protectionism that:

• Prioritises US industries and workers 
• Addresses trade imbalances by protecting US industries from unfair competition
• Fosters American innovation and growth
• Reduces US dependency on foreign manufacturing

‍Tariffs are not Trump’s first foray in trade policies. 🚢 During his previous presidency, Trump signed into law the United States-Mexico-Canada Agreement (USMCA). This is a free trade agreement that aims to facilitate free trade and economic cooperation among the three neighbouring countries.

Some economists have questioned the future of the USMCA. This includes the Peterson Institute for International Economics, which last week released four ‘possible scenarios’ for tariffs on Mexico and Canada. Because some tariffs are industry specific, however, proposed tariffs may not be at odds with the agreement. 

The president is, however, using the more than century-old tool of trading between countries to address non-trading issues — that is, Trump, a master negotiator, has said, to stop illegal immigration and the flow of opioid drug fentanyl into the US. And it appears to have worked:

‍‘Canada and Mexico have basically said, "Tell us what you want us to do on this, and we will do it." They've set up new fentanyl and migration working groups. You heard Karoline Leavitt, the press secretary say, "Mexico's making some great progress on migration, and we're having good talks with Canada as well”.’ — Gavin Bade, trade and economic policy reporter, The Wall Street Journal

Industries that could be affected by Trump tariffs

‘Access to the American market is a privilege’ — The White House. 🇺🇸 The US is the world’s largest importer of everything from fuel, wood, minerals, electronics, machinery, metals, vehicle parts, medication and medtech, to meat, avocados, tomatoes and beer (view imports here). America’s largest trading partners are China, Canada, Mexico, Germany, and Japan.

Trump is looking long-term, to US stability and security. 🌎 He's acknowledged that there ‘maybe’ pain but that ‘it will all be worth the price'. Other modelling shows if tariffs come into effect, companies may also face possible supply chain disruption, and US consumers may have to pay more. 

‘This may be the biggest own-goal yet. This is a huge gamble. It’s a recipe for slowing down the economy and increasing inflation.’ — Mary Lovely, senior fellow at the Peterson Institute for International Economics, CNN

Industries and companies that could be negatively impacted by proposed import tariffs include:

• Automotive (consumer durables) — General Motors (GM), Ford (F),Tesla (TSLA), Harley-Davidson (HOG), REV (REVG) and Jeep maker Stellantis (STLA) could face higher costs for auto parts imported from Canada, Mexico and China
• Consumer goods —  Nike (NKE), Coca-Cola (KO), Pepsico (PEP), British American Tobacco (BTI), Philip Morris International (PM) Procter & Gamble (PG), Unilever (UL), Colgate-Palmolive (CL), The Clorox Company (CLX), and Church & Dwight (CHD) could face higher costs for raw materials and finished goods imported from the affected countries, for example China is the world’s largest tobacco producer
• Energy — ExxonMobil (XOM) and Chevron (CVX) are two companies that may see costs increase due to tariffs on Canadian energy imports
• Retail giants —  Walmart (WMT), Costco (COST) and Target (TGT) could be affected by higher prices for imported goods from China and Mexico‍
• Tech (hardware) —Apple (AAPL), Microsoft (MSFT), and Intel (INTC) may see increased costs for components sourced from China

US automotive industry tariff concerns

Should vehicle makers be worried? 🚘 Automakers are America’s largest manufacturing sector, accounting for around 3% of America's GDP, and historically have shown to shape the US economy. And despite being the world’s largest producer of crude oil, the US imported an additional 60% of oil from Canada and 7% from Mexico, making its northern neighbour the largest oil supplier to America, giving the US energy trading security.

In vehicle manufacture, Canada and Mexico are vital trading partners for the US. But the industry may be caught in the ‘crosshairs’ of Trump’s tariffs. Auto parts move back and forth across the US-Canada border up to eight times even before a vehicle rolls off the assembly line, and Mexico is the largest supplier of machinery and car parts to the US. In addition, China supplies fabricated metal, such as bolts, screws, as well as some car parts — and Trump’s US tariffs have led to ‘tit-for-tat tariffs’ from China. 

‍‘A 25% tariff on Canada and Mexico will raise production costs for US automakers, adding up to US$3,000 to the price of some of the roughly 16 million cars sold in the US each year. Grocery costs could rise, too, as Mexico is the United States’ biggest source of fresh produce, supplying more than 60% of US vegetable imports and nearly half of all fruit and nut imports.’ — Shannon O'Neil and Julia Huesa, Council on Foreign Relations, What Trump’s Trade War Would Mean, in Nine Charts

Ford CEO Jim Farley told investors during their fourth quarter earnings call that if tariffs come into effect, they ‘would have a huge impact on our industry, with billions of dollars of industry profits wiped out and an adverse effect on the US jobs’. And some in Canada’s automotive industry have even warned proposed tariffs could ‘shut down North American auto production within a week’.

US dollar strong over 6 months

Greenback volatile but up. 💵 Following Trump’s tariff announcements, while the Mexican peso and the Canadian dollar weakened, the US dollar strengthened, although has fluctuated over the month as Trump came into power. Zooming out, however, over six-months, the US Dollar Index has steadily climbed around 5%, and returned 7.1% in 2024.

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A strong US dollar can indicate a robust American economy compared to other countries, and can suggest investor confidence. It can also cheapen US imports, and therefore benefit US consumers and industries, which may help keep inflation in check. On the flip side, a strong dollar can hike the cost of US exports, making them less competitive in global markets. America’s largest exports include oil, nuclear reactors, electronics, vehicles, spacecraft, medtech and pharmaceuticals, and plastics.

Trump China tariffs have some high profile support

The trillion dollar AI race. 🤖 Along with the tech titans at Trump’s inauguration, tech entrepreneur and Silicon Valley venture capitalist Marc Andreessen has spent time at Mar-a-Lago advising the president on trade policy and AI. Last year, the former Democrat-supporter-turned-Trump-supporter and his business co-founder Ben Horowitz discussed the need for America to bolster its economic and AI competitiveness, calling AI and robotics the ‘new global arms race’. 

Then DeepSeek arrived. 📱 Trump called DeepSeek a ‘wake-up call’ for US industries, insisting America needs to ‘be laser-focused on competing to win’; while Andreessen said DeepSeek-R1 was ‘AI's Sputnik moment’. Despite formerPresident Biden’s efforts to limit China’s access to semiconductors DeepSeek-R1 was trained using just 2,000 of Nvidia’s (NVDA) H800 chipsDeepSeek-R1 was trained using just 2,000 of Nvidia’s (NVDA) H800 chips, DeepSeek-R1 was trained using just 2,000 of Nvidia’s (NVDA) H800 chips, (H800 exports were later banned by Biden in 2023).

But not even AI — China's or America's — can predict the future. All we do know is, whatever happens as tariffs are delivered and the AI race ramps up, the US markets will keep investors watching.

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