China will also sense new opportunities in Latin America as the continent bristles at America’s threats to Panama and Mexico. Aggressive US action against these countries – including military force – is distinctly possible, given Trump’s determination to regain control of the Panama Canal and to take on the Mexican drug cartels.
But Trump’s aggression towards Mexico is likely to be counterproductive. If tariffs push Mexico into a deep recession, the flow of desperate people heading to the US is only likely to increase – as is the power of the drug cartels, whose exports are not subject to tariffs.
Canada and Mexico are painfully aware that the odds are stacked against them in a trade war with the US. But they are compelled to retaliate.
No national leader can afford to seem weak in the face of American bullying. And hitting back against Trump is probably the right strategic move.
As one European foreign minister put it to me recently: “If Trump punches you in the face and you don’t punch back, he’ll just hit you again.”
Countries such as Britain and Japan that have not yet been singled out for tariffs might breathe a sigh of relief. But they are kidding themselves if they think keeping a low profile will buy them immunity. If Trump decides that his first tariff war has worked, he will certainly look for new targets.
Corporate America also needs to wake up and stop the sycophantic prating about the return of “animal spirits” to the US economy. What Trump is essentially offering America is economic autarky and the destruction of the Western alliance. That would be an economic and strategic disaster for American business – and for the US as a whole.
