The Trump administration's chaotic back-and-forth on tariffs leaves businesses in trade limbo.
On Feb. 1, President Donald Trump announced a 25% tariff on goods from Mexico and Canada. However, on Feb. 3, he delayed tariff implementation for both countries to March 4. He also placed an additional 10% tariff on goods from China, which China retaliated against with expanded export controls on critical minerals and antitrust measures against U.S. companies including Google.
The Canada and Mexico tariffs, as well as the Trump administration's threats of additional tariffs on even more countries, create uncertainty for businesses that will force decision-makers to put capital expenditure decisions on hold, said Sunderesh Heragu, senior adviser to the dean in the Oklahoma State University College of Engineering, Architecture and Technology.
Major investments in electronics, oil and gas, and other products could be slowed until the U.S. provides further clarity and certainty on trade relations, he said. The Trump administration gave multiple reasons for considering such tariffs, including trade imbalance, fentanyl and immigration concerns. Trump delayed tariff implementation on Canada and Mexico because both countries said they would address border concerns.
"One of the things that is not clear is the real reason for these tariffs," Heragu said.
Semiconductor exports on the line
Heragu said tariffs will affect U.S. semiconductor exports. Semiconductors are a top U.S. export, according to the Semiconductor Industry Association. In 2023, the U.S. exported $52.7 billion in semiconductors.
Canada and Mexico are the U.S.'s largest export markets, with exports totaling $680 billion in 2023, according to the Brookings Institution.
"Canada and Mexico may start sourcing more from Taiwan, Malaysia and other places, China included," Heragu said.
They could start forming alliances with other countries as well, Heragu said. Canada might ally itself more with European nations, while Mexico could look to partners in Latin America.
Trump's tariffs would harm trade relations with Canada and Mexico and could give China a boost, said Susan Ariel Aaronson, director of the Digital Trade and Data Governance Hub at the George Washington University. The U.S. is much stronger with partners and allies competing against China rather than the U.S. alone, she said.
Aaronson argued that the negative impact of tariffs on the bond market, long-term interest rates and cost to borrow will "kill American business."
"The United States looks so insane and unstable," she said. "The more unstable we look, the more disinvestment we will have."
The president has talked about tariffs on the U.K. and Europe. So where do manufacturers decide to relocate some of their sourcing operations?
Sunderesh HeraguSenior adviser to the dean, Oklahoma State University College of Engineering, Architecture and Technology
Trump has not only threatened tariffs against Canada and Mexico, but said in a post on Truth Social in January that BRICS nations could face 100% tariffs should they seek to replace the U.S. dollar with another currency. BRICS nations include Russia, China, India, Brazil and South Africa. Egypt, Iran, Ethiopia and the United Arab Emirates also joined the BRICS international association in January 2024.
"The president has talked about tariffs on the U.K. and Europe," Heragu said. "So where do manufacturers decide to relocate some of their sourcing operations?"
The threat of tariffs against multiple countries leaves businesses with few options for uprooting and relocating supply chains. Heragu said business decisions on where to manufacture are not made lightly or for the short term.
Makenzie Holland is a senior news writer covering big tech and federal regulation. Prior to joining Informa TechTarget, she was a general assignment reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.
