This week, President Donald Trump again threatened to slap tariffs on products from Canada and Mexico—America’s two biggest trade partners.

For some reason, the president feels these tariffs will hurt the originating countries. But, in reality, it is consumers who shoulder the burden. In most cases, middlemen pass on the additional costs, rather than absorbing them. Furthermore, it seems that every time the US imposes a tariff on a foreign country, that country reciprocates by taxing US import—helping no one.

Then there’s the issue of car manufacturing. Under free trade agreements originally set up in the late 1980s, North American countries could send products back and forth without being subject to tariffs. As a result, auto manufacturing hubs developed on both sides of the Canadian and Mexican borders. It’s almost impossible today to know what parts of a car came from the US and what came from Mexico or Canada.

Today, it appears Trump has offered to delay implementing tariffs for another month. Perhaps this was meant as nothing more than a negotiating tactic to get a better “deal” for the United States. However, the turmoil this has stirred in the markets, as well as the ill will generated on both sides of the border, will not easily be forgotten.

People do change their behavior when a proverbial gun is put to their head, but they do it with resentment and frustration. Already, many Canadian stores are starting to stock alternatives to American brands. If the tariffs don’t hit this month, maybe they’ll come back in the near future. Better to address the situation now than to wait to be blackmailed again soon.

There are times that do warrant carrying a big stick and using it as necessary. But these are usually against your enemies—not your friends.

It takes a long time to build trust, which can be quickly eroded under stressful situations. In this case, it’s not just the avocados or maple syrup that are taxed: it’s the relationships as well.

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linda@popky.com
(650) 281-4854
www.leverage2market.com