Are they Lutnik’s, Bessent’s, Navarro’s or Trump’s tariffs?
Are they just a tool to bring to the table?
Meet Stephen Miran, Chief Economic Advisor
Miran’s Thesis:
- USA must shift costs of defense to allies,
- Generate Tariff positive flows unilaterally
- Realign value of the USD vis-a-vis other currencies
Why?
- By unfairly subsidizing allies’ defense costs, USA is unfairly treated, thereby foregoing national spending/tax cuts.
- Other countries have kept higher tariffs and many non- tariff barriers disadvantaging US exporters.
- USA’s world’s reserve currency “unfairly” drives up USD value, making American producers higher cost and causing a persistent deficit in USA trade balance; that makes US absorb foreign savings into as (excess) indebtness in T Bills.
Trump/Miran’s solution:
“Gradual” Unilateral (“Reciprocal?”) tariffs.
Miran’s Thesis was not “gradually implemented”
Counterpoint: The USA manufacturing deficit has no direct correlation with the value of the US dollar.
“Once it is conceded that the dollar is not a primary cause of the decline in US manufacturing employment, the justification for taking aggressive measures to lower the dollar goes out the window.
As I’ve noted in previous writings, the trade deficit per se is not a problem: with unemployment near record lows, our spending on imports is no threat to our economy, and, in fact, it reduces the likelihood of overheating and inflation.
Rather, as evidenced by the recent declines in household confidence and consumer spending, one of the greatest threats to our prosperity is uncertainty about Trump’s future actions in the realm of international economic policy. I hope the future head of the CEA is prepared to acknowledge that fact.”
Steven B. Kamin (AEI)
Implications for Mexico & Canada
These are the implications for Mexico and Canada after Donald Trump’s issuance of the “Executive Order to Rebuild the Economy and Restore National and Economic Security Due to a National Emergency”:
- The existing fentanyl/migration IEEPA orders remain in effect, and are unaffected by this order.
- This means USMCA compliant goods will continue to see a 0% tariff
- Non-USMCA compliant goods coming from Mexico/Canada will see a 25% tariff, (trans-shipped) and
- Non-USMCA compliant energy and potash coming from Mexico/Canada will see a 10% tariff (trans-shipped).
- In the event the existing fentanyl/migration IEEPA orders are terminated, USMCA compliant goods would continue to receive preferential treatment, while non-USMCA compliant goods would be subject to a 12% reciprocal tariff.
As for the Non-USMCA reciprocal tariffs,
- Countries in the American continent largely received 10%, including Great Britain & Brazil.
- African, Asian and European countries ranging from a minimum of 17% (Israel) to 67% (China)
The “2025 Tariff War” was ill-thought, ill-defined and not well planned for.
What about Mexico?
Mexican retaliatory measures are not likely, however are not to be discounted yet.
Recommended Actions for Manufacturing/Exporting Companies in Mexico
USMCA Rules of Origin Criteria
- Art. 4.2(a): The good is wholly obtained or produced entirely in Canada, Mexico, or the US.
- Art. 4.2(b): Non-originating material(s) undergo(es) prescribed tariff shift and/or satisfies RVC requirements.
- Art. 4.2(c): Good is produced entirely in Canada, Mexico, or the US from materials described in Criterion 1 or 2.
- Art. 4.2(d): Excluding HTSUS Chs. 61-63, good is produced entirely in Canada, Mexico, or the US, classified with its materials or satisfies the “unassembled goods” requirement, and satisfies an RVC requirement.
- Art. 2.10(2): Product of Schedule Il of the USMCA Rules of Origin Uniform regulations.
Conclusions: Audit – Decide – Comply
In general, long-term damage to the Post-War Economic System has been done, as it was built on the basis of Trust, the international Rule of Law and values-based Alliances. Due to:
Chaos in implementation,
No forward guidance,
Arbitrarily applying the solution to friends & foes (deleveraging potential pain points to China)
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The content of this page is not and should not be considered legal advice, the information is for informational purposes only.
