The strategic blunder of Trump's tariffs
- Tor Martin Flesvik
- Feb 21
- 3 min read
Updated: 2 days ago
By: Tor Martin Flesvik
Partner & Head of Equity Research
President Trump’s embrace of economic nationalism has long sparked debate, but his administration’s recent decision to impose tariffs on Canada and Mexico - two of America’s closest allies and trading partners crosses from contentious policy into reckless self-sabotage. These tariffs, ostensibly a tool to extract concessions, are instead a dangerous gamble with the U.S. economy, global alliances, and long-term strategic interests. Here’s why this move is not just misguided, but a blueprint for decline.
Consumers will pay the price - literally
Tariffs are taxes by another name, and these levies on steel, aluminum, and other goods will inflate costs for everyday Americans. Automobiles, gasoline, appliances, and countless consumer goods reliant on imported materials will see price hikes. At a time when inflation already looms over the economy, this decision effectively forces U.S. households to subsidize a trade war they didn’t ask for.
Modern supply chains are not zero-sum; they’re deeply integrated. Take the auto industry: Vehicles and parts crisscross the U.S.-Canada-Mexico border up to ten times during production, with each crossing adding value. By disrupting this system, tariffs raise costs for U.S. manufacturers, making them less competitive against European and Asian rivals. The result? Reduced job creation, diminished exports, and a North American bloc weakened in the global arena.
Retaliation Is inevitable and painful
Canada and Mexico are not passive targets. They will retaliate, and they’ll do so strategically. Expect tariffs on U.S. agricultural exports, manufactured goods, and other politically sensitive sectors. American farmers, already grappling with volatile markets, could face ruin. Meanwhile, industries like machinery and chemicals key pillars of the U.S. economy will suffer collateral damage. The administration’s belief that allies will fold under pressure ignores both history and economic logic.
If the goal is to curb migration from Central America, destabilizing Mexico’s economy is a baffling strategy. Tariffs risk slowing growth, stifling investment, and exacerbating economic instability in Mexico factors that historically drive migration northward. Punishing Mexico economically is akin to punching a hole in your own lifeboat while complaining about the water level.
This move isn’t just economically unsound, it’s diplomatically incoherent. The first rule of statecraft is to unite allies and divide adversaries. Instead, the administration has handed China and other strategic competitors a gift: a fractured North American alliance. Why would any nation trust U.S. leadership if Washington arbitrarily weaponizes trade, even against partners? The erosion of trust will outlast this presidency, diminishing America’s ability to rally coalitions on issues from security to climate change.
These tariffs are more than a policy dispute, they signal that the U.S. views trade as a tool of coercion, not collaboration. By treating allies as adversaries, the administration risks permanent damage to partnerships that underpin America’s global influence. Investors, too, will think twice: Uncertainty over arbitrary tariffs makes the U.S. a less reliable place to do business.
A test for corporate America
The business community cannot afford silence. Corporate leaders know that supply chain chaos, rising input costs, and retaliatory measures stifle growth. Yet too many have acquiesced to this administration’s trade agenda, fearing political backlash. It’s time for CEOs to defend the open, rules-based trading system that built American prosperity or risk being complicit in its unraveling.
Trade wars are not “easy to win”; they’re costly to wage. The tariffs on Canada and Mexico exemplify a myopic vision that conflates toughness with strategy. The true cost won’t be measured in tariff revenue, but in lost jobs, weakened alliances, and a diminished role for the U.S. on the global stage. If economic nationalism becomes America’s brand, the world will move on and leave US behind.
— The stakes could not be higher. It’s time to choose pragmatism over brinkmanship
Author
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