Washington – With President Trump’s last-minute decision delaying high tariffs on imports from Mexico by at least a month, the United States has avoided or at least delayed a potentially disastrous trade war, its largest and fastest-growing partner.
The delay is good news for California.
Imports from China have dropped sharply since Trump imposed tariffs on the country in 2018, and almost all of this slack has been compensated for, according to U.S. trade statistics. Some of these gains are the result of multinational companies’ transfers from China to Mexico.
China still leads all countries to send products to California, but imports from Mexico have soared 40% since 2018, while Chinese goods entering California have fallen 25%. For exports, Mexico is California’s top market so far, with Canada ranking second, ahead of China.
Canada won the same probation given by Mexico on Monday, when the U.S. said it would impose 25% of its products on its northern neighbors, for at least one month. The deal only puts China in its first three goals initially facing direct threats of tariffs as Trump plans to impose an additional 10% tax on the country at midnight on Tuesday. China is preparing to talk about trade with Trump.
The sudden turnaround at the White House suggests that Trump’s disastrous economic threat to allies and others could be largely a negotiated strategy and a form of political theatre.
These threats can enhance his image and become a strong, prisonless advocate of American interests while avoiding the expensive consequences that would alienate voters.
U.S. stocks fell earlier Monday, and then quickly recovered after Trump confirmed he would postpone tariffs on Mexico for a month. He said the delay was based on an agreement with Mexican President Claudia Sheinbaum that the two countries would take joint measures to fight fentanyl’s movements on the U.S. border.
The Dow Jones Industrial Average fell by about 500 points in the Asian stock market (the Asian stock market led by Japan). European stocks also fell. The Dow Jones Index is temporarily lower.
But even before trading with Mexico, financial markets did not show panic, suggesting that many hope Trump can back down or delay its planned tariffs because simply because full-scale taxes could kill economic growth, resulting in higher prices and hurt jobs.
Ahead of a deal to avoid tariffs, Canada announced retaliatory tariffs on the United States on Sunday, targeting agricultural commodities and other products in Republican-led states to achieve the greatest political impact. Mexico and China also said they were preparing countermeasures.
Whether Trump is using the tariff sword purely as leverage or intending to use it, it is clear that the United States and its trading partners are entering a period of extreme uncertainty.
If the tariffs and countermeasures expected by their trading partners eventually come into effect, the borders can be confusing, as many companies and government agencies seem unprepared for the sudden imposition of new rules. If a trade war occurs, it will be expensive in every way at least in the near future and probably longer.
In addition to major disruptions to supply chains, the anti-guardians of trading partners can also hurt U.S. exporters. While U.S. export tariffs on things like wine and soy will be hit by red state economies, California will feel slower sales of auto parts and electronics, as well as other commodities, as well as seaports and logistics industries up and down the country will be affected by Chinese freight.
U.S. trade with Mexico, Canada and China exceeded CAD 2.1 trillion in 2023, accounting for about 42% of all countries – almost every product involved in the sun.
Although Canada and Mexico are more vulnerable, as they depend largely on exports to the United States, the three North American economies have been deeply integrated, especially in the production and trade of agricultural commodities.
Analysts warn that U.S. consumers will see prices in grocery stores rise within days and businesses are expected to transfer higher costs to consumers as inventory of cars and other consumer goods runs out.
Mexico’s exports to the United States reached $475 billion in 2023, and 13% of shipments to California, about $62 billion. According to 2023 data, this growth has a variety of products in many industries, led by nearly $15 billion in transportation equipment and $13.5 billion in computers and electronics.
That year, Mexico’s shipments to California also included $7 billion in agricultural commodities, $3 billion in machinery, $1 billion in oil and gas, and $664 million in clothing, as many Los Angeles companies moved to sewing and job cuts south of the border.
Canada’s exports to California have declined over the past few years, but it remains a significant supplier of oil and gas, food and transportation equipment.
Analysts say while tariffs on Canadian imports would hurt California, they are equally concerned about retaliatory tariffs that would harm key export industries.
California mainly exports mixtures of electronics and agricultural products to Canada. By November, exports totaled $17 billion last year. According to analyzing U.S. statistics by trade economist Jock O’Connell, the top three are all electronics, such as telephones and computers, followed by civilian aircraft, engines and parts, and then electric vehicles.
He said California also sent $310 million worth of lithium batteries, $308 million worth of strawberries and $333 million worth of wine to its northern neighbors. Canada said it and its and its restaurants will include tomatoes, rice, citrus fruits, nuts and wines.
“It’s interesting that the wine category targeted in Canada seems to limit tariffs to wines with alcohol content no more than 13.7%.
“I’m not sure if the reds produced in Napa and Sonoma these days are so weak,” he added. “Maybe it’s an engraving designed to not punish Bluebon products.”
The 10% tariff on Chinese goods will exacerbate the decline in freight from China’s port of Los Angeles, the largest container seaport in the United States.
Sung Won Sohn, a professor of finance and economics at Loyola Marymount University, said Silicon Valley is heavily dependent on China’s electronics, components and manufacturing industries. Higher tariffs on semiconductors, computer parts and smartphones will increase costs for companies like Apple, Tesla and Intel. Many tech startups depend on Chinese suppliers, and therefore it is difficult to compete, he said.
Many California companies import clothing, furniture and electronic products from China. Retail giants such as Target, Walmart and Amazon will face higher costs to pass on it to consumers. Small businesses that rely on low-cost goods may have difficulty staying profitable, Thorne said.
