A factory worker in Mexico. (AP)

A factory worker in Mexico. (AP)

 

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AS/COA Insider: Susan Segal on Trump's Tariffs on Canada and Mexico

“We're the best friends of each other, and that's really important to remember,” said the AS/COA president and CEO.

On February 1, U.S. President Donald Trump fulfilled a campaign promise to put 25 percent sanctions on Canada and Mexico due to his concerns over migration and the cross-border flow of drugs like fentanyl. Two days later, after separate negotiations with Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau, Trump announced a one-month delay on the tariffs.

“It is in the interest of the United States, Mexico, and Canada for us all to sit down as neighbors and friends and find a path forward that preserves everything that we've worked on creating over these number of years,” said Susan Segal, AS/COA's president and CEO. Segal speaks on the economic realities of tariffs, what they would mean for regional trade, and the future of USCMA.

AS/COA Online: Tariffs on Mexico and Canada were a central campaign promise of Trump in 2024. Now that he’s begun the process of implementing them, what is your view of his use of these tariffs to achieve his economic and foreign policy goals?

Susan Segal

Susan Segal: I think the issue is that tariffs never work. My own view on tariffs is that they inhibit trade and trade is good. I believe that implementing tariffs would impact all three economies. I just heard right now that potentially the impact of tariffs could be a reduction in growth somewhere between 0.6 and 1 percent in the United States and the increase in CPI could be over 0.4 percent.

Not only that, tariffs are a regressive tax, so they hit the lower class and the middle class harder than they hit the upper class or the people that can afford to buy no matter what. My belief is that if you put on tariffs, it'll be inflationary. It'll start an inflationary cycle because manufacturers pass some, if not all, the tariff onto the consumer, even if the manufacturer squeezes some of their margins.

The less expensive item, the greater the tariff. In an environment where we are talking about needing to not raise taxes, this is another form of potentially raising taxes. Now, it does raise revenue, but as I said, I'm not sure it does it on a very equitable basis.

These tariffs will slow down growth. It's clear that President Trump was doing it for other reasons, but the economic implications of tariffs are severe.

AS/COA Online: What do you think is the mood among North American investors in this context?

Segal: Look at what happened to the stock market this morning. It opened down 500 or 600 points. Look at what happened to crypto. It went down. Look at what the anticipation of tariffs did to the Federal Reserve's willingness to continue to lower interest rates. Markets are not favorable to tariffs.

We have been working really hard over a number of years, since the nineties, to have an integrated supply chain for North America to make it the most prosperous region in the world. When you begin to take that supply chain apart, it has incredible implications. And frankly, it is President Trump's first administration that renegotiated USMCA. I believe that it was a good agreement then, and it continues to be a good agreement today. It benefits workers in all three countries. We're all the best allies. We're the best friends of each other, and that's really important to remember.

AS/COA Online: Do you think that even with this delay, there's damage already?

Segal: I don't think the damage is done, but I think that there's uncertainty because we don't know what will happen over the next month. I think the incentives are such that it is in everyone's best interest to come up with a solution. It is in the interest of the United States, Mexico, and Canada for us all to sit down as neighbors and friends and find a path forward that preserves everything that we've worked on creating over these number of years.

Remember the origin of USMCA/NAFTA was really to create a stable environment for North America—a stable economic environment and a political environment. It has helped create growth and jobs across all three areas. And while I appreciate the idea that we want to create more jobs in the United States, that's just not the way it works, in my opinion. It's not that you're gonna create more jobs necessarily.

I think North America is an amazing opportunity. We talk about critical minerals and we talk about energy. Guess what? Mexico and Canada are filled with critical minerals, and they are filled with energy. And so if what we want to do is buy critical minerals that supply jet planes or the chips, then it's better that we're buying those critical minerals and that we have energy from our friends.

Look, if we can't come to a stable agreement with our neighbors and our partners—and we should be able to— then countries are gonna look for other markets, right? Mexico and Canada have to have growth, have to provide opportunity for the people just like we do in the United States. And so if we can't find the shared prosperity that we have enjoyed over the years, then obviously they're gonna have to look someplace else.

The one thing that's really been true is that neither Mexico or Canada have really been super receptive to the Chinese. But if we close our markets and begin to undo the supply chain, my opinion is that the Chinese will take advantage of this because they're always trying to take advantage of a situation.

All that being said, I don't see any reason why we can't come to some resolution. I think the Mexicans know, as President Sheinbaum said, immigration is an issue. Mexico and the United States understand that fentanyl is a huge issue. It's a huge issue for Mexico too. And as she said in her statement, guns are a big issue as well going across the border into Mexico. And I think that the United States has offered to help her with that as well, because that's a big challenge. Maybe the silver lining will be that there'll be more cooperation. That doesn't mean that there won't be bumps along the road.

AS/COA Online: What will you be watching for this next month? What are the important pieces in play?

Segal: I think it's about communication, communication, communication. It’s about negotiation, sitting down and having conversations and rediscovering how important we all are to each other.

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