Update: tariffs on Canada have also been suspended for 30 days.

As he had repeatedly threatened on the campaign trail and since his election, Donald Trump signed an executive order this weekend under the International Emergency Economic Powers Act (IEEP) imposing tariffs on the US’s three largest trading partners, accounting for over a third of America’s total trade volume. The order places 25% duties on goods from Canada other than oil and gas, which are subject to a 10% duty, as well as 25% on imports from Mexico and 10% on goods from China. Following a preliminary border security agreement reached today with Mexico, with further negotiations on security and trade issues ongoing, the tariffs on Mexican products have been suspended for one month. The order also eliminates the de minimis exception for shipments valued below $800 subject to the tariffs, impacting online retailers like China’s Temu and Shein.

Barring last-minute breakthroughs, the Canada and China tariffs are set to take effect tomorrow, February 4. Implementation details can be found in Customs and Border Protection notices for China and Canada currently pending publication in the Federal Register.

Notably, these tariffs have not been presented as a response to any disputes actually concerning international trade. Instead, Trump has repeatedly stated that they are intended to force cooperation from the affected countries on stemming the flow of drugs, particularly fentanyl, and illegal immigrants into the United States. Taken at face value, this is somewhat puzzling: unless Trump’s talk of annexing Canada as America’s “51st state” is to be taken seriously, it is unclear what the president actually wants from Canada, as both immigration and drug flows at the US northern border are far smaller than those from Mexico.

Canada promptly responded with a list of US products including fruits and vegetables, juices, alcoholic beverages, household appliances, and sporting goods subject to its own retaliatory 25% tariff, to be implemented this month in two stages. The country’s Department of Finance has published a complete list of the US products affected. Prime Minister Justin Trudeau also said Canada will file a complaint with the World Trade Organization (WTO). Canadian sports fans’ booing of the US national anthem at weekend hockey and basketball games may signal a shift in consumer sentiment against American brands in favor of “buy Canadian”. Several provinces began removing US spirits and wine from liquor store shelves over the weekend. Ontario premier Doug Ford announced that his province had canceled a CAD 100 million contract with Elon Musk’s Starlink and that US companies would be excluded from provincial procurement contracts until the tariffs are removed.

According to Mexican president Claudia Sheinbaum, 10,000 Mexican National Guard troops will be deployed to the border region, while the United States has agreed to combat trafficking of American firearms to Mexico. She had previously stated that her country was prepared to counter the Trump tariffs with “Plan B”, an as-yet unspecified package of tariff and non-tariff measures.

China’s response to the tariffs has been more muted, with leaders promising to complain to the WTO, but also preparing to resume discussions and present new proposals to increase imports and investment and to reduce exports of fentanyl precursors under the Phase One trade agreement with the United States, signed in 2020 but never fully implemented.

While theoretically importers facing tariff costs could accept lower margins or negotiate lower prices with foreign suppliers, in practice most of the cost of the tariffs levied during Trump’s previous term was passed on to consumers.

Should negotiations fail and an extended trade war ensue, the US holds the upper hand against each individual country, but could face difficulties in a multi-front war, especially if tariffs are also levied on the European Union as Trump said Sunday “will definitely happen”. Several European heads of state expressed defiance after a summit today, warning that hostile measures between the US and the EU would only benefit China. Mexico and the EU updated an existing agreement in January to ease trade in food and beverages, suggesting opportunities for coordination among the target countries.

I intend to keep up with the trade policy changes implemented by the new US administration, but I don’t want to rebroadcast every new social media post from Donald Trump, so for the most part I plan only to write about confirmed official measures. Still, I do think some of the new details that have emerged this week, and how international media are responding, are worth noting.

The Singapore Straits Times reports that Trump intends to impose 25% duties on all imports from Canada and Mexico as well as a 10% tariff on imports from China to the United States beginning February 1. The president accuses China of sending fentanyl to Canada and Mexico from where it is then smuggled into the United States, along with illegal immigrants. He has also accused China of failing to live up to promises to import American agricultural products made during his first term in office.

While mostly taking a conciliatory tone and expressing willingness to address American concerns, all three countries have also vowed to retaliate against any new US tariffs.

The French newspaper Le Monde quotes Mexican president Claudia Sheinbaum saying, “It’s important to always keep a cool head and refer to signed agreements,” referring to the USMCA trade pact concluded during Trump’s first administration which is scheduled for review next year.

Germany’s Die Zeit covers (in German) new threats to levy duties on goods from the European Union, which until now has been a less frequent target of Trump’s pro-tariff rhetoric.

It appears significant that Trump has tied most of the tariff threats to issues such as drugs and immigration that are not directly related to trade. This suggests that there is room for negotiation on these issues that could, one hopes, still avert any severe disruptions to the global economy. In the EU case, however, he mentioned the trade deficit and accused Europe of being “very, very bad to us” by refusing to buy American cars and farm products.

The EU tariff threat is bad news for, among others, American whiskey distillers. As part of a trade dispute during Trump’s first term, the European Union levied duties on US whiskey initially set at 25% and later scheduled to rise to 50%. The measure was suspended with the easing of trade tensions under the Biden administration, but the suspension is due to expire on March 31.

This looks useful: the Houston District Export Council is holding a seminar on exporting to Mexico this February 11.

Global Trade reports that the International Longshoremen’s Association and United States Maritime Alliance have reached a contract agreement, averting the threat of a strike at US east coast and gulf coast ports. The agreement remains subject to ratification but is expected to pass.

With “Day One” of the Second Trumping just two weeks away, businesses are bracing for the impact of the new administration’s promised tariff policies. During the election campaign, Trump frequently spoke of imposing across-the-board 10–20% duties on all imports to the United States. On Truth Social last November he threatened to increase tariffs by 10% on goods from China and impose 25% duties on imports from Canada and Mexico if those countries refused to cooperate on stemming the flow of drugs and migrants into the United States. At other times the returning president has proposed tariffs of 60% or more on Chinese goods. He has also threatened to impose 100% levies on imports from the BRICS countries should they proceed with plans to move away from the US dollar in international trading, and has often voiced support for tariffs in general.

The exact shape of the new trading regime remains unclear. Just today a Washington Post article claimed that Trump aides are exploring tariff plans that would cover all countries but only “critical” sectors — a report that Trump promptly labeled “Fake News” in a Truth Social post.

Until the outlines of the new policies come into sharper focus it will be difficult to gauge their impact in any detail, but it could clearly be massive. The targeted countries include America’s most important trading partners: trade with Canada and Mexico within the USMCA amounts to $1.5 trillion per year, while US-China trade is on the order of $600 billion annually. In the past, the infamous Smoot-Hawley Tariff Act of 1930 is widely held by economists to have exacerbated the Great Depression. And a Brookings article cites findings from multiple studies indicating that the US-China trade war during Trump’s first administration, with a far smaller scope than what is now being proposed, cost the United States between 0.3 and 0.7% of GDP, with most of the costs borne by US companies. China will not pay for Trump’s tariff wall.

Higher tariffs will supercharge inflation, not only by adding directly to the price of imported goods purchased by consumers, but also by raising the cost of imported production inputs such as ingredients and components for products manufactured in the United States. These intermediate goods account for the majority of US imports. Supply chains in sectors such as the North American automotive industry have become so densely intertwined that many assemblies cross the border multiple times during the production process, blurring the distinction between imports and exports. These industries will be especially hard hit.

With the threat of a US dockworkers’ strike already looming, a further concern is that logistical bottlenecks will form as importers seek to stockpile inventory before the tariffs take effect. The resulting disruptions could lead to spiking freight charges and critical material shortages that could take months to clear.

Beyond the first-order inflationary effects, a high-tariff regime is practically certain to trigger retaliation by our trading partners, just as punitive tariff policies did during Trump 1.0. Mexico’s president and economy minister have already vowed to retaliate, and China’s move last week to impose restrictions on 28 American companies is widely seen as a signal that it will respond aggressively to any US moves against its economic interests.

If partner countries retaliate, tariffs in foreign markets will present US exporters with a sliding scale of curtailed demand and lower margins, depending on how much of the duties they are willing to offset with lower prices. Along with potential non-tariff measures, retaliatory tariffs could put American companies at a significant disadvantage in overseas markets against local and third-country competitors, harming not only major players such as the US auto industry, but also thousands of small exporters.

Alongside retail price increases, squeezed margins, and increased supply chain complexity, the biggest impact on American businesses may be from planning uncertainty on both the purchasing and marketing sides simply from the threat of unpredictable major policy shifts. The erosion of rules-based free trade in favor of lobbying, subsidies, and favoritism also raises the long-term potential for corruption worldwide. (A study published in 2021has already found a correlation between tariff exemption application approvals and Republican political donations during Trump’s first term.)

Moreover, many of the tariffs’ effects will hit smaller organizations disproportionately. Small businesses have fewer administrative resources to deal with compliance burdens, far less lobbying clout for securing tariff exemptions, and less financial capacity to quickly reconfigure supply chains.

Given their prominence during the president-elect’s campaign appearances, it’s unlikely that the tariff plans are mere Trumpian bluster in their entirety, but there are indications that the more extreme and targeted measures are intended largely for negotiating leverage. Indeed, in his announcements on Truth Social, he explicitly tied tariffs aimed at China, Canada, and Mexico to the flow of drugs and illegal immigrants entering the United States. Still, Trump has also touted tariffs as a major potential source of tax revenue and on many occasions voiced his attachment to them, so it seems near-certain that some form of expanded tariff policy will be implemented.

Some commentators have suggested that the president lacks the power to levy tariffs unilaterally. In principle the power of taxation, including tariffs, rests with Congress, but a number of laws adopted since the 1930s delegate authority to the executive branch in various circumstances, and presidents from both parties have made use of that authority. While most of the president’s options would either be temporary in nature, require a prior investigation and finding, and/or require action by Congress, the International Emergency Economic Powers Act gives the president broad authority to regulate international transactions upon declaring an emergency. The law has been applied many times since its adoption in 1977, most recently by Joe Biden, although never to implement across-the-board tariffs of the kind the Trump campaign has proposed. Any action under the IEEPA will probably be challenged in the courts, but a prompt injunction to block the tariffs while the case is heard is unlikely.

Importers do have options to mitigate the damage. Even where full reshoring of production is impractical, some may be able to employ “tariff engineering” to fine-tune their manufacturing processes so that components are imported under classifications subject to lower duties than may be the case for goods nearer to or farther from the finished product. Likewise, in complex multinational supply chains, various stages of manufacturing processes can be shifted to different countries to manipulate the value-add percentages that define the “country of origin” and determine which duty rates apply.

Another tactic is to employ a trading company as middleman to import the product and pay duty based on a lower first-sale invoice value before reselling at a markup to the final purchaser. Needless to say, this approach is subject to restrictions lest the first-sale valuation be deemed fraudulent.

Where goods are imported for transit or further processing before reexporting, it may be possible to avoid duties by storing and/or processing them within a foreign trade zone.

Exporters facing retaliatory tariffs may have fewer options, primarily involving market diversification. So far, for example, Trump has not threatened new tariffs targeted specifically at the United Kingdom or European Union countries. If a trade war does break out, countries that remain outside the path of the storm may prove to be more attractive markets. In other cases, companies may be forced to accept thinner margins or, ironically, move some production outside the United States to hold on to their position in key markets.

With multiple rounds of tariffs, counter-tariffs, and negotiations to be expected, it will likely be months if not years before any new trade regime stabilizes. It may be tempting to take a wait-and-see attitude until things shake out. But with stakes this high, businesses large and small would do well to map out possible scenarios and prepare contingency plans for a range of potential higher and lower tariffs on both imports and exports, universal or targeted.

I’m in the process of updating a Global Market Analysis of export markets for US-made whiskey that we published a few years ago in the B.C. era (before Covid). As part of the overhaul, I’m revisiting the data sources used to identify high-potential markets and incorporating some new ones. One of these is the United Nations Comtrade Database.

Quoting Comtrade’s About page, “The United Nations Commodity Trade Statistics Database (UN Comtrade) contains detailed goods imports and exports statistics reported by statistical authorities of close to 200 countries or areas. It concerns annual trade data from 1962 to the most recent year. UN Comtrade is considered the most comprehensive trade database available with more than 3 billion records.”

The database features comprehensive import and export statistics by year, country/territory, and six-digit Harmonized System commodity code. The data can be filtered to display global or bilateral import or export figures for each market. Besides dollar value, the statistics also include unit quantities, making it easy to calculate average prices for each market and period. The website provides analytics and visualization tools, and CSV extracts can be downloaded after registering for a free account.

Needless to say, a degree of caution is in order when using these statistics. For one thing, data for certain periods and/or countries is often missing, especially for smaller and less-developed markets. More importantly, trade volume trends during the pandemic and immediate post-pandemic years reflect the unusually volatile conditions during this period. As you may have heard, “past performance is no guarantee of future results.”

Still, data to be taken with a grain of salt is better than none at all. Some very preliminary number crunching reveals that the greatest average annual growth in whiskey imports between 2019 and 2023 took place in China, with an average increase of over $94 million per year. Does this mean that American craft distillers should be rushing to get in on the action in China? Well, not necessarily, at least not without a lot more research and preparation….

Testing and certification company SGS is offering a white paper that’s potentially of interest to food producers seeking to export. The report describes the Global Food Safety Initiative (GFSI) and the various international food safety standards that support it. Grab a copy and start developing a standards compliance strategy for your food exports!

To celebrate Indigenous People’s Day, Swift Passage is again making a donation to The Language Conservancy to support the organization’s endangered language preservation efforts.

While in London recently I visited the Silk Roads (note the plural) exhibition at the British Museum, displaying a dazzling array of artifacts from across the vast web of ancient trade routes spanning the Eurasian continent from Japan and Korea to Ireland. The show makes clear that global trade, far from being a phenomenon of the modern age, has been enriching human material and cultural environments for many centuries. (If you go, be prepared to fight crowds despite limited ticket quotas for specific entry times.)

The phrase “going global” captures the excitement and ambition of pursuing customers and markets far from home, but for most product-based businesses it makes little sense to launch export operations by literally selling simultaneously into every one of 200-odd potential export destinations around the world. Because your time and budget are finite, you’ll want to avoid wasting resources by first entering those markets that present the highest likelihood of success for your brand. As in so many areas in business and life, focus is key.

Selecting the right markets for exporting is crucial for the success of a business, as it directly impacts the effectiveness of marketing strategies and the overall profitability of international operations. By starting out in a small handful of large and fast-growing markets, you can focus your resources on regions with the highest potential for growth, ensuring that your marketing efforts are directed where they are most likely to yield positive results. The selection process involves analyzing export statistics, market trends, and the competitive landscape, which helps companies understand where similar products are currently being shipped and how they can position themselves effectively. Additionally, understanding cultural nuances and market-specific characteristics is vital, as these factors can significantly influence product design, packaging, and advertising strategies.

One obvious place to start your selection analysis is to consider your company’s past experience. Even if you haven’t implemented an explicit export strategy, you’ve probably had at least a few leads or sales to foreign buyers or maybe been approached by foreign distributors at a trade show. Especially if you’ve noticed that a majority of these expressions of interest have come from one country, or a group of countries with something in common such as region, climate, culture, or development level, this can be a good indicator of which markets deserve a closer look. Likewise, if you’re seeing activity from competitors in some particular part of the world, that area is likely one you should be checking out too.

But before committing large amounts of your investors’ money and your own scarce time and attention to any group of markets, you’ll also want to do some in-depth research and number-crunching. You should develop an analysis model based on specific indicators of your product’s potential in a given market. Who’s buying your product, and what do these buyers have in common? When, where, and under what circumstances do sales take place? You’ve probably already put a great deal of thought into these factors in the context of your domestic marketing strategy. Now the aim is to develop a set of qualitative and (mostly) quantitative attributes that can be researched for each prospective market to determine which ones most closely match your product’s sales drivers. We’ll take a closer look at some potentially useful indicators in future posts on this blog.

Once you know what information you need about each potential market, there is a wide range of data sources available for finding it. You can begin with free online resources such as The US Census Bureau’s mindbogglingly detailed database of American trade statisics at USA Trade Online or the United Nations Commodity Trade Statistics Database (Comtrade) as well as demographic and economic databases such as the World Bank Development Indicators. Later, when you’ve begun to narrow down the list of potential target markets, you’ll want to collect primary data more closely tailored to your specific requirements. In the United States, the US Department of Commerce produces Customized Market Research reports for a reasonable fee, based on data gathered locally by US embassy staff around the world. If you’re not based in the US, there’s a good chance your own government offers similar services. Many industry trade associations also conduct market surveys, and of course private firms are available to carry out market research in most countries.

In many ways, entering a new export market is like launching a whole new business. By systematically identifying your highest-potential markets and focusing your attention there, you can minimize competition, maximize opportunities, and ultimately enhance your competitiveness in the global marketplace.