Reeling International Markets ... A Trump Specialty

 

"The reaction from the worlds of business and finance has been swift."

"Wall Street witnessed its worst two-day sell-off in the past five years last week."

"International markets continued their downward trend on Monday, with Japan's Nikkei index and the Shanghai Composite Index dropping over seven percent."

Jesse Kline, The National Post

A drone view of Stellantis's Chrysler Windsor Assembly facility in Windsor, Ontario, Canada, February 4, 2025. REUTERS/Carlos Osorio

World markets are reacting to the Trump White House announcements on everything from its realignment of chosen allies, to its characterization of NATO members as free-loaders on the American military, to punishing nations across the globe for their protectionism in trade through tariffs on American goods. A very similar protectionism in President Trump's own 'Make America Great Again', prioritizing U.S. jobs and production by suddenly heaping stiff tariffs on imports to the United States worldwide, leaving all those targeted reeling, and international markets in a confusion of utter chaos.

 

Business confidence and investment, high finance hardly knows where next to look for additional shocks to global markets. One man and his seemingly irrational decision-making has managed to roil the world with a major economic crisis, one that threatens to take not only the countries he has targeted into recession, but the United States as well. It was, after, all, North American and European consumers that decided they preferred to buy manufactured goods produced in cheap-labour markets and their buying power bypassed home-produced goods effectively shutting down factories in favour of inexpensive overseas-produced goods ranging from kitchenware to footwear, bedding and clothing.

 

Lululemon said 40 per cent of its products were manufactured in Vietnam, which was slapped with a 46 per cent tariff initiated by U.S. President Donald Trump. Photo by Joe Raedle /Getty Images

There have been a plethora of tariff statements linked to specific dates, complicated by second-thought reprieves which simply had the effect of destabilizing markets even more, and leaving economists and trade authorities in the dark over what next to expect from a mercurial president of the powerful United States of America. Universal tariffs ranging from ten to 49 percent set to come into effect on the 10th of April have now been temporarily suspended, once again. When they are  reinstituted they will be applied to imports from 180 different countries. 

 

In Canada, America's northern neighbour, President Trump's order to carmakers that he expected manufacturing to return to the United States and the closure of U.S. manufacturing plants in Canada and Mexico to facilitate that move, one that in practical terms will raise the price of the finished product to bite the bank accounts of Americans, yet a transition that would take years in the making, to undo a complex system of established integrated manufacturing between the U.S., Canada and Mexico, both of which Mr. Trump accuses of ripping off America.

 

Automaker Stellantis last week announced its production pause at two of its North American plants -- one in Canada, affecting 3,200 employees, the second in Mexico where 900 workers are to be laid off at five U.S. factories. Canada, as a result of this turmoil, lost 33,000 jobs in March and even greater numbers of full-time jobs. So that's how America's partners in the CUSMA Free Trade agreement are faring at the present time.

 

Employees working in a clothing sewing workshop in Guangzhou, China’s southern Guangdong province. Photo by PEDRO PARDO /AFP via Getty Images

And in the United States, textile and footwear industries have warned that 97 percent of the clothing and footwear sold in the U.S. are imported; the new tariffs on textile-producing countries like Vietnam, Cambodia and China could raise prices by over 50 percent. With free trade, offshoring and strong competition keeps prices down, leaving U.S. consumers with stable pricing on goods over extended periods of time. 

An average car cost is likely to rise between $5,000 to $10,000. These new tariffs are set to cost American households an estimated $1,900 for starters this yer, according to the Tax Foundation think tank; "the largest tax hike since 1982". 

President Trump's endgame is to force production in manufacturing back to the United States as it was before the global community gave its complacent blessing to China to become a colossus of manufacturing, flooding the world with cheap products to please the ordinary consumer focused on cost to the exclusion of closing down their own job markets. In his determination to haul production back home, some matters have not been taken into account.

 

Such as the fact that the low-skilled workforce in the United States no longer exists; goods currently made in developing countries in economies of scale will not be reproducible in the U.S. Even as the Trump White House is sending notices to temporary residents of the U.S. that their freeloading on the U.S. taxpayer is over and millions of undocumented immigrants are being rounded up and returned to sender. Is the U.S. prepared to reduce its high minimum wages to challenge the low wages received by skilled workers in 'undeveloped' countries of the world? 

 

Another example was brought to the fore when the Footwear Distributors and Retailers of America contacted the new U.S. Trade Representative informing him that the typical shoe contains 70 materials that cannot be sourced within the United States. Even should American companies begin producing domestic footwear, tariffs would still apply on many of the raw materials they would have to import to produce footwear. 

And then there's the issue of moving automobile production back to the United States. Transplanting auto part producing factories and vehicles would take years to come to fruition. American-made vehicles also contain thousands of components sourced world-wide.  For producing companies to make long-term reshoring plans they would be risking hundreds of millions at a time of uncertainty and instability; both complicating economic conditions the Trump administration has made itself known for.

 

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