Trade war

On 29 April 2025, the Bureau of Economic Activity published that in the first quarter of the year, the US economy contracted by 0.3% as a result of the new tariffs. On the same date, the White House decided to relax tariff measures on the auto industry. The problem is that trade flows and global auto production are not overwhelmingly American. The advantages of the T-MEC and imports from Asia, both more than three decades old, cannot be reversed in a couple of years

In 2024, the US announced a general increase from 7% to 25% and 100% for electric vehicles (EVs). It was followed by Canada, which imposed 100% tariffs on EVs, and Mexico, which eliminated EV exemptions and imposed a 25% tariff on steel. Subsequently, on April 3, 2025, Trump announced reciprocal tariffs on all countries, with a 10% base plus an additional country-specific percentage. This led to an escalation with China, for whom they have been set at over 100%. In this article, we will review the consequences of the trade war on the North American steel industry.

In 2024, it became clear that the West had lost the competition in electromobility to the East. American flagship companies such as Ford or GM are lagging in producing electric cars (EVs). Tesla, which until 2022 was the leading supplier of pure EVs, has been overtaken by Chinese manufacturer BYD since 2023 while facing difficulties in its sales, profit margins and supply chain intertwined with Asia. On the other side of the Atlantic, Germany's Volkswagen also showed that it could not compete with Asian companies by announcing the closure of two factories in its territory (an unprecedented move), which Chinese companies could take over. In Asia, Japanese companies can compete, especially Toyota, which leads in the production of hybrid EVs. Nissan and Honda announced plans to merge, in December 2024, and take on the Red Dragon cars. Although the deal with Nissan did not go through, the company is continuing with its restructuring plans. In this article, we will review what this means for Latin America as it transitions towards electromobility in the context of the trade war launched by Washington.

Mexico is the second-largest economy in Latin America. It has a deep-rooted relationship with the United States through the T-MEC, now affected by the U.S. announcement of unilateral tariffs. It benefits from preferential access to the U.S. market, which has allowed it to export manufactured goods, automobiles, and agricultural products at the cost of importing all the inputs from China to export these products to the North. In the context of the trade war between Washington and the Red Dragon, the tariffs against Mexico prevent Chinese brand products manufactured in the country from entering its market without tariffs. The Aztec country has sought to diversify its relations by exploring trade agreements with other countries and strengthening Asian investment in strategic sectors for domestic purposes. Given the growing importance of the Asian giant in the country, Washington has pressured its southern neighbour to take measures against China, both in terms of tariffs and investment restrictions, considering them a possible risk to U.S. national security. Such policies limit Mexican growth and productive diversification. This article analyses the presence of the Asian giant in trade and investments in the Aztec country and the limits to this relationship due to its alignment with its northern neighbour.

Evidence shows that the US needs to catch up with China regarding technology. A list by Professor Allison of Harvard University in a book published by the Aspen Institute in 2020 shows seven sectors lagging. In January 2024, the Australian Strategic Policy Institute published a report detailing the lag in 9 sectors and 64 sub-sectors. In response, President Trump's administration placed tariffs on products of Chinese origin starting from March 2018. President Biden extended it and designed an import substitution policy to catch up with the leader.