Donald Trump has announced tariffs of 25% for Mexico and Canada, and an additional 10% for China from the first day of his term. It is a measure that would especially affect, if it ends up taking place, the North American technology sector, strongly integrated with these countries for different reasons.
Why is it important. The measure is strategic: it comes less than two years after the renegotiation of the USMCA (the trade agreement between the United States, Mexico and Canada), which makes it sound like a pressure tactic and not so much a definitive policy. This procedure was very common in Trump’s first term and is linked to his past in business, not politics.
The technology sector, with its supply chains crossing continents, would be one of the most affected.
In figures. The three countries account for more than 43% of US foreign trade:
- Mexico: 15.4% of imports
- China: 13,9%
- Canada: 13.6%
The technological impact. Technology companies would be the most exposed. Foxconn, NVIDIA, Lenovo and LG would face problems in their supply chains: either they channel the new extra costs of their products, or they would have to reorganize to avoid the increase, which would not be easy or fast.
The four companies mentioned share a recent expansion of their operations in Mexico with new server installations or component factories, as explained Al Jazeera.
Between the lines. As we said, it seems like a strategy designed to obtain concessions before 2026:
- Use the entire industry – but especially the technology industry – as a negotiating lever.
- Pressure Mexico and Canada to make the new terms favorable to the US.
- Maintains and increases pressure on China in the technological war.
The alarm signal. Steve Madden, a company focused on fashion and footwear, has announced the transfer of production to Cambodia and Vietnam if tariffs are implemented, according to reports CBS. Other manufacturers could follow suit.
The technological case is somewhat more complicated: qualified labor is needed for much of the production while in other industries it is a less complex process.
In detail. Trump has used very similar pressure strategies in the past, whether on tariff or other issues. In his previous four years in the White House, he accustomed us to strong proposals that later ended in a lesser position.
A legacy from the past in business negotiations: proposing a very complicated initial scenario to gradually reduce it.
What’s next. If this measure ends up coming into force, either in the terms that Trump has just proposed or with lower percentages, the US technology industry would face three possibilities:
- Absorbing the new cost of tariffs: complicated for the majority, who manage very lower margins.
- Pass the increase on to consumers: and in this way increase prices and lose competitiveness compared to other manufacturers.
- Reconfigure their supply chains: an intermediate option that would allow the reduction in profit margin to be mixed with a moderate Price increase, gaining efficiency. Apple used this technique after the pandemic.
For now, uncertainty and waiting for the final decision.
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Featured image | Gage Skidmore
