Reciprocal trade relations are only one piece of President Trump’s new tariff policy, but it is worth a quick history lesson to put that piece of the puzzle in perspective.

Mexico, Canada and China are America’s three largest trading partners, accounting for about $1.4 trillion worth of US imports annually. For context, US gross domestic product clocked in at $27.36 trillion in 2023, according to the US Bureau of Economic Analysis, as reported by the New York Post.
The old Republican Party always claimed to be in favor of “free trade.” However, their idea of “free trade” was to allow foreign competitors to undercut American producers in our domestic markets, while doing nothing when our trading “partners” imposed tariffs on our exports or even excluded American goods from their domestic markets.
The Democrat half of the DC Uniparty was happy to contribute to the destruction of our domestic manufacturing by enacting ever-increasing layers of regulations on American producers – environmental, labor, even DEI, while ignoring the labor and environmental practices of our competitors.
The result was that over many years we “off shored” many industries, and the jobs that went with them, in the name of tough environmental and labor regulations.
So, when Trump, during his June 28, 2016, remarks in Monessen, Pennsylvania, called the loss of American heavy manufacturing and the creation of the “Rust Belt” a politician-made disaster he was right on the money.
As Trump put it back in 2016:
We allowed foreign countries to subsidize their goods, devalue their currencies, violate their agreements and cheat in every way imaginable, and our politicians did nothing about it. Trillions of our dollars and millions of our jobs flowed overseas as a result. I have visited cities and towns across this country where one-third or even half of manufacturing jobs have been wiped out in the last 20 years. Today, we import nearly $800 billion more in goods than we export. We can’t continue to do that. This is not some natural disaster, it’s a political and politician-made disaster.
In that analysis Donald Trump was correct, and his prescription of tariffs as a way to equalize costs is exactly what our trading “partners” have done for years.
Michael Pettis, who is a senior associate at the Carnegie Endowment for International Peace, has made a splash with a contrarian, historicized observation about tariffs that goes against the general opposition to tariffs voiced by most economists. Even more notable, he has had some nice things to say about Trump’s plans for aggressive trade reforms. “Done under current circumstances,” Pettis wrote, “tariffs could increase employment and wages in the United States, raising living standards and growing the economy.”
However, there’s another angle to President Trump’s tariff policies that has gotten lost in all the media whining over the potential price increases for Mexican avocados, Canadian whiskey and Chinese Christmas tchotchkes.
And that’s the idea that tariffs can be used as a diplomatic tool to prompt other countries to act on non-trade related matters – such as border control and illegal drug exports.
In that regard the Red Chinese were the first ones to get the message, but so far, they don’t seem to be inclined to act on it.
Indeed, Communist China’s foreign ministry said, “Fentanyl is America’s problem… The Chinese side has carried out extensive anti-narcotics cooperation with the United States and achieved remarkable results.”
While the Red Chinese have refused to take responsibility for pushing fentanyl on Americans, the Canadian and Mexican governments largely ignored the non-trade related aspects of President Trump’s tariff policies – until yesterday.
On Monday, President Trump and Mexico President Claudia Sheinbaum announced that they had agreed a one-month pause on the imposition of a 25% across-the-board tariff by the US in exchange for concessions on border security by Mexico while a broader deal gets negotiated.
As part of the temporary pause, Sheinbaum agreed to reinforce the US-Mexico border with 10,000 personnel from her country’s National Guard, to help crack down on fentanyl dissemination and illegal immigration into the US, per statements from the two leaders, reported by the New York Post.
In response to President Trump’s initial announcement of the new tariff regime outgoing Canadian Prime Minister Justin Trudeau unveiled a suite of retaliatory 25% tariffs on more than $106 billion in US goods.
With the non-tariff issues of illegal border crossing and fentanyl also on the table with Canada, Trump and Trudeau also held a call on Monday and agreed to a second call later in the afternoon to further hash out an arrangement. FLASH: Trudeau agrees to reinforce border and curb illegal crossings, tariffs on hold for 30 days.
While it is early days for President Trump’s trade and foreign policy team, at least with Mexico and Canada it appears his use of tariffs as a non-trade tool of diplomacy is working.
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