Tariffs: Pushing Mexico into China's accepting Arms and Silver Grabbing Hands

China's role as the largest consumer of silver globally.

Feb 01, 2025

Mexico's Energy Nationalization and Political Landscape

Mexico has embarked on a series of energy nationalizations, reflecting a significant shift in its economic and political landscape. This trend began in the 1930s with the nationalization of oil, followed by lithium in 2022 and electricity in 2023. These actions underscore Mexico's commitment to maintaining control over its vital energy resources.

The driving force behind these nationalizations is the Morena party, which has risen to power with a unique coalition of supporters. This grassroots movement includes farm workers, factory workers, peasants, campesinos, academics, intellectuals, indigenous groups, and women. The party's mandate is clear: redistribute wealth from the privileged few to the poor, challenging the status quo and foreign investment in the process.

Rallying Cries and Resource Sovereignty

The Morena party's approach to governance is encapsulated in several powerful slogans:

"The resources of Mexico belong to the People of Mexico"
"We must secure Mexico's Energy Future"
"The Comrades are to become Defenders of the Territory"

These rallying cries reflect a strong nationalist sentiment and a desire for resource sovereignty. They also serve to mobilize support for the party's policies and actions.

Mexico's Silver Industry and International Relations

Mexico's position as the world's leading producer of silver adds another layer to its economic strategy. This becomes particularly significant when considering China's role as the largest consumer of silver globally. The alignment of these economic factors has led to a natural partnership between Mexico and China, extending beyond mere trade relations.

This partnership is not just economic but also philosophical and ideological. Both countries share certain socialist principles, making China an attractive ally for Mexico in the Western Hemisphere. This alignment comes at a crucial time for Mexico, as it seeks to diversify its international relationships, particularly in light of tensions with the United States under previous administrations.

Mexico's recent nationalizations of key energy industries, coupled with its political shift under the Morena party, signal a significant change in the country's economic and political direction. By asserting control over its natural resources and forging new international partnerships, particularly with China, Mexico is positioning itself for a future that prioritizes national interests and challenges traditional power structures. This strategy, however, is not without its risks and challenges, as it may impact foreign investment and diplomatic relations with other countries, particularly the United States.

Tariffs will trigger more inflation, job losses, and retaliatory cycles that will outweigh any short-term political gains.

President Donald Trump is set to implement significant new tariffs on Canada, Mexico, and China starting February 1, 2025, as confirmed by White House Press Secretary Karoline Leavitt. The tariffs will impose a 25% duty on goods from Canada and Mexico, and a 10% tariff on China, specifically targeting the illegal fentanyl trade

Despite last-minute efforts by Canadian officials to negotiate with White House border czar Tom Homan, Trump has firmly stated that there is nothing these countries can do to prevent the implementation of these tariffs.

This move fulfills a campaign promise and is described by the administration as "promises made and promises kept."

Editors note: Just because you announce on the Campaign trail something that isn’t very well planned doesn’t mean the American people want you to keep a promise they never asked for

The scope of these tariffs is significantly broader than those implemented during Trump's first term. While his previous tariffs affected about $380 billion of foreign goods, these new measures could impact approximately $1.4 trillion of imported goods, assuming no exemptions are made.Trump has also announced plans to extend tariffs to other sectors in the near future:

Chips, oil, and gas tariffs are expected around February 18.
Steel, aluminum, and eventually copper will also face tariffs.
A "tariff wall" is planned for pharmaceuticals to bring production back to America.

The administration acknowledges that these measures may cause some "temporary, short-term disruption" but believes the American people will understand. However, economists warn of potential inflationary effects and increased costs for American consumers. The Peterson Institute for International Economics estimates these tariffs could cost the typical US household over $2,600 annually.

International reactions have been swift:

Mexican President Claudia Sheinbaum stated they have multiple contingency plans and will defend their sovereignty.
Canadian Prime Minister Justin Trudeau warned of a "forceful and immediate response" if the tariffs are implemented.

The implementation of these tariffs represents a significant shift in U.S. trade policy, with potential far-reaching effects on the global economy. As the situation unfolds, businesses, consumers, and international partners are bracing for the impact and potential retaliation measures.

Guaranteed to Backfire (According to Silver Academy)

President Trump's new tariffs on Canada, Mexico, and China carry a significant risk of economic backlash, potentially undermining their intended goals. While designed to pressure trading partners on issues like immigration and fentanyl, these measures could harm U.S. consumers, industries, and broader economic stability in several ways.

Firstly, tariffs act as indirect taxes, raising prices for imported goods and domestic alternatives. The 25% tariff on Canada and Mexico, key suppliers of oil, vehicles, and produce, could lead to substantial price increases. For instance, gas prices might spike by 50 cents per gallon, while grocery bills could rise by 0.5 percentage points. Similarly, the 10% tariff on China would directly affect consumer goods like electronics and apparel. Economists warn these costs could burden households with an additional $1,700 to $3,900 annually, exacerbating inflation already strained by post-pandemic recovery.

Secondly, these tariffs are likely to provoke retaliatory measures. Canada and Mexico have pledged "forceful" retaliation, including tariffs on U.S. exports like distilled spirits and agricultural goods. China, facing existing trade tensions, may escalate its own tariffs or reduce purchases of U.S. commodities like soybeans, potentially repeating the farm-sector crisis of 2018. Such retaliation could lead to long-term job losses in the U.S., with estimates suggesting up to 142,000 jobs at risk.

Furthermore, these tariffs could cause significant supply chain disruptions. U.S. manufacturers reliant on cross-border inputs, particularly in automotive and energy sectors, face higher production costs. The proposed 25% tariff on Canadian steel could add $3,000 to car prices, while oil tariffs might destabilize Midwest refineries dependent on Canadian crude. The Tax Foundation estimates these disruptions could shrink GDP by 0.4%.

Historical precedent shows that tariffs rarely achieve their protectionist goals. For example, Trump's 2018 steel tariffs saved 140,000 jobs but cost 1.6 million in downstream sectors. Similarly, washing machine tariffs raised consumer prices by 12% without boosting domestic employment.

Lastly, these tariffs threaten to destabilize the global economy. Trade-dependent allies like Germany and Japan could face economic challenges, while China's economic slowdown could deepen, potentially triggering currency wars or stronger alliances with U.S. rivals.

While aiming to leverage U.S. economic power, these tariffs will trigger more inflation, job losses, and retaliatory cycles that will outweigh any short-term political gains.

The complex interconnectedness of global trade means that such aggressive measures always have far-reaching and unintended consequences.