Issue No. 1

Why We Started This Newsletter

On Nov. 30, 2018, the leaders of the United States, Mexico and Canada – President Donald Trump, President Enrique Pena Nieto, and Prime Minister Justin Trudeau – signed the U.S. Mexico Canada Agreement, or USMCA.

In its opening paragraph, the USMCA resolved to “strengthen anew the longstanding friendship” among the three countries “and their peoples and the strong economic cooperation that has developed through trade and investment.”

In 1993, the year before the advent of NAFTA, the precursor of USMCA, total U.S. goods exports to Mexico were just $42 billion; by 2023, exports had grown to $323 billion – an eight-fold increase. Over the same period, U.S. exports to Canada more than tripled. Mexico and Canada are far and away the largest markets for U.S. goods, accounting for about one-third of global U.S. exports.

This graphic from Forbes, based on data from the U.S. Census Bureau in September, shows the importance of Mexico and Canada as buyers of exports from the United States.

Mexico has also become the number-one manufacturing trade partner with the United States, surpassing both China and Canada in less than a decade. This chart, from the Dallas Fed, shows total trading volume (both exports and imports) from manufacturing:

But the benefits of free trade are now under threat. Three weeks after Donald Trump’s re-election, ABC News reported:

Trump posted on his Truth Social platform that one of the first executive orders he will sign when he takes office on Jan. 20, 2025, will be to charge Mexico and Canada with a 25% tariff on all products coming into the United States.

These tariffs, coming on the brink of the 2026 review of the USMCA, violate the very heart of the USMCA and pose an existential threat to many businesses and farms, not just in Mexico and Canada but in the United States. As Mexico’s new president, Claudia Sheinbaum, immediately indicated, tariffs imposed by the U.S. would lead to retaliation by Mexico. Caught in the crossfire of this inevitable trade war will be consumers throughout North America.

Imagine the effect, for example, on certain industries. Mexico is by far the largest market for U.S. steel exports, and it is setting records for buying U.S. corn.

Source: U.S. Grain Council

It is this background that prompted the creation of the Project to Advance North American Prosperity (PANAP). Our goal is to prevent the imposition of tariffs in North America and maintain the U.S., Mexico and Canada as the most powerful free-trade zone in the world. Why?

• Tariffs will harm the U.S. by increasing prices for consumers, boosting inflation (and thus interest rates), and reducing economic growth and unemployment. All of these projections have a strong basis in economic research.

• Especially harmed will be such U.S. sectors as agriculture, automaking, petroleum products, steel, plastics, electronics and computers, industrial products, and retailing. Hard-hit will be the farming and industrial sectors of the Midwest and South, as well as Texas, Arizona, Florida and California, where cross-border trade is especially prolific.

Top Agricultural Exports From the U.S. to Mexico

Source: U.S. International Trade Administration

A strong trading relationship – including a short, free-flowing supply chain – between the U.S. and Mexico is essential to countering China economically. 

• A trade war with Mexico will weaken the cooperation needed to solve the U.S. immigration and drug addiction crisis. These are separate issues that need addressing without the threat of tariffs.

• Abrogating a treaty signed just six years ago will send a message to allies that the U.S. cannot be trusted to keep its word – a point made in an article last month by Joshua Meltzer of the Brookings Institution.

• A trade war will help U.S. adversaries and competitors such as China, harming U.S. national security.

• The collapse of the free-trade regime will destroy the value chains that have developed in recent years between the U.S. and Mexico, especially. China will be the winner.

At the heart of PANAP is information: up-to-date facts and analysis. We will be a hub for news and advocacy in favor of North American cooperation and economic growth and in opposition to destructive tariffs.

We are led by James K. Glassman, former U.S. Under Secretary of State for Public Diplomacy and Public Affairs. Ambassador Glassman also served as Chairman of the U.S. Broadcasting Board of Governors and Founding Executive Director of the George W. Bush Institute in Dallas. He has a background as an editor and economics writer and for nearly 20 years was a fellow at the American Enterprise Institute.

The Project to Advance North American Prosperity is a new organization, and we welcome businesses, individuals, trade unions and non-profit organizations as supporters. Just contact Ambassador Glassman or Elizabeth Heaton Posthumus here.

In addition, Ambassador Glassman is available for media interviews, panel discussions and speaking engagements.

How Much Would Tariffs Damage the United States?

On Nov. 8, a few days after the presidential election, the Tax Foundation, a respected non-profit research organization, provided a review of estimates of the economic costs of tariffs proposed by Donald Trump during the campaign.



First, the author, Erica York, pointed out what economists have known about tariffs for centuries. She wrote:

Over the long run, tariffs shrink the size of the economy by reducing work and investment. That’s because tariffs increase the relative prices of imported and protected goods, and after paying those higher prices, people have less income left to spend elsewhere. Effectively, this means tariffs reduce the after-tax value of income by reducing how much consumption people can afford.

York makes a point that supply-side economists like Milton Friedman and Art Laffer have long argued, “A reduction in the after-tax value of income reduces incentives to work, which reduces hours worked and, in turn, capital investment. Fewer hours worked and a smaller capital stock result in a permanently lower level of output and income.”

York also noted that “tariffs lead to dynamic inefficiencies, which reduce productivity. By creating a protected domestic market, tariffs blunt competitive pressures that otherwise force firms to remain innovative. Instead of needing to constantly search for ways to improve processes and meet consumer demands, firms can sit back and enjoy higher profits from protection.”

York then presents a table showing the results of 17 separate analyses of proposed Trump tariff regimes from organizations including ratings agencies Moody’s and Fitch and financial institutions like RBC. The results are devasting.

Moody’s, for example, projects that a universal tariff of just 10%, followed by retaliation from other countries will lead to a decline in U.S. GDP of 1% in 2025, 2.8% in 2026, 3.5% in 2027 and 3.5% in 2028. Under similar assumptions, the accounting and consulting firm EY forecasts a GDP reduction of 1.1% in 2026 and 2.3% in 2027.

The Peterson Institute for International Economics reported “that imposing a 20 percent across-the-board tariff combined with a 60 percent tariff on China would cost a typical US household in the middle of the income distribution more than $2,600 a year.” 

Mexico and Canada are by far the two largest trading partners of the United States. The American Action Forum (AAF), a group headed by Douglas Holtz-Eakin, a past Director of the Congressional Budget Office, projected that the cost to the average U.S. family of 25% tariffs on Mexico alone would be $900 per year; on Canada, $800 per year.

Retailers would be especially hard-hit as the cost of imported goods they sell would rise, discouraging shoppers and cutting into profits. In a November press release, Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation (NRF), noted, “A tariff is a tax paid by the U.S. importer, not a foreign country or the exporter. This tax ultimately comes out of consumers’ pockets through higher prices.” He added:

While some U.S. manufacturers may benefit from the tariffs, the gains to U.S. producers and the Treasury from tariff revenue do not outweigh overall losses to consumers. For example, a $40 toaster oven would cost consumers $48-$52 after the tariffs. The price of a $50 pair of athletic shoes would jump to $59-$64 and a $2,000 mattress and box spring set would end up costing $2,128-$2,190.

In six product categories – apparel, toys, furniture, household appliances, footwear and travel goods – NRF research found that “American consumers could lose between $46 billion and $78 billion in spending power each year” if Trump tariffs (10% to 20% universally and 60% on China) are enacted.

‘We Don’t Support Tariffs,’ Says the Head of the Farm Bureau. No Wonder.

U.S. farmers will suffer from tariffs. In 2018, President Trump put Section 232 tariffs on steel, and six trading partners – Mexico, Canada, India, China, the European Union, and Turkey – responded by placing retaliatory tariffs on U.S. agriculture. A 2022 study by the U.S.Department of Agriculture found that soybean exports to China dropped 76% between 2017 and 2019. Corn exports to the European Union fell 83%; pork exports to Mexico fell 20%. Overall, U.S. farm exports globally dropped 9%. The states that suffered most were Iowa, Illinois and Kansas.

This new round of tariffs threatens to be worse for farmers. On Dec. 10, the president of the American Farm Bureau, Zippy Duvall, warned of “collateral damage” in rural America if President-elect Trump increases tariffs.

“We really need this new administration focused on trade,” Duvall said during a news conference in Des Moines. “I know that the new administration’s talking about tariffs. We don’t support tariffs. We know that when tariffs are put on that other countries take it out on agriculture and we’re real fearful of what might happen in that area.”

A study released in October by the National Corn Growers Association found that “a tariff-driven trade war with China could cost U.S. soybean and corn farmers as much as $7.3 billion in annual production value.” The study’s authors added:

This burden is not limited to the U.S. soybean and corn farmers who lose market share and production value. There is a ripple impact across the U.S., particularly in rural economies where farmers live, purchase inputs, utilize farm and personal services, and purchase household goods.

Beware of Rhetoric Encouraging Tariffs from the U.S. Steel Industry

U.S. decision-makers should beware of rhetoric meant to encourage tariffs coming from industries that believe they will benefit. One good example is steel.

On Jan. 7, Nucor, the largest U.S. steel company, sent letters to its customers announcing a decision to “cease production on our wire rod rolling mill at Nucor Steel Connecticut.” That plant, in Wallingford, will continue to manufacture wire mesh products, bright basic wire and rebar, and the company will still make rod in its South Carolina, Nebraska and Arizona factories.

Why is the rod operation in Wallingford shutting down? The letter cited “surges of wire rod imports from trading partners, such as Canada, Greece, Mexico, Poland and Ukraine.”

But when one examines the data from the U.S. Census Bureau, the claims regarding Mexico don’t hold up. Mexican total exports of carbon and alloy wire rod in 2024 (using actual figures through November and licenses for December) totaled 24,000 metric tons. That is a reduction of 23% from 2023 and 71% from 2021. Mexico in 2024 accounted for just 1.5% of total U.S. imports of wire rod.

Canada is the number-one exporter of rod to the U.S., but it’s hard to see a “surge” in the data there either. Exports rose 17% over three years, or about 5% annually on average. The other exporters that Nucor named – Ukraine, Poland, and Greece – are, like Mexico, distinctly minor in this category. Combined, they represent about 2% of U.S. rod imports.

Nucor’s statement is only the latest in a series by U.S. manufacturers and a few Congressional allies trying to suppress steel imports from Mexico by claiming a “surge.” In fact, there is no surge. There is only competition, which is beneficial for purchasers of steel, homeowners, car buyers, and consumers in general. Competition is also beneficial for U.S. steelmakers, who are spurred to greater efficiency – as Nucor, especially, as an innovative business, should know.

In a June op-ed in Steel Market Update, the general director of Mexico’s steel trade association, Canacero, noted that the U.S. has consistently run a trade surplus with Mexico in the steel sector and that total Mexican exports to the U.S. fell in 2023 vs. 2022 and continued to decline in 2024 while “US exports to Mexico have grown massively.”

Accusations about surges are not just based on inaccuracies, they are on the wrong track. The foundation of the USMCA is that North America should be viewed as a single market and a bulwark against the true adversaries and cheaters. As the Canacero general director, Salvador Quesada Salinas, wrote:

This isn’t a zero-sum game where one country wins, and the other loses. It’s about collaboration, efficiency, and building a stronger North American economy, which is constantly under attack by dumped steel from places like China or ally countries such as Vietnam.

The Legal Mechanisms for Imposing Tariffs

President-Elect Trump has promised widespread tariffs on imports, but what is the legal mechanism to impose these duties?

“While some analysts have tried to reassure investors and markets by asserting that Trump would lack the legal authority to implement his tariffs plans, this reflects an overly optimistic view of the limits of presidential tariff authority,” said a commentary by three trade experts, published by the Center for Strategic and International Studies (CSIS) on Oct. 10.

The authors were William Alan Reinsch, who holds the Scholl Chair in International Business at CSIS; Warren Maruyama, former general counsel to the U.S. Trade Representative; and Lyric Galvin, a trade attorney.



The American Action Forum (see above) examined the question of presidential authority last month and came to this conclusion:

The most plausible and tested avenues for tariff action would be using Section 301 of the Trade Act of 1974 to raise tariffs on Chinese goods or Section 232 of the Trade Expansion Act of 1962 to raise tariffs on goods with national security implications such as steel. Trump took these two routes during his first term and had successful implementation.

A Congressional Research Service report in May pointed out the broad latitude that Section 301 gives a president, who can impose trade sanctions on countries that “engage in acts that are ‘unjustifiable’ and ‘unreasonable’ and burden U.S. commerce.” The WTO agreement, which provided extensive means of retaliation, reduced U.S. reliance on Section 301, but in his first term President Trump used 301 against China, bypassing WTO, citing the World Trade Organization’s weakness as an enforcement body.

But Sections 232 and 301 require periods of investigation, public comment and consultation with foreign governments. Final action can take a year.

The President could also use the International Emergency Economic Powers Act (IEEPA), which, says the Dec. 10 AAF report, “would be the fastest path toward a blanket tariff on all U.S. imports, although this approach would have more dubious legal standing and would likely face hurdles that hinder unilateral enactment due to it being untested for enacting tariffs.”

Still, the IEEPA can be interpreted as giving the President broad powers. It states: “Any authority granted to the President by section 1702 of this title may be exercised to deal with any unusual and extraordinary threat…. if the President declares a national emergency with respect to such threat.”

The CSIS piece also points to the President’s balance-of-payments authority in Section 122 of the Trade Act of 1974, which would allow him to impose an additional 15 percent tariff on imports for 150 days “whenever fundamental international payments problems require special import measures to restrict imports—(1) to deal with large and serious United States balance-of-payments deficits, (2) to prevent an imminent and significant depreciation of the dollar in foreign exchange markets.”

In addition, the CSIS piece asserts:

Any legal challenges to future Trump tariffs likely would face a steep uphill climb. The courts, including the Supreme Court, traditionally have been reluctant to interfere with the president’s exercise of foreign affairs and tariff powers.

If the President is thwarted (or even if he isn’t) another route to more extensive tariffs would be Congress, which under the U.S. Constitution (Article I, Section 8) has “the Power to lay and collect Taxes, Duties, Imposts and Excises.” Congress began delegating some of this power to the President during the Great Depression.

The CSIS piece ends this way: “There appear to be few practical or legal barriers to Trump making good on his campaign promise” to impose wide-ranging tariffs.

Some Trump Aides Say Tariffs Could be Targeted, With Metals and Medical Supplies in the Crosshairs

The Washington Post reported on Jan. 6 that President Trump may be reconsidering universal tariffs. Instead, “aides are exploring tariff plans that would be applied to every country but only cover critical imports, three people familiar with the matter said — a key shift from his plans during the 2024 presidential campaign.”

The Post reported:

Preliminary discussions have largely focused on several key sectors that the Trump team wants to bring back to the United States, the people said. Those include the defense industrial supply chain (through tariffs on steel, iron, aluminum and copper); critical medical supplies (syringes, needles, vials and pharmaceutical materials); and energy production (batteries, rare earth minerals and even solar panels), two of the people said.

The article by Jeff Stein added, “It’s also unclear how these plans intersect with Trump’s stated intent to impose 25 percent tariffs on Mexico and Canada and an additional 10 percent tariff on China unless they take measures to reduce migration and drug trafficking.”

It is impossible to know how much credence to apply to the reports from a few aides, but the incoming Trump Administration may be responding to economic reality – that tariffs will increase prices and lower growth.

Even tariffs targeted to particular industries will almost certainly lead to retaliation – as steel and aluminum tariffs did after 2018. The retaliation was aimed at U.S. agriculture, which would certainly be in the sights of trading partners hurt by tariffs. But U.S. steel exporters would also be affected significantly. Mexico is their number-one foreign purchaser.

The Post article unfortunately repeats the inaccurate claim that steel exports from Mexico are surging by quoting an official with a notorious protectionist advocacy organization. In fact, steel exports from Mexico to the U.S. have declined in recent years, and the U.S. has long had a surplus in the sector, exporting far more steel to Mexico than Mexico exports to the United States.

In an article in Recycling Today, Salvador Quesada Salinas, the Director General of CANACERO, the Mexican steel trade association, wrote, “The reality is that the U.S. and Mexico aren’t just trading partners: they're integral parts of each other's supply chains. In terms of market share, Mexican steel represents 2.5 percent of U.S. market share, while steel from the U.S. represents 14 percent of Mexico's market share."