President Donald Trump today implemented his long-promised tariffs on Canada, Mexico, and China. The 25% import tax on most Canadian goods, and a 10% tax on energy imports, could have particularly broad consequences in Maine, which did some $6 billion worth of trade with its northern neighbor last year. To explain more about what this all means, Maine Public's Ari Snider spoke with University of Maine political science professor Kristin Vekasi.
Ari Snider: There's been so much uncertainty with these tariffs about whether they were going to happen and when they were going to happen. Has that uncertainty already had an impact on the economy in Maine or across the country?
Kristin Vekasi: Well, when there are risks like this, business risks, companies already do need to start planning for that. And so you see in a lot of different industries under this uncertainty a lot of planning and thinking about what alternative markets might be. And the alternatives usually are more expensive. So the reason that we have the supply chains and the trade that we have is because it makes business sense. It typically makes economic sense. It often makes geographic sense. And so trying to find alternatives already means that you're looking at things that are more costly, trying to figure out where to cut down here, cut down there.
And do we have a sense yet of how this all is going to impact Maine?
So we have some predictions, although it's incredibly hard to know what is going to play out. So Maine's largest trading partner by far is Canada, and one of our largest imports is energy. The tariff level on energy is lower, only 10% compared to the 25%, but one of the broad predictions that we can make for the tariff conflict with Canada is that energy prices will go up. We also see, of course, our lobster industry that has a lot of intersections with Canada. We have a pretty integrated lobster supply chain with Canada in terms of processing and shipping. We also see plenty of places that rely on steel imports and aluminum imports. That's something that we would expect to see costs go up for Maine manufacturers. We also can expect to see this with some of the lumber and paper industries that also do a lot of cross-border work. And I want to point out that these are really long-term relationships. This new policy will introduce the highest trade barriers that we've had between Canada and the United States since 1940.
Is there any risk, or any possibility, that some of these trading relationships could be permanently damaged, and that countries like Canada and Mexico might just look to other countries to do the bulk of their trading?
There are two different answers to that question. These sorts of political shocks are often what kick countries into gear and kick business people into gear, into making painful choices about how they're going to diversify, and we have lots of examples of that. So it's certainly possible that we will see this leading to different market patterns and more of a permanent kind of, or at least a medium- to long-term kind of rupture. On the other hand, the biggest predictors of who you trade with is who are you close to, and do you have a shared language? And those are strong predictors that the United States and Canada are going to be pulled back together. I think the other thing that's important to note about this particular set of trade frictions is some of the responses from the United States' trading partners. One of those is that Canada is ready and very willing to use harsh retaliatory measures, which we haven't seen before. But the suddenness of this, maybe lack of compromise that we see has really led to a new sense of nationalism, and nationalist movements in Canada, where they're willing to take these very harsh measures in response to very harsh measures.
And how soon might consumers start to notice changes?
I think with energy, it will be a lot faster, because that's something that flows. With other products, it will depend on what sort of cushion we have in terms of stock. I think in terms of agricultural products coming from Mexico, we'll probably start to see that effect in a couple of weeks, that's my prediction. But again, energy will probably be much sooner.
