Policy Risk Monitor – January 30, 2025
A weekly news scan of key policy areas to help firms identify and monitor policy risks.
Trade
Trumps Says Tariffs on Mexico and Canada Coming February 1
President Trump said he will to impose 25% tariffs on imports from Mexico and Canada, beginning February 1. Trump cited the influx of migrants at the U.S.-Mexican border, the flow of fentanyl into the United States, and the U.S. trade deficit with the two countries as the reason for the tariffs.
Prior to Trump’s statement of his intent to impose tariffs on Mexico and Canada, Mexican President Claudia Sheinbaum said she did not expect the tariffs to happen. “We don’t expect it will happen,” she said. “But if it does, we have our plan.”
Colombia Agrees to Accept Deported Migrants After Tariff Threat
Colombia agreed to accept military aircraft carrying deported migrants after Trump threatened to impose 25% tariffs on the country for refusing to accept the military flights. Colombia agreed to “all of President Trump’s terms,” and the Trump administration agreed not to impose tariffs unless Colombia “fails to honor this agreement.” Trump had threatened an emergency 25% tariff on all Colombian imports to be raised to 50% in a week. He also threatened travel restrictions on government officials and banking and financial sanctions.
Trump Says He Wants Universal Tariffs “Much Bigger” than 2.5%
President Donald Trump said he wants to impose universal tariffs that are “much bigger” than the 2.5% tariffs that Treasury Secretary Scott Bessent supports. Bessent supports low tariffs of 2.5% on all U.S. imports with a gradual increase, the Financial Times reported. This would allow time for businesses to adjust and for countries to negotiate.
Trump Advisors Advocate Tariffs on Mexico, Canada Before Talks
President Trump’s advisers support imposing 25% tariffs on Mexico and Canada by February 1. Commerce Secretary nominee Howard Lutnick and deputy chief of staff for policy Stephen Miller are pushing for tariffs before any talks with Mexico and Canada.
Trump Says Tariffs Will Cover Computer Chips, Drugs, Steel, and Aluminum
President Trump said he will impose tariffs as high as 100% on “foreign production of computer chips, semiconductors and pharmaceuticals to return production of these essential goods to the United States.” He also indicated that his administration will consider tariffs on steel, copper, and aluminum.
EU Resumes WTO Case Against China
The EU resumed its WTO case against China after a one-year suspension. The EU had to resume the complaint to prevent it from lapsing. The EU may again suspend the proceedings to compile additional evidence. The EU filed the complaint against China in 2022 in response to trade restrictions from China on Lithuania after that country opened a Taiwanese representative office in its capital.
EU Needs to Improve Competitiveness to Keep Up with U.S. and China
EU Economics Commissioner Valdis Dombrovskis said the European Union needs to “make competitiveness of European economy a priority” to keep up with the US and China, Bloomberg reported. “There are also structural issues like relatively slow productivity growth, which we’ve had for decades and we’re falling behind the US and China in terms of productivity and growth and we need to address it.”
EU to Propose “Buy European” Plan to Protect Key Industries
The European Commission “will propose the introduction of a European preference in public procurement for critical sectors and technologies,” the Financial Times reported. The EU wants to allow governments to exclude foreign bidders and “buy European” to allow governments a way to protect critical EU sectors from cheaper Chinese competitors.
U.S.-China
Trump Says Would ‘Rather Not’ Put Tariffs on China
President Donald Trump said he’d prefer not to have to impose tariffs on China. “I’d rather not have to use it. But it’s a tremendous power over China,” he said.
Freeland Says Canada Can Help United States Weaken China’s Supply Chain Dominance
Chrystia Freeland, Canada’s former finance minister who is running for prime minister, said the country can work with President Donald Trump to reshape global trade and weaken China’s dominance of supply chains. Freeland said Trump is threatening tariffs on Canada, Mexico and other allies to prepare for tougher policies on China.
USTR Launches Two New China Probes
The U.S. Trade Representative announced two new reviews of China: a review focused on unfair trade practices and a review to assess China’s compliance with the Phase One Trade Agreement. The reviews are conducted in accordance with the presidential memorandum “America First Trade Policy.” (see Trump Outlines “America First Trade Policy”.) The reviews could provide the basis for new tariffs on China.
Record Number of U.S. Companies Looking to Exit China
A record 30% of U.S. companies in China are looking to relocate manufacturing or sourcing, according to a survey by the American Chamber of Commerce in China. Respondents considered or started looking for an exit to diversify their operations. diversification in 2024. Many companies cited increasing geopolitical tensions.
Trump Indicates He Will Ask China to Help End Ukraine War
President Donald Trump said he will try to partner with China to press Russia to end its war with Ukraine.
Energy
EU Will Not Immediately Ban Russian LNG
The European Commission’s latest sanctions on Russia did not propose a ban on Russian liquefied natural gas (LNG) imports. Member states pressed to first secure alternative sources, including from the United States.
Argentina Considering Exit from Paris Climate Agreement
President Javier Milei is considering withdrawing Argentina from the Paris Climate Agreement. If it withdraws, Argentina and the United States would be the only two countries to leave the accord. The move would likely reshape global climate efforts.
Businesses Pressuring EU to Reduce Sustainability Agenda
Big businesses and national governments are pressuring the EU to reduce its sustainability agenda in response to the impact on the EU of President Trump’s deregulatory agenda in the United States. ExxonMobil. Europe president Philippe Ducom said “very little” of its €30 billion investment in hydrogen and carbon capture would come to Europe as a result of its “frivolous, excessive and expensive regulation,” the Financial Times reported.
Geopolitics
Trump Presses Denmark Prime Minister on Greenland Acquisition
President Donald Trump expressed his seriousness in taking over Greenland in a telephone call with Denmark’s prime minister, the Financial Times reported. Prime Minister Mette Frederiksen said the territory was not for sale. “The intent was very clear. They want it,” a European official said. “The Danes are now in crisis mode.” Trump later criticized Denmark’s military defense of Greenland and said the United States will gain control of the island.
Saudi Arabia Proposes $600 Billion U.S. Investment
Saudi Arabia’s Crown Prince Mohammed bin Salman said the kingdom wants to invest $600 billion in the United States over the next four years. The comments were made in a phone call with President Trump, the president’s first call with a foreign leader since taking office.
China Using Lending to Gain Dominance in Clean Energy Minerals
China is using a network of state-backed financial institutions across the developing to build control of critical minerals needed to facilitate a clean energy transition world, according to a new report. The report draws on a dataset that systematically tracks China’s official sector financial commitments for copper, cobalt, nickel, lithium, and rare earth element extraction and processing operations across countries in its Belt and Road Initiative over a 22-year period.
Economic Policy
Senate Confirms Scott Bessent as Treasury Secretary
The Senate confirmed investor Scott Bessent as Treasury secretary, where he will play a key role in implementing President Donald Trump’s tax, trade, and financial policies. During his nomination hearing, Bessent said extending the 2017 tax cuts is “the single most important economic issue of the day.” Bessent supports using tariffs to raise revenue, protect strategically important industries, and as a foreign policy tool. He also wrote in The Economist that the “next generation of America’s international economic policy must more closely link security and economic relations to deliver the benefits that truly free trade can bring.”