As many of you know, I've been doing project missions in the USMCA region recently and finally, after so many years, I'm back operating in Mexico. Brazil and Mexico are already my favorites in Latin America. In these projects, I always had/have a lively exchange with the border states of the USA in particular - especially Arizona, New Mexico and Texas.
Now, the world waits with bated breath as the United States heads toward the Nov. 05, 2024 presidential election. With frontrunners Donald Trump and Kamala Harris presenting opposing strategies for America’s future, the outcome will ripple across global markets, impacting everything from inflation to climate policy. Whether it’s a second Trump administration or a first term under Harris, the policies of the next US president will have far-reaching economic consequences.
The State of the US Economy: Resilient but Unstable
The US economy has shown resilience, weathering higher interest rates and persistent global uncertainties. However, inflation remains a significant challenge. The Federal Reserve’s policy responses—already impacting the domestic economy—are increasingly reactive to an environment of supply shocks and structural labor shortages. A new administration, regardless of political orientation, will need to navigate a more unpredictable inflation landscape.
Policies aimed at stimulating demand, like tax cuts, or those that target supply issues, such as tariff increases, could bring renewed inflationary pressure. This would leave the Federal Reserve with little choice but to raise interest rates further, potentially reaching an uncomfortable level that could strain the economy.
The question remains: how will US policies impact not only the domestic economy but global trade?
Global Trade in the Balance
Global trade, already recalibrated during Trump’s first term, hangs in the balance. Trump’s administration took a hard stance on tariffs, especially against China, marking a departure from prior US trade policy. His 2024 campaign continues this theme, emphasizing tariffs as a tool for economic leverage. Should Trump win, tariffs on Chinese imports could climb modestly from 2.5% to about 4.5%, short of his campaign’s 10% goal but still potent enough to erode US growth. Higher tariffs would likely stoke inflationary pressures, adding another layer of complexity to the Federal Reserve’s already delicate balancing act.
In contrast, a Harris presidency would bring different trade priorities. The Biden administration has championed industrial subsidies as a way to protect and foster domestic industries. These subsidies represent a subtler form of protectionism, one that is likely to continue if Harris prevails. While tariffs may not increase under Harris, her administration’s approach could still disrupt trade dynamics, as US subsidies could disadvantage foreign competitors.
Energy and Climate: A Divisive Path
Both candidates share a broad ambition for energy independence and economic self-sufficiency. However, their approaches to achieving these goals differ sharply, especially in terms of climate policy. For Kamala Harris, climate regulations would tighten, bolstering the clean energy sector and accelerating the shift away from fossil fuels. Her administration would likely emphasize reducing emissions, supporting renewable infrastructure, and aiming for aggressive climate targets.
In contrast, Donald Trump’s energy policy seeks to sustain the fossil fuel industry, at least in the short term. Although market trends suggest an eventual shift to renewables, a Trump administration could slow this progress by rolling back environmental regulations and promoting fossil fuel production. This divergence could fracture the global response to climate change, leading to economic costs that go beyond national borders and stalling the worldwide green transition.
What Lies Ahead?
Ultimately, the outcome of the 2024 election could set the tone for the global economy in the coming years. A Trump victory signals renewed trade tensions, potential inflation surges, and a delay in climate progress, while a Harris administration would continue a protectionist stance through subsidies and champion more climate-focused policies.For global markets and economies intertwined with the US, the aftershocks of November’s vote will likely be felt for years.
No matter the victor, the world must prepare for an era of economic policies driven by national priorities—and the wide-reaching global impact that accompanies them.
A Closer Look on Mexico
USMCA Faces New Scrutiny Amid Election Threats and Geopolitical Tensions
In the evolving landscape of North American trade, the United States-Mexico-Canada Agreement (USMCA) faces increasing scrutiny as geopolitical and economic dynamics shift. A surge in Chinese imports flowing into Mexico has raised questions about the resilience and long-term objectives of the trade deal. As the 2026 review of the USMCA approaches, experts speculate on the impact of upcoming elections and policy shifts on the future of North American trade.
Mexico’s Role in the Supply Chain Reconfiguration
Talking with C-level managers of Freightos, highlights that Mexico has become an attractive destination for foreign companies, including American firms, to mitigate costs in response to global supply chain disruptions. During our project missions 2023/24 in Mexico It’s clear that foreign and American companies are turning to Mexico to lower costs amid ongoing supply chain reconfigurations. This trend, which began during the pandemic, has gained momentum as businesses seek to build resilience and adapt to economic shifts.
The influx of Chinese goods into Mexico is driven not only by lower production costs but also by strategic advantages. Mexico’s proximity to the U.S. makes it an attractive alternative for companies looking to move goods efficiently into the North American market. However, the question remains whether the next U.S. administration will closely examine the USMCA’s role in facilitating these trade flows, potentially reconsidering provisions that enable Asian goods to enter the U.S. market via Mexico.
USMCA Review - A Period of Uncertainty
The USMCA, which replaced the North American Free Trade Agreement (NAFTA) in 2020, includes a six-year review clause, with the first review scheduled for July 2026. This provision allows any of the three countries to propose changes or withdraw from the agreement, triggering a prolonged period of uncertainty should any party opt to negotiate different terms.
During all project missions executed, specially in 2024, I emphasized that this review will likely include a close examination of how Chinese goods enter North America through Mexico. It seems that China is using Mexico as a strategic platform to move materials and parts into North America, I would remarked, adding that the question of how to handle duties—tariffs imposed on Chinese goods—could become a major topic in the 2026 review discussions.
Potential Policy Changes Under a New Administration
The U.S. political landscape will play a critical role in shaping the future of the USMCA. The potential return of former President Donald Trump, who was instrumental in renegotiating NAFTA into the USMCA, has raised concerns among logistics managers and companies. Some fear that a renewed Trump administration could lead to additional tariffs on Chinese goods entering the U.S., possibly as high as 60% to 100%. Businesses are already strategizing to front-load imports to mitigate the risk of sudden policy shifts that could impact costs and trade flows.
During our iMB.Solutions project missions with a European client of mobility industry in the first semester of 2024, we analyst a huge bundge of information sources, among national press secretary for Trump’s 2024 campaign, emphasized that Trump would continue his approach of prioritizing American workers and farmers in trade negotiations. They argued that the current administration’s policies have allowed China to gain undue advantages, particularly with regard to electric vehicle mandates, and warned that these issues could worsen if the current administration remains in office.
While the Harris-Biden administration has yet to comment on these developments, the impact of a potential policy shift could have significant implications for trade relations, particularly if stricter regulations are placed on Chinese imports routed through Mexico.
Mexico’s Growing Role in North American Trade
Despite potential challenges, we (iMB.Solutions) believe that Mexico’s role in North American supply chains will continue to expand. If all three countries agree to renew the USMCA, we (iMB.Solutions) don’t expect the flow of goods from China into Mexico to slow down.
As global trade evolves in an increasingly complex geopolitical environment, Mexico’s strategic importance within North America is set to grow, further strengthening its role in regional supply chains.
In the lead-up to the USMCA’s 2026 review, companies are closely monitoring political and economic developments. For businesses navigating this complex trade environment, Mexico remains a critical hub, but the road ahead is clouded with uncertainty. The outcome of the todays U.S. elections and the subsequent USMCA review will play a decisive role in determining whether Mexico can sustain its current position as a key node in North American supply chains.
If you want to dive a little deeper into scenario generation, here is my absolute blog recommendation. Without question, it's also a highlight if you're looking for a rapidly new approach to strategic planning. In any case, I am very focused on USMCA - no matter how it turns out, you should be prepared for tactical adjustments with a view to value creation in USMCA. But remember: strategic scenario generation comes before tactics.
>>> READ BLOG: Unlocking Strategic Business Scenarios with Generative AI as a Project Assistant - Scenario Generation USMCA
https://www.imb.solutions/blog-newsletter/unlocking-strategic-business-scenarios-with-generative-ai-as-a-project-assistant-scenario-generation-usmca
