NORTH CAROLINA — As news of the Trump Administration enacting tariffs hit headlines in the last week, North Carolina economists argue the impositions could cause broad-ranging negative effects on residents.
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Trump announced Saturday he would instate 25% tariffs on Mexico and Canada and 10% on China, something he campaigned on during his election. By Monday, though, the president agreed to a 30-day pause on tariffs against Mexico and Canada but tariffs against China remain in effect. On Tuesday, China announced retaliatory tariffs ranging from 10% to 15% on U.S. exports including coal, oil, liquefied natural gas, and agricultural machinery.
China was the Port of Wilmington’s top importer in October 2024 with $102 million worth of goods, according to the most recent publicly available data from the Observatory of Economic Complexity. The Port of Wilmington accepts imports including furniture, textiles, and pharmaceutical ingredients from China and exports pork, agricultural products, and softwoods.
“We are monitoring the latest updates on the proposed tariffs, several of which have now been delayed for at least a month,” a North Carolina Ports spokesperson told Port City Daily.
China was Wilmington’s second largest import country of origin in 2023, shipping in $942 million worth of products. Port City Daily asked the Port for details about its Chinese, Mexican, and Canadian imports and exports but did not receive a response by press.
“It could definitely hurt imports at the port,” NC State Professor and Supply Chain Resource Cooperative Executive Director Robert Handfield said. “It can also hurt exports if there’s retaliatory exports as well.”
North Carolina’s top export market in 2023 was Canada, followed by China and Mexico, according to the most recent report from the Office of the United States Trade Representative.
The Trump Administration has cited several reasons for implementing tariffs, including reorganizing global trade to increase domestic manufacturing, geopolitical competition with China, and compelling targeted countries to commit to border control agreements to prevent fentanyl trafficking.
“Do we start seeing reshoring happen as a result of these decisions?” UNCW economist Mouhcine Guettabi asked rhetorically. “That’s the wild card. That’s the big question. There is not a great track record of tariffs bringing manufacturing or production back, but we’ll see.”
Guettabi pontificated that maybe it’s a “shock-and-awe strategy” of the administration.
“It’s really hard to know and it’s happening in real time,” he said.
Guettabi pointed to research that broadly shows consumers primarily bear tariff costs. He said some domestic companies may benefit from reduced competition, but trade wars cause global economic instability leading to disrupted supply chains, inflation, and reduced investment.
N.C. State trade expert Andrew Greenland told Port City Daily the previous Trump Administration imposed tariffs on China in 2018 that increased costs for both manufacturers and consumers in North Carolina. A 2024 American Action Forum study found tariffs — which continued under the Biden Administration — cost U.S. consumers roughly $51 billion per year since 2018.
Trade organizations such as the Food Industry Association — whose members include Harris Teeter, Lowes, and Publix — expressed concern tariffs would increase grocery costs. But some companies, such as Charlotte-based steel manufacturer Nucor, have shown support for the initiative.
“Like the rest of the country, our membership includes varying perspectives on tariffs,” NC Chamber of Commerce President Gary Salamido said in a statement to Port City Daily. “One thing is certain though, people are the priority for employers and we unequivocally support removing the scourge of fentanyl that is killing North Carolinians in communities across our state.”
Wilmington-based entrepreneur Mark Bloomquist is the co-owner of Distributor Daytoon Inc. His company produces Blue Shark Vodka and Hacienda Chactun Tequila, which cultivates Blue Agave in Mexico.
“Even if the duties came in — of course the market would go up with pricing — but we have a lot of it already stocked and our prices are set,” he said. “We’re not political people. We’re here to provide great spirits to the great people of this great state.”
Guettabi, an expert on the Cape Fear region, told Port City Daily Monday morning he was concerned about the impact of tariffs on Canadian lumber and building material costs for construction on housing affordability in the Cape Fear region.
“Whether we’re a housing company or an average consumer,” he said. “We’re now paying higher prices because either we’re buying from the U.S. producer who has higher prices or we’re buying from imported goods that now has a 25% tax slapped on it.”
Trump reached an agreement with Canadian prime minister Justin Trudeau Monday afternoon for a 30-day pause on tariffs in exchange for new commitments to appoint a fentanyl czar, designate cartels as terrorists, and form a new $200-million intelligence directive on fentanyl and organized crime.
The White House and Mexican President Claudia Sheinbaum Pardo similarly agreed to a 30-day pause Monday morning contingent on Mexico reinforcing the northern border with 10,000 national guard members and U.S. efforts to prevent gun trafficking into Mexico.
The president and his economic advisors argue tariffs are a useful negotiating tool to create a more favorable global trade system. Trump instituted the recent rounds of tariffs under the International Emergency Economic Powers Act, which has not been used to enact tariffs before but grants the president broad powers to address “any unusual and extraordinary threat.” He cited China, Mexico, and Canada’s role in U.S. fentanyl trafficking as a national security threat justifying the impositions.
At his confirmation hearing last week, Trump’s Commerce Secretary nominee and transition co-chair Howard Lutnick said Mexico and Canada could avoid the new 25% tariffs if they committed to border agreements to prevent fentanyl trafficking.
“As far as I know, they are acting swiftly, and if they execute it, there will be no tariff,” he said.
China is the world’s largest manufacturer, including exports of chemical precursors used to make fentanyl. The Trump Administration argues China has failed to crack down on firms selling fentanyl precursors to Mexican drug cartels, which traffic the finalized product into the U.S. An April House committee study found China subsidizes firms producing fentanyl precursors and has hindered U.S. investigations of manufacturers. China implemented new regulations on fentanyl precursor exports in September.
The U.S. seized 21,000 pounds of fentanyl at the Mexican border last year but only 43 pounds from the Canadian border. The conservative-leaning Cato Institute notes 90% of fentanyl seizures occur at legal border crossing routes, and 86.4% of fentanyl trafficking offenders from 2019 to 2023 were U.S. citizens, according to the United States Sentencing Commission.
The Chinese and Mexican governments counter the U.S. fentanyl epidemic is fueled by U.S. pharmaceutical companies’ efforts to profit from mass opioid addiction. North Carolina will receive more than $1.4 billion in national opioid settlements from firms including Teva Pharmaceutical, which pressured doctors to prescribe products including fentanyl lollipops.
Lutnick is the CEO of financial services firm Cantor Fitzgerald. Lutnick’s firm has a $600-million investment in Tether — the largest cryptocurrency by trading volume — and oversees its $113-billion holdings in U.S. Treasury bills. Tether has faced broad controversy for facilitating criminal transactions and is under federal investigation for illegal activities, including Mexican cartel drug money-laundering.
In November, the Department of Homeland Security announced charges against Chinese chemical company Hubei Aoks for selling fentanyl precursors in the United States. The Chinese government is cooperating with the investigation, dissolved the company, and arrested four involved Chinese citizens. According to the indictment, Hubei Aoks officials used Tether for fentanyl-related transactions.
“[Organized crime and Mexican cartels] are exploiting the lack of compliance oversight in the crypto industry,” retired DEA special agent Christopher Urben said during a Senate hearing last year.
Lutnick declined to answer whether he would recuse himself from the president’s Working Group on Digital Asset Markets focused on cryptocurrency regulation in a confirmation questionnaire last week.
Lutnick and Trump have favored eliminating federal income taxes and covering lost revenue with new tariffs. Trump issued the “America First Trade Policy” memo to executive agencies the first day of his presidency ordering a broad review of trade agreements and the creation of an “external revenue service” to collect foreign duties and tariffs.
“President Trump has shown tariffs are a means by which he can successfully extract negotiating leverage — and revenue — from trading partners,” Trump economic advisor Stephen Miran wrote in a November policy paper.
N.C. State’s Greenland cast doubt on the strategy’s viability. He noted the U.S. Department of Agriculture distributed $12 billion to agricultural producers hurt by China’s retaliatory tariffs during the Trump Administration’s 2018-2020 trade war.
“American consumers’ prices went up in response to those tariffs,” Greenland said, “and then [the Trump Administration] turned around and took tax revenue and gave it to farmers as a subsidy.”
An August 2024 Peterson Institute for International Economics found Trump’s larger proposed tariff plan — 60% on China and 10% for other countries — would cause lower income consumers to lose 4% to 6% of their after-tax income, whereas the top 1% of earners would only lose 1.4%. The Institute found extending tax cuts in tandem with new tariffs would benefit the top 1% of income-earners while causing net losses for the rest of the population.
The Institute released a study Sunday finding the recently proposed tariffs on Mexico, Canada, and China would cost the average U.S. household over $1,200 a year:
“Future waves of US tariffs and retaliation will increase these substantial consumer costs alongside the other economic harms of tariffs: reduced economic growth, a shrinking export sector, and supply chain disruption.”
Trump expressed interest in imposing tariffs against European Union countries on Monday as well and has threatened 100% tariffs against nine countries in the BRICS coalition if they proceed with plans to create a new reserve currency system to replace the U.S. dollar.
Economist Michael Pettis argues the dominance of the dollar in international trade benefits the U.S. financial sector by directing other countries’ excess savings to the country. However, it can also disadvantage America’s manufacturing sector. A strong dollar compared to other currencies makes it cheaper to purchase imports from abroad but makes U.S. exports more expensive for other countries.
Trump has repeatedly argued the dollar’s strength is impeding domestic manufacturing and advocated for a weaker exchanger rate. The Wall Street Journal editorial board described the president’s currency policy position as “contradictory” Monday as recent tariffs increased the dollar’s value compared to other currencies; the dollar is considered a safe haven during periods of global uncertainty.
“We’re moving towards a multipolar world,” Guettabi said. “What are the consequences of these decisions on some of those alliances?”
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