Not all countries are playing the same trade game — and that matters for FTZs

Tempo de leitura: 2 minutos

As tariffs return under a resurgent Trump administration, North American trade is once again fracturing. For operators of free trade zones (FTZs), understanding how each country interprets and responds to trade conflict is now essential. Countries do not all behave as if they are playing the same strategic game. And those differing interpretations are shaping the emerging role of FTZs across the region.

The US: a game of chicken
A game where both sides escalate to force the other to yield, but mutual escalation can be costly for all.

The US under Donald Trump is engaged in a game of chicken. Tariffs are used as tools of pressure, not protection, designed to extract concessions from trade partners. This creates a volatile trade environment in which FTZs may flourish tactically.

Companies will turn to US FTZs to mitigate tariff exposure by delaying duties, exploiting inverted tariff structures, or re-exporting finished goods. FTZ activity may surge in industries like autos, electronics and pharmaceuticals. However, the downside is unpredictability. Frequent policy reversals and politicised trade decisions undermine planning horizons. FTZ operators should prioritise flexibility, fast customs clearance, and contingency planning.

Mexico: iterated prisoner’s dilemma
A repeated game where co-operation is possible, but defection invites retaliation in future rounds.

Mexico may be acting as if it is engaged in an iterated prisoner’s dilemma. Given its deep economic integration with the US, especially through the IMMEX programme, Mexico has reason to preserve stability while retaliating selectively. This allows for calibrated responses that defend national interests without dismantling the trade architecture on which its manufacturing economy depends.

In this model, Mexican FTZs become stabilisers. Zone-to-zone linkages with US FTZs deepen as companies reorganise supply chains around predictability and proximity. Expect steady growth in medical devices, automotive components, textiles and electronics. Mexican FTZ operators should invest in cross-border logistics, long-term relationships with US manufacturers, and visibility across regional supply chains.

Canada: co-ordination game
A game where players benefit most by aligning with others, but only if all co-ordinate successfully.

Canada has historically favoured a co-ordination game approach —reinforcing multilateral alliances and trade frameworks to stabilise global flows. Through agreements like the ​​Canada-European Union Comprehensive Economic and Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, Canada could reorient trade toward Europe and Asia. FTZs in Halifax and Vancouver may become platforms for rerouted goods, warehousing, and re-exporting.

Strategic outlook for North American FTZs

This divergence in strategic behaviour is not just theoretical. It determines how zones are used, what risks they face, and where opportunities will emerge. For FTZ operators and investors, reading the game correctly may be the difference between hedging volatility and anchoring long-term advantage.

This is the first of two instalments where the author explores the implications from Donald Trump’s tariffs for different countries.

Michael Castle-Miller

Fonte: FDI Intelligence