Trump’s Tariff Promise
Via Reuters: Trump vows new Canada, Mexico, China tariffs that threaten global trade.
Trump, who takes office on Jan. 20, 2025, said he would impose a 25% tariff on Canada and Mexico until they clamp down on drugs, particularly fentanyl, and migrants crossing the border, in a move that would appear to violate a free-trade deal.
Trump also outlined “an additional 10% tariff, above any additional tariffs” on China, in some of his most specific comments on how he will implement his economic agenda since winning the Nov. 5 election on promises to “put America first”.
This is, of course, a terrible idea.
More than 83% of exports from Mexico went to the U.S. in 2023 and 75% of Canadian exports go to the country.
Trump’s threatened new tariff would appear to violate the terms of the U.S.-Mexico-Canada Agreement on trade. The deal which Trump signed into law took effect in 2020, and continued the largely duty-free trade between the three countries.
[…]
Economists say that Trump’s overall tariff plans, likely his most consequential economic policy, would push U.S. import duty rates back up to 1930s-era levels, stoke inflation, collapse U.S.-China trade, draw retaliation and drastically reorder supply chains.
They say tariffs are paid by the companies that import the products subject to the duties, and they either pass on the costs to consumers or accept lower profits.
While I suppose we can all continue to hope that he isn’t serious or that some other force (the courts, the bureaucracy, incompetent, etc.) will stand in his way, if carried out this will do substantial harm to the global and domestic economies. One of the grandest ironies of them all that this move will make prices on a host of goods go up substantially.
There is also the utter illogic of connecting tariffs, fentanyl, and illegal immigration. From Trump’s post on Truth Social:
This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country! Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem. We hereby demand that they use this power, and until such time that they do, it is time for them to pay a very big price!
That is, of course, not how any of this works.
Hampering trade with Mexico and Canada will not stop the illegal drug trade. And, no, neither country has the “power to easily solve” these complex issues.
This is all foolishness, but that’s where we are.
There is a lot going on with Trump and recent GOP politics, but it is rather remarkable to watch the party of markets and free trade become the party of tariffs.
And I just have to wonder how anyone in the Trump coalition who thinks of themselves as a policy analyst, or intellectual, or works at a “think tank” actually thinks when they read their party’s leader arguing that tariffs are the solution to drugs and immigration.
It is all so absurd that I am still processing it.
I can only hope that some of our regular Trump apologists will offer explanations.
Why doesn’t Mexico demand that we stop corrupting their country with our insatiable appetite for drugs and cheap labor? Willing seller, willing buyer. Both sides are equally culpable.
All that I can speculate is that these brainiacs are just as mentally challenged as Trump is or that they truly fear for their well being if they question his proposals.
Or both…
Or maybe they are wanton opportunists.
Off topic, but I have to say that the photo of Trump saluting made me throw up in my mouth a little. I know obscenity when I see it.
Per Trump:
There it is. “…easily solve…” Every time Trump talks “policy” there’s the inference that some intractable problem remains unsolved merely because of a lack of will of somebody not named Trump. It’s so pathetic it hurts, but apparently it sells well.
Trump says a lot of things.
But, Trump only needed to get himself elected, along with the “get-out-of -jail card.”
Mission accomplished.
Everything going forward is aspirational. (Damn you Deep State! -shakes fist in air). Except another round of tax cuts, and deregulation.
@Scott F.:
Bingo.
The people in Moscow who want to see the West self-destruct must be giddy.
The ignorance and irrationality embedded in this sentence are astonishing. Firstly, as everyone except Trump has acknowledged, the “price” will be paid by American businesses and consumers, in the form of lower profit margins and higher prices. How much foreign suppliers end up getting hurt will depend how easily importers can find alternative suppliers. In some cases – e.g. Canadian lumber and dairy products, Mexican cars – there might not be any commercially viable alternatives in the short term even at the tariff-inflated prices. Certainly if everyone assumes the tariffs will come off again sooner rather than later, foreign firms won’t “pay any price” at all.
But assuming the tariffs remain in place long term, over time the markets will adjust. Mexican and Canadian exporters will lose sales while firms in other countries will increase theirs. Even if the new commercial environment makes it profitable to produce goods domestically, it will take years before new factories make a dent in the market. Nobody’s going to invest billions in new car production facilities until they’re satisfied the new tax regime is permanent. Goods will remain at the new, tariff-inflated level. Domestic businesses and consumers will pay the price in dollars. Foreign workers and small businesses will lose their jobs.
How any of this is supposed to translate into “Mexico and Canada paying a very big price” is a mystery.
@Ken_L: A MAGA guy explained the theory to me: the foreign companies will suffer because they have to cut their profit margins to get Americans to buy their products. This, of course, will not either happen or work, unless you use underpants gnome math, since there would have to be comparable domestic products available in the market for less. Not only, as you point out, will this take years to develop, but the domestic companies would simply price their products only slightly below the tariff price, not at the current non-tariff price. Why would they leave extra profits on the table?
The last time a Republican president brought us the trifecta of deregulation, mass deportation and high tariffs, the result was the Great Depression….
Vis a vis tariffs on goods from Mexico and Canada, how would the conflict with the trade agreements be resolved, theoretically? Of course I realize Trump has not thought that through, but some advisors might have? Seems like a big obstacle.
@Ken_L:
Presumably by the many Mexicans and Canadians dying of laughter.
I hear he’s planning a 40% tariff on fentanyl. This should help bolster our local meth industry.
I looked at the headlines and see most my concerns are covered:
– This violates the Treaty that replaced NAFTA that Trump promoted, that doesn’t expire until 2026 (simple version on expiration, I’ve worked in treaty law, Trump can’t just do this on a US Senate approved Treaty, and it takes at least 6 months (I’m not looking it up, might be 12 months, at least 6 months) if the Senate agrees to revoke it – minimum 11 months).
– Why is he pissing off our great neighbors? (I live 200 miles from a boarber).
– I hope you like the price of fresh produce jumping up over 20% in the winter (Mexican farms, BC greenhouses)
– This reminds me of the corn issue 20 years ago, due to EPA rules, alcohol corn more valuable than food corn so USA corn exports to Mexico plummeted so the price of corn products in Mexico soared (tortillas, tamales) = way more economic refugees (illegal immigrants).
– What about Maquiladora? Sorry, the USA , Mexico and Canadian economics are very closely linked.
– Aluminum – um, USA doesn’t have the electricity to refine it, Canada does.
However I do support tariffs outside this hemisphere (Chinese subsidies) – but a tariff on Durian fruit that can’t be grown int eh USA, silly.
Meanwhile we have the protectionist sugar tariffs to protect sugar beet and sugar cane farmers so that the US price of (cane) sugar is 3x the world price.
Maybe it’s because the days are getting longer and the skies are perpetually cloudy but what I thought when I read about this latest Trump idiocy was that he can only do it in a nation whose people are no longer willing to do the heavy mental lifting of understanding how things actually work.
Like Trump’s rant about NATO allies not paying what they owe, as if they’re paying annual fees at one of his golf clubs, rather than referring to those countries’ own defense budgets.
We are not a serious nation anymore, and unserious nations are on a downward slide.
Make Inflation Great Again
Is Trump going to stop the sale and flow of guns to Mexico? Then he is not serious about the cartels. And the gun lobby will not put up with it.
Just making this announcement should cause some problems now. I doubt Trump has thought it through but could some of his advisors be trying to tank the economy now to change the narrative of Republican presidents taking over strong economies from Democrats….
@Erik:
I meant to note this last night. Tariffs increase the prices of both the imported goods and the domestic alternatives (if they exist).
A lot of people voted for Trump out of frustration over inflation and he is promising a massively inflationary policy on Day One.
@Richard Gardner:
FWIW, USMCA isn’t a Senate-approved treaty.
Indeed. And the auto industry in Detriot relies heavily on parts from Canada on a basically daily basis.
This is all so very absurd and potentially quite destructive.
@Steven L. Taylor: yup, but I’m sure those extra profits will go to increasing worker pay to offset the pain, right? Right? /s
Tariffs can be a complicated subject (can be?). When asking whether they are good or bad, one goes Vorlon by necessity and answers “yes.” For that matter, international trade, and domestic trade, is also a complicated matter.
This is why it’s idiotic to simply issue blanket tariffs without rhyme or reason or even casual, distant considerations of their effects in the short, medium, and long term.
@Argon:
MIGAs…. goes great with eggs.
@Ken_L:
1) Trump’s pronouncements are always comported as if eminating from the mind of a middle schooler. (and seems to be getting worse).
2) His apparent deficiency in the complicated, intertwined concepts of economics, may explain his history of business failings, aside from “falling upward” into his money shot of self branding. His long trail of “bagholders” should have been a clue, and a caution.
I personally don’t want this guy dinking around with my economics.
@Rob1:
I haven’t done that in ages. the traditional migas recipe, as handed down at home, is to fry small corn tortilla pieces to make them small chips, them saute chopped onions and serrano pepper, then add the eggs, then the chips, then scramble and at last add some Oaxaca cheese.
I found serrano pepper too hot, so I used a lot less. Then it wasn’t hot enough. and in any case, the serrano has little flavor of its own. So I subbed Tabasco sauce for the pepper. A little on the onions as they saute, and more just before scrambling the eggs in the pan.
Some people add chopped tomato, some omit the cheese. One time I added some dried beef I got in Monterrey (machaca). It was jussssst this side of heaven (well, you know).
@Gustopher:
See? He’s always playing 5-dimensional chess.
Seriously, you win the Internet today. Congratulations.
BTW, a 25% tariff on all Mexican products instituted on January 20th, would all but guarantee a shortage of avocados in time for the Super Bowl.
Or really high prices for them.
Win-win
@Kathy: We’ll all be enjoying the newly resurgent North Dakota avocados by then. Buy American!
@Steven L. Taylor:
I like to think Trump’s political instincts will save this from ever coming about. He should know that a sudden spike of inflation would make him unpopular, and adoration is something he deeply, deeply craves. Wishful thinking on my part. The lack of sophistication in his advisers may be deep enough that nobody will tell him that will happen.
Reminded of the Jackson administration in this. Ol’ Hickory took apart Hamilton’s sophisticated financial system largely because he and his people lacked the bandwidth to understand it. The results took decades to fix. The results of taking apart the federal banking system took some time to hit home for Andy Jackson, but Trump’s tariffs would raise the prices at Walmart and most of the other places his supporters patronize immediately. Bigly.
@Joe:
Beer, too.