Trump’s tariffs: good or bad?
Of all the things Trump has done since his inauguration, the large tariffs on Canada and Mexico are the ones that bothers me the most. I’ve read many articles both pro and con – it’s much easier to find those that are con – and I’m left feeling very uneasy. I don’t really have strong trust in any prognostications I read about them, and economics is not my strong suit. But it seems to me that Trump should have taken it more slowly and done more talking to both Canada and Mexico first.
The smaller tariffs on China don’t trouble me as much.
I’ve read that the tariffs will be offset by tax cuts. I’ve read that Canada and Mexico need our goods more than we need theirs. But somehow I just don’t see Canada and Mexico caving on this issue. Even Pierre Poilievre, the Canadian Conservative Party leader, is angry, saying “there is no justification for these tariffs or this treatment.” However, he also said:
“These tariffs are a wakeup call that it is time for us to meet our potential,” he said. “It is time for us to be a country that can trade for itself, that builds homes quickly for its youth, that allows entrepreneurs to succeed quickly and profitably so that success is once again rewarded.”
That sounds like “make Canada great again” (or for the first time), which doesn’t seem like such a bad idea.
I make no predictions on this, except that the whole thing makes me nervous.
Here are some quantitative predictions made by an organization called The Tax Foundation, which describes itself as non-partisan, for what that’s worth.
Even Trump himself has said that it probably won’t be all unicorns and rainbows:
Trump argued if companies made their products in the United States, there would be no tariffs.
“This will be the Golden Age of America!” Trump continued. “Will there be some pain? Yes, maybe (and maybe not!). But we will make America great again, and it will all be worth the price that must be paid. We are a country that is now being run with common sense — and the results will be spectacular!!!”
Isn’t one of the reasons we buy products from Mexico that they are cheaper? Products made in the US don’t have tariffs, to be sure, but aren’t they inherently more expensive for the same product?
Anyway, I’ll let you iron it out in the comments.
As I said in the Open Thread, I take these tariffs as an opening position by Trump. I expect in a few months the situation will have changed as the sides start talking to each other. I may be wrong about Mexico and Canada coming to the table, but I’m willing to wait a bit before saying Trump made an mistake on this one.
Ostensibly, the tariffs are to prod Mexico and Canada into taking action against illegal immigration and fentanyl.
I do not know if such actions are reasonable or feasible, or really address the problem. I DO know which I believe, between Trump and the mainstream media. On issue after issue, Trump has been proven essentially correct, and the media has proven to be either misinformed or actively deceptive.
That is my bottom line.
Some thoughts on the real effects of tariffs from John Konrad, who is publisher of the maritime-industry site gCaptain:
https://x.com/johnkonrad/status/1882463188546970022
Even if you should know better, I guess if you’re bombarded by the propaganda enough, you start taking what your phone tells you believe seriously and that this time it is finally right that the Bad Orange Man is going to kill us all.
Well that didn’t take a few months!
https://www.foxnews.com/politics/mexico-agrees-deploy-10000-troops-us-border-exchange-tariff-pause
Trump’s base includes the losers of NAFTA and free trade in general, so he’s delivering for them.
Maybe it will be OK. I have almost no confidence in economic predictions, especially the kind that come from the consensus of experts. But this one seems pretty straightforward. If you raise the price of foreign goods so that US goods can compete, the consumer pays more.
Trump’s comment about “pain” supports this. He’s asking the country to stomach higher prices so that people in his manufacturing sector base can enjoy more economic security.
I think this is indicative of the modern world, where there are fewer and fewer “win-win” solutions. And the losers very quickly become part of your opponent’s coalition. It’s how Trump got elected in the first place.
I could very easily see a scenario in which consumer prices rise in the next few years in a manner matching the inflation of the Biden years and Trump and his MAGA allies are run out of DC on a rail.
Then we get woke again. Or, even worse, someone like Shapiro who can pretend to be against woke while carefully re-incorporating it into every aspect of government and beyond.
physicsguy often makes strong points. Here’s more action in Mexico, and a Canadian billionaire slamming outgoing Prime Minister Justin Trudeau:
Mexican authorities ‘have arrested “El Ricky,” a regional leader of Cartel del Noreste, one of the most powerful and violent cartels in Mexico.‘
Canadian billionaire and founder of its second biggest company torches Trudeau as he issues shock take on Trump’s tariffs
Western World has fed off the American Teat for decades – then often screamed, held their breathe, whined ‘n cried, kicked us in the back, etc. Perhaps it’s time to express ourselves more clearly to them…
I suspect that the Lame Stream Media will be weeping alligator tears over the increase in costs to the average person. (After touting that there was no inflation for the past four years. And not caring an iota for what was happening to the average person.)
It’s not just about the costs of manufacturing. Mexico not only lets illegals pass through their country, but FACILITATES their passage to the US border. They do nothing about their cartels, and pretty much let them act with impunity on the border. (I suspect they do that so the cartels will not murder them)
Canada under Trudeau has done a fair amount of that as well. Not the cartel violence, but facilitating the movement of illegals through Canada to the US.
LOL, now that Mexico has caved, the left is now screaming that Trump is a liar as the tariffs were “just a ploy!!” Well, duh!! These people are either very stupid, which the ones I know really aren’t, or so full of TDS they can’t see a negotiating tactic that Trump uses all the time as is usually successful.
“Just a ploy”, eh?
Um, no.
It’s called leverage. Real, genuine, down-to-earth leverage.
But hold on! Why SHOULDN’T Mexico try to prevent fentanyl from pouring into the US?
And why SHOULDN’T it try to prevent illegals from pouring over the border into the US?
(Hmm, maybe someone should ask “Biden” about that….)
And why shouldn’t any responsible American government try to prevent it??
In any event, Trump’s giving Mexico “incentive” to do the right thing shouldn’t be pooh-poohed as a mere “ploy” especially when fentanyl and open borders have been causing such destruction and pain…
Oh wait, that was precisely the goal, though, wasn’t it? (Decent Joe wasn’t called “President Fentanyl” for nothing….)
As for Canada’s jejeune, if devious, purported leader, he’s not going to kowtow to any American diktat, no not he! HE has principles!!
So let the fentanyl roll! Let the illegals roll!
(Besides, if Trudeau will be able to blame Canada’s problems on Trump—problems caused by Trudeau’s intentionally destructive policies—having followed the same WEF/WTF playbook so beloved of “Biden”—then THAT, as Trudeau sees it, would be a net gain for him….)
I want Trump to tariff fascist countries like the UK and I don’t care what it costs. I want to use access to our markets as a weapon against most of the world’s crap countries.
If you look at the list of goods we import from Canada, obviously fuels are the biggest commodity and Trump has a carveout. Next is automobiles/parts but I’m not sure that will have a huge impact– how often do you buy a car and right now the US car market is in flux.
Another factor is the value of the Canadian dollar vs US. The CD fell against the USD and could offset the cost of any tariffs.
Bottom line, Trump is serious about bringing manufacturing/jobs back to the US and at least one Canadian company has already announced moving to the US. Every manufacturing job supports an additional 10 jobs– which can be a boon to state/local governments and take some pressure off federal budget.
While trade with Canada and US is important for some sectors like auto manufacturing/parts that industry has been damaged more by the Biden EV mandate than this ever could.
neo, it might help to think of a tariff as the same kind of thing as a lawsuit between businesses. While it is possible to win such a lawsuit, that’s not really why they are doing it. It’s another tool of negotiation. Both sides lose something as long as the lawsuit is going on. When one side decides they have less to lose than by giving the other side what they want, the lawsuit is dropped or settled. The lawsuit was never the point, the negotiation was the point.
That a tariff benefits the whole economy of a country, instead of a favored few within that country, is still as much of an economic fallacy as it ever was, back when Bastiat penned The Candlemakers’ Petition. But by using tariffs as a negotiating tactic to force other countries to drop their tariffs or change something else they are doing, they can definitely benefit the whole country. The tariffs are not an end in themselves.
I read that Canada has some lax visa requirements so that people who are on the terrorist watch list are able to get to Canada and then sneak into America via the northern border.
The southern border had more people come over, but more baddies came from the northern border.
If tariffs help to close the northern border, then it is a good thing.
neo, it might help to think of a tariff as the same kind of thing as a lawsuit between businesses. While it is possible to win such a lawsuit, that’s not really why they are doing it. It’s another tool of negotiation. Both sides lose something as long as the lawsuit is going on. When one side decides they have less to lose than by giving the other side what they want, the lawsuit is dropped or settled. The lawsuit was never the point, the negotiation was the point.
That a tariff benefits the whole economy of a country, instead of a favored few within that country, is still as much of an economic fallacy as it ever was, back when Bastiat penned The Candlemakers’ Petition. But by using them as a negotiating tactic to force other countries to drop their tariffs or change something else they are doing, they can definitely benefit the whole country.
The tariffs are not really an end in themselves. Now if Trump is serious about changing the tax structure to be based on tariffs across the board and not income tax, well it’s obvious there that the tariffs are a consumption tax in disguise, and that would be WAY better what we have now, but that’s because it’s a change in the tax structure. I have my doubts he can bring about such a thing. Regardless, tariffs intended for revenue, rather than for protection of domestic industry, are pretty obviously a form of taxation and very few people try to argue that taxation creates economic prosperity, at least on our side of the aisle.
Be all that as it may, unless you know what the markup is on what you buy, as well as what’s going on with all the other inputs like labor, you really have no idea what the tariff is going to do to the price paid by consumers. A 25% increase in tariff might well mean a 5% increase in price to the consumer of the finished product. If you imagine we were talking about coffee, for example, the price of the coffee is only a tiny fraction of what you pay for the latte; $0.42 for the coffee I buy, for example, and if the price of that coffee went up to $0.50 it’s entirely possible the price of the latte wouldn’t go up at all.
If Trump wants Canukistan to cave he should block the flood of Canadians who enter to shop at Costco.
That a tariff benefits the whole economy of a country, instead of a favored few within that country, is still as much of an economic fallacy as it ever was
This is exactly right.
@Chases Eagles:If Trump wants Canukistan to cave he should block the flood of Canadians who enter to shop at Costco.
True story: I once got some stinkeye from a US border guard because I said I had gone to British Columbia to shop at Costco. That was so implausible he didn’t believe me and he had a ton of followup questions. But the reason I went is because they have different brands in the Canadian Costcos. He decided I was a harmless lunatic and let me through.
But you raise an interesting point. Canada has a dairy racket, government mandated controls on dairy production to keep milk prices artificially high. Canadians are broadly supportive of these, and at the same time they duck across the border to buy American milk, to the point where the dairy outlets near the border post the daily limit to take across the border at the front door.
So why do they vote for something they all try to evade, that they know makes their lives harder? I think it’s because politics makes people insane. Certainly Americans have analogous mental pathologies.
“I’ve read many articles both pro and con – it’s much easier to find those that are con – and I’m left feeling very uneasy.” [Neo]
I can understand that. Yet as I get older and older, I see the inherent wisdom of the quote (attributed to Frederick the Great) “L’audace. L’audace. Toujours l’audace”. It doesn’t quell uneasiness, but it does help one to avoid making bad decisions as a result of panic and unease. I know several people who have been victimized by internet/phone scams and the one thing that they all have in common is that they were cajoled by scammers to make decisions out of uneasiness and fear.
IMO on a humorous note (and with more than a kernal of truth) Trump’s approach over the past two weeks has been a combination of Frederick the Great and Yosemite Sam. See the link at 2:00 to 2:20
https://www.youtube.com/watch?v=OhSRsAtCQXs
That a tariff benefits the whole economy of a country, instead of a favored few within that country, is still as much of an economic fallacy as it ever was, back when Bastiat penned The Candlemakers’ Petition. – Niketas C.
Leaving aside that The Candlemakers’ Petition is a poor analogy for free trade, I disagree with your assertion that “tariff’s benefit…..a favored few within that country.”
What is “the whole economy” other than the aggregate of smaller economies throughout “the whole economy”? You make think that a tariff that supports a sector of a regional economy as being “a favored few”, but the folks in that regional economy don’t share you viewpoint. In fact, we’ve seen economies like the Rust Belt played out in other areas, where jobs have been hollowed out by “free trade”.
Does that mean every sector should be protected at all costs? No, but it also doesn’t mean that every sector should be forced to compete with low labor/low regulation mercantilist countries. China gained tremendous advantages in trade by manipulating their currency. A regional economy has no answer to that sort of cheating. And the US government let it go on far too long.
Rather than a default position that American industry must compete or die, I think it’s time for the US to give their own companies a fighting chance. We should be quick to support companies competing against mercantilist countries.
Sorry, that line shoule read “. . .they were cajoled by scammers to make bad decisions out of uneasiness and fear.
Mexico caved same day, as did Colombia, Venezuela (Maduro), and now Panama ending their China flirtation.
I think Trump knows what he’s doing..Canada will cave very quickly as well. Trump/America has the leverage. The largest economy in the world is its biggest sledgehammer.
And for those I’ve seen saying the drop in the peso and Canadian dollar will offset the 25% tariff, only if they collapsed 25%. But then everything they import from anywhere would be 25% more expensive.
See how that works?
@Brian E:Leaving aside that The Candlemakers’ Petition is a poor analogy for free trade
Easy to say, but you can’t explain why without self-contradiction.
What is “the whole economy” other than the aggregate of smaller economies throughout “the whole economy”?
Of course it is, that is why I say what I do. If one subsection gets a tariff to protect it, consumers and other subsections that rely on it for an input suffer slightly more than that subsection benefits. People are forced to pay more for something, so they have to cut what they use of it, substitute another thing, or give up something else to pay the extra. If the other actors cut or substitute then the favored subsection loses out on something which offsets the tariff benefit; if the other actors have to give up something else, then THAT producer is now suffering from the tariff.
Of course all these things happen together, and it’s very confusing: the Seen and Unseen. The Seen benefit of the tariff is easy to point to, and the Unseen penalty is hard to point to because it is diffused, and protectionists have relied on this squid ink for centuries.
You can make it sound like a good thing economically only if you ignore the third parties who lose due to the tariff, or if you pretend that consumption and production are static with respect to the tariff.
The money Paul gets from his tariff is paid by Peter in a hundred different ways, we obviously can’t all be Paul.
Sure, there’s valid non-economic reasons for tariffs: security, public health, morals… and of course revenue is a valid reason, but regardless of the reason the tariffs still destroy economic value. That’s okay, some things are more important than economic value. Like clearly thinking through the consequences of our actions.
When on the road I regularly listen to Tom Sullivan who has had several shows talking about tariffs which he vigorously opposes. One caller pretty well laid the reason for them besides Trump’s negotiating and bargaining deals. He pointed out the selective tariffs of most of our trading partners from France and Norway to Japan and China. They ALL do it as a form of protectionism. But according to people like Sullivan, we must be pure and practice “free trade” even when for all intents and purposes it’s a joke. We’re being played and Trump is smart enough to expose the charade and take advantage. How far he goes with this is another question.
tl; dr tariffs aren’t “good” or “bad” in themselves. They are a tactic which (like a lawsuit, or like other taxation) imposes net destruction of economic value on the country that adopts them as well as on the country targeted by them; and they could be used well or poorly, in service of a sound strategy or an unsound one.
Pretending they create net positive economic value is a sure way to use them badly, but they can be used well and so far the evidence is that Trump is using them well.
@The Other Chuck:They ALL do it as a form of protectionism. But according to people like Sullivan, we must be pure and practice “free trade” even when for all intents and purposes it’s a joke.
They engage in protectionism to benefit domestic rackets at the expense of their own countrymen, meanwhile giving us things at a discount. It’s a scam they run on their own people. When they take poison, we should not also take poison to “make it fair”.
If Trump’s retaliatory tariffs provoke our partners to drop their own tariffs, that’s good for both nations. If we just end up with our own protectionist scheme that will be bad for most of us but very very good for a few of us. But I don’t think that will happen. The tariffs will impose pain on both nations involved but in our case I doubt most of us will notice, and our trade partners will find it much harder to bear.
Which is why so far we’ve seen the beginnings of results within hours of the announcements.
In general I support free trade, but has trade with China ever really been “Free” ?
I think it was Thomas Sowell who pointed out that some protective actions regarding our steel industry helped the steel industry. Which is to say allowed domestic prices to remain higher than without such action. Good for the steel industry but not for the larger economy where various projects were abandoned before being begun due to the increase in steel prices. More losers than winners, but the former are widely distributed with no concentrated forces (unions, legislators, so forth) speaking for them as has the steel industry.
That said, these tariffs of Trump’s aren’t for protecting relevant US industries but to force other nations to change their actions in other spheres such as illegal immigration and drugs.
We can, if various administrative issues are hurried, drill our own oil to offset what Canada sends us. It may be necessary to build a factory to replace some item no longer economically available due to tariffs on imported goods. Or maybe a factor puts on a second shift, which would be faster and cost less. Depends on what and how much we have going domestically.
But, as has been said, this is not about economics.
I have read that the China tariffs, besides being 10% across the board, cancel the loophole which Temu and others have used. They’ve been shipping direct to US purchasers and so long as the amount was under, I think, $800, they went through customs without inspection or fee. Now Temu will have to charge the 10% even on small shipments.
I’m no economist and Trump has more business knowledge in his pinky toe than I have in my whole body, so I won’t opine about the wisdom of his methods. Time will tell.
I will say, though, that part of the reason that things made in Mexico are cheaper than here is because of two considerations: Mexico’s economy is such a mess that Mexicans are willing to work for virtual slave wages with few benefits, and few safety regulations. To get Americans to do the work, they expect a decent salary, some decent benefits and a reasonable expectation of retiring after 30 or 40 years on the job with all their appendages intact.
Another factor is the regulatory structure in the US makes the expense of opening manufacturing plants and obtaining US sourced raw materials prohibitive both in money and in time.
Mexico itself is the only entity that can resolve the first issue. Addressing the rampant corruption in the government and lawlessness of the cartels would go a long way in that direction, but that’s up to them.
The second issue will hopefully be addressed by the Trump and Vance administrations over the next 12 years and “Made in America” will become not only common, but again associated with the quality that is sorely lacking in the products of today.
I am a natural cynic and pessimist and have never been shy about expressing it, but I have more hope for the future right now than I have in decades.
Well, the back and forth is interesting.
I tend to take the position that Trump is very smart, and even savvier, and that he has surrounded himself with very smart, and savvy people.
While I may be initially alarmed at some of his actions, I remind myself that it is a ‘long game’. Actually, so often, as with Mexico, Columbia, Venezuela, and Panama I subsequently learn that the game was not nearly as long as I anticipated.
This thread has reminded me that there actually was a moment that I first started taking Trump seriously as a candidate. It was during the primary debates in 2016. I had them on while I was going about my business at home, almost as background noise. Tariffs came up and a question was addressed to Trump. I’m sure I was shaking my head and muttering something like, tariffs are stupid, when Trump said, “We’re all better off paying a little more…”, and he went on to make his case for tariffs.
I wasn’t particularly impressed with the case he made, but I was very impressed with his acknowledgment that we’d all be paying more. This is not how politicians speak. They always want to have their cake and eat it too. You’d think there was no cost at all for the policies they propose.
Mike Plaiss
There is an acknowledged cost. But those Other Guys, who deserve it, are the ones paying. That makes it even more yummy.
Canada follows Mexico to relief: https://therightscoop.com/%f0%9f%9a%a8big-breaking-canada-caves-to-president-trump-says-tariffs-will-now-be-paused/
Smells like another small win, no?
Yes, sdferr, LOL now Canada caves. While all of you were arguing about the economics of tariffs, Trump’s first goal of border security has been increased due to the tariffs. Now there’s a few months for negotiations on the economic side..
Lots of winning.
Are we seeing the shortest trade war in history?
Well, Trump said they were easy to win.