Trump’s tariffs
Yesterday Trump announced that he plans to impose a 25% tariff on all goods from Mexico and Canada, and increase the tariff on goods from China 10%. Most of the coverage (including the article I just linked) assumes that it would raise prices here. That may indeed be a valid assumption. Most of the articles don’t emphasize the other part of the equation – which is that he says he will do it until the border countries do something to curtail the importation of fentanyl, and to stem the tide of illegal aliens crossing their respective borders.
Trump claimed:
This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country! …
I have had many talks with China about the massive amounts of drugs, in particular Fentanyl, being sent into the United States — But to no avail. Until such time as they stop, we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America.
So the way I see it is that this is Trump’s opening bid in a complex negotiation – let’s make a deal. Whether Trump will get what he wants from those countries, or whether this will be economically disastrous or at least difficult for US consumers, remains to be seen.
Will the costs be passed on to US buyers and cause inflation? Will companies absorb them? Will the costs be offset by other de-inflationary policies such as lowered energy costs or tax cuts? If we become more energy independent, will we not need to import much oil from Canada? And will Mexico and/or Canada and/or China blink and actually do something about fentanyl and/or about the border traffic?
The assumption by the left is that of course this will be inflationary and that Trump is a stupid dodohead Nazi whatever. But at this point I would’t underestimate Trump.
Why doesn’t Trump explain his strategy better, so that the American people can understand all the thinking behind this?
(1) Maybe he really is a stupid dodohead.
(2) Maybe he doesn’t want to tip his hand and reveal too much to the other sides in the negotiations.
(3) Maybe he will explain better later.
(4) Maybe he wants to make all his enemies and opponents predict something dire that doesn’t happen, and be wrong again.
I agree. This is an opening gambit. You don’t open negotiations the way Obama/Biden did with Iran which was “Tell us what you want and we’ll give it to you’
Your option #2 with a sprinkle of #4.
He hasn’t taken office yet, this is a move to clearly establish what he wants from them.
What Steve and Betty said.
A “stupid dodohead” doesn’t turn his several million dollar inheritance into several billion dollars.
I don’t particularly like him, and I could use a lot of derogatory terms to describe what it is that I don’t like about him…but “stupid” isn’t one of them.
Big Tariffs sounded great when I first read it. Then read something about it hurting workers in all involved countries—including here. I dunno…
Good point.
Vice crime enforcement has a long history of failure in America—reflecting on big expenses and *BIG GOVT ENFORCEMENT* plus keeping local govts busy and broke.
Trump obviously knows this so it can probably be dropped in the “complex negotiation”.
Leave the new ‘Silent’ Trump to his work… 😉
(2) and (4). It’s an opening bid.
Agree with (2) and (4). And didn’t he do the same thing last time? That is, didn’t he threaten Mexico with tariffs if Mexico didn’t agree to “remain in Mexico?”
I don’t know much about tariffs and have no idea what will happen if Trump imposes them. I just want to say that I love this phrase:
“. . . stupid dodohead Nazi whatever.”
It sums up so much Trump derangement, so brilliantly. Wonderful!
Loose lips sink ships therefore it’s wise to play close to the vest. I swear, the left doesn’t seem to understand either dealing with bullies or negotiation with bullies. Trump seems to have a good handle on both. My guess is this understanding was sharpened by dealing with the construction business in NYC.
Democrat politicians are used to being bullies. They hate it when their bluff is called.
“Why doesn’t Trump explain his strategy better, so that the American people can understand all the thinking behind this?”
• Out of curiosity, what would “better” look like?
• All of us – USA & abroad – heard/ read what the experts/ MSM/ etc. said would happen when Trump stated that he was going to deploy tariffs in his first term (see ‘The sky will fall’).
• Then all of us experienced what actually did happen, including the fact the next USA administration left the tariffs in place (see ‘The sky did not fall’).
• Strikes me that Trump clearly stated what he wishes to see happen – curtail drug smuggling/production & illegal immigration – and that many will understand & support those goals (see ‘Less is More’).
• Lastly, Trump was returned to office in part because he earned much of the public’ trust when it came to handling the economy and protecting the country, and that is part of the public’ understanding too – “explained” or not (see ‘Don’t let perfection get in the way of progress’).
It’s going to be a bumpy ride. The posturing by Mexico’s President is interesting.
Also her comments on Trump’s election in a speech to fellow Mexicans. Sounding like she is ready for a fight. This after the election before Trump announced the tariffs when he takes office. It does put the ball in Mexico’s court to demonstrate they will help control their southern border.:
This isn’t inflationary. It’s a tax. It will increase revenue to the government. How much it will raise the price of goods imported from Mexico depends on whether it’s a finished good or a component in the production of a product here.
Unless you consider all taxes inflationary which would be kind of a new definition of a tax.
Some relevant links and discussion at my post Trade, Tariffs, and Prices:
https://chicagoboyz.net/archives/72115.html
Note especially the linked post from Craig Fuller @FreightAlley: “When products are imported into the US, the importer is charged a tariff based on the declared value of those imports, not the marked-up retail price consumers will eventually pay…The markup might be only 5% for big-ticket items like cars, while it could be as high as 500% for luxury goods. Most retail goods have markups of over 100% over their declared value.” He discusses the alternatives available to importers and suppliers, of which ‘raise retail prices’ is only one.”
Bill Waddell, whose new book I mentioned, also has several recent essays (at LinkedIn) about manufacturing, tariffs, and ethics.
Food costs could go up here. We get a lot of our fruit and veggies from Mexico and SA.
I think the Prez of Mexico would find that Mexico would catch the Flu, while the US will have the sniffles.
Trump could explain until he was blue in the face, but the average citizen would still not understand, nor pay attention
The 25% on Canada and Mexico is a bit of a surprise to me. Especially Canada, though Trudeau is a possible factor there.
I thought that the way the news item stated the tariffs was odd. “An additional 10% on China.” Additional to what? Apparently, as stated in The Hill, there are tariffs that Trump placed on China in his first term that are still in effect. Additional to those tariffs.
https://thehill.com/homenews/senate/5010163-brian-schatz-trump-tariffs/
When it comes to tariffs, I’m reminded of Thomas Sowell’s remark:
“There are no solutions. There are only trade-offs.”
For a longer treatment of an economist’s view of tariffs and a bunch of other current issues, please consider reading Scott Sumner’s recent post entitled “The ‘It Doesn’t Matter’ Perspective” (https://scottsumner.substack.com/p/the-it-doesnt-matter-perspective).
Sumner is an economist who became well-known for his interesting take on the financial crisis. I finally had to quit reading his blog after he contracted a virulent case of Trump derangement syndrome. Luckily, this post is free of that, and has plenty of those anti-commonsense arguments that economists like to make. It’s interesting. Unfortunately, I studied economics a million years ago, so I’m not qualified to critique Sumner’s post.
For those in a hurry, here’s what Sumner has to say about tariffs:
“I’ve seen other pundits make all sorts of arguments against tariffs, claiming that they will indirectly hurt our firms by driving up the cost of inputs such as auto parts, or that other countries will retaliate. Those claims may be true, but there’s a much simpler explanation for why tariffs don’t have the impact their proponents expect; our current account balance reflects the gap between domestic saving and domestic investment (which is a negative number in the US.)
A tariff that raised a great deal of revenue could conceivably reduce the deficit by raising national saving. But the sort of populist politicians that favor tariffs also tend to run massive budget deficits, so it’s unlikely that any plausible US tariff policy would actually reduce the trade deficit. For example, the deficit did not improve as a result of the Trump/Biden tariffs. Tariffs tend to appreciate the domestic currency, offsetting any competitive advantage to domestic firms from higher taxes on imports.”
How about (5): He likes to watch the Left’s heads explode.
With a hint of (2) and (4).
Can tariffs ultimately hurt American citizens?
Yes, but … and this is a yuuuge but … corporations and companies will do anything to avoid tarifffs … well there’s a caveat … US companies will do anything except to build US plants and employ US workers. This is not wholly, but mostly.
Harley Davidson is truly a good example even though it’s used as bad example under Reagan … Harley Davidson decided to move US production on several bikes to Thailand. Thailand had a massive tariff and at the same time gave incentives to foreign investment.
Granted, it’s more complicated, but if you tariff and give incentives, you can get very good results.
Harley is not the only one to do such things.
This article proclaims Trump’s tariff is wrong, but its assertion fact belies that claim …
https://thehill.com/opinion/finance/4949406-trump-tariffs-harley-davidson/amp/
What? They the only one … nope … every friggin Japanese auto maker did this in response to Reagan’s tariffs
https://amp.cnn.com/cnn/2019/06/26/business/japan-american-honda-hnk-intl
“To avoid the quotas of the 1980s, more Japanese automakers decided to move manufacturing on to American shores and establish alliances with domestic car makers.”
This is what companies do to avoid tariffs. It’s a maxim of going towards the path of least resistance. And it makes $$$ for them.
What’s ironic and sad in my opinion is US car companies have been exporting manufacturing and jobs to countries like high cost Canada and low cost Mexico with no tariff issues for half a century or more.
I no longer consider either Mexico or Canada to be friendly countries. They have disrespected, and taken advantage for a long time.
Trump needs to get their attention, and he won’t do it by saying ‘please’.
My thoughts were that Trump should simply shutdown the Southern border. Let the Mexicans eat their guacamole and refried beans. Let GM’s Mexican built cars gather dust, broken windows, or stolen tires. Let the tourist traps go empty. Nothing, nothing at all moves North or South until he gets their attention.
If that is considered too strong, then methodically inspect every single truck arriving at a border crossing. Let’s see videos of very long lines, creeping forward at a snail’s pace, or slower. Let’s listen to the wails of the Mexican shippers and truckers.
Trump should tell the American people that we have been invaded for years now; and we have to do whatever is necessary to stop it. I am old enough to remember eighty or so years ago when Americans dramatically tightened their belts at home, and sent millions of young men to fight Germany and Japan. Neither of them presented a level of threat to the homeland equal to the one we face now. It is time for the current generations to defend America, even if it involves, alas, a bit of inconvenience.
Not holding my breath for any of this, of course. But, good luck President Trump.
Given the official and semi-official complicity of various governments in, at the least, the fentanyl trade, a tariff seems like a modest tactic. Comparing these deaths to various wars is enlightening.
What, if not a tariff, would be sufficient to get the Mexicans and Chinese to stop the drug freeway? Would that make anybody happier than would tariffs?
Ditto with regard to immigrants.
Suggestions have included Delta Force, armed drones, and, generally, moves which would look pretty much like war. I mean, 100,000 of OUR PEOPLE DEAD means…what?
Answers will vary, and with them suggestions as to how to stop the drugs. And which ones would be nicer and kinder than taiffs?
Mexican President vows to stop migration through Mexico into the U.S. ‘effective immediately,’ Trump says
Geez…more Trump “bluster” – again?!? After posting an article last night that Mexico was going to “stop migration” – and added a quote of Sheinbaum confirming it:
Mexican president clarifies country will ‘not close borders’ just hours after Trump declares MAJOR victory by claiming she said the EXACT opposite
Quit whining about the border – close it and issue warnings that anyone crossing illegally will be shot—women and children included.
Oldflyer…”If that is considered too strong, then methodically inspect every single truck arriving at a border crossing. Let’s see videos of very long lines, creeping forward at a snail’s pace, or slower. Let’s listen to the wails of the Mexican shippers and truckers.” Yes, non-tariff barriers are a thing, and this point rarely gets discussed amid all the talk about tariffs.
Many years ago, I had a nice lunch with a group of European customs officials. They were swapping stories about techniques that had been used in their countries to minimize the import of low-cost products that threatened employment in their own countries.