Tariff Dangers, So Far

Tariff Dangers, So Far
January 30th, 2025

If there is anyone who can convince the President that his tariff plans are risky, for him? That the 1890’s US he likes was a product of the 1880’s US and his own point is that we are more globalised than we were ever before to be like the 1880’s US? That a fast change with multiple sets of tariffs increases the chances of failure and makes it hard to identify the cause of failure? It doesn’t seem like anyone is. Applying all the tariffs he’s mentioned would be a complete mess, but here are a few highlights.

Canada: You may have forgotten that the United States-Mexico-Canada trade agreement was negotiated by President Trump’s first administration and was signed by him. He is now acting as if his deal led to a disaster that requires an emergency solution. There is no justification for high tariffs on Canada, which is a market economy not in the top five of US trade deficits (the China deficit is five times bigger). Fentanyl shipments across the Canadian border are tiny. The main risk here is that Trump loses in court, which could cause trade policy to become a mess.

Mexico: Fentanyl and illegal migration are explained as the reasons for border controls with Mexico, and the consequences of the interference with trade would be Mexico’s fault. But border controls are not the same as tariffs, which do not stop illegal immigration and may even encourage it by threatening Mexican jobs. Mexico is also the most important substitute for China in trade. If new China tariffs are not heavier than new Mexico tariffs, then Mexico tariffs will make the country more vulnerable to all the Chinese actions that Trump rightly complained about in 2016.

Global: We tariffed China in 2018-19 and the inflation effect was pretty much nonexistent. This was because there were substitutes available at home and abroad. We can substitute everyone for the products, but we only have substitutes at home and therefore all imports would be replaced. This may well be the argument that Trump had in mind, except the US cannot replace all imports – we do not have the people for it. The prices of the imports which we still require would rise. Where we do have the people, it will take time to replace imports.

Taiwan’s Chips: One of the most unusual things that President Trump has promised rather early on is 100 per cent tariffs on Taiwanese chips. It’s strange because the US is already relocating Taiwanese production serving the US to the US exactly as he wants, through the CHIPS Act. Trump says we won’t have to pay firms to build here once they can’t just build overseas and sell here. But new chips plants take years and tariffs can take just weeks. The time difference results in chips shortages and chips shortages result in a shortage of cars and many other things.

Steel, Pharma, and Others: This is the same mistake as the Biden administration. Just because we are producing final products does not mean there are more jobs (net). If we start to import steel and aluminum then the iron ore and bauxite that we weren’t importing before will have to come from somewhere. The same with equipment. If we compile and produce it all here, then other industries will have our steel and aluminium workers. Pharma is more interesting. It is possible to have tariffs on (only) some drugs that are made abroad with Chinese chemicals and this can result in more production of these drugs in the US without inflation.

Not China? The list of countries and products that can be tariffed can grow bigger with the EU, for instance. There is one country that is quite low on the list and should be at the top. The biggest source of our trade deficit, the main producer of fentanyl precursors, the biggest cyber threat, and so on. Based on how new China tariffs work, it is understandable to want to try other tariffs later. But everyone else first, and then maybe China? When Chinese goods occupy the American market before the country can create more products, will President Trump argue that it was not a disaster?

If the Donald Trump of 2015 appeared in 2027, he may well look at all these tariffs and run again as a Republican. But he might instead look at an exploding China trade deficit, shortages, inflation, and potential losses in court and see a giant, juicy political target. The Donald Trump of 2025 is rolling the dice and the dice are loaded against him and the Republican Party.

Shandor Brenner

Shandor Brenner is an American journalist recognized for his sharp and insightful reporting on social and political issues. His work is known for its depth, integrity, and the ability to highlight critical societal concerns.

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