The tariffs have landed
At 12:01 a.m. this morning, Donald Trump launched a gratuitous and unwarranted trade war as his tariffs against Canada, Mexico, and China took effect.
The move imposes 25% tariffs on Mexican and Canadian imports, though Trump limited the levy to 10% on Canadian energy. He also doubled the tariff he imposed last month on Chinese products to 20%.
The three countries are our biggest trade partners, and all three immediately retaliated, which is what happens in a trade war.
China retaliated with tariffs of up to 15% on a wide array of U.S. agricultural exports. It also expanded the number of U.S. companies subject to export controls and other restrictions by about two dozen.
Canadian Prime Minister Justin Trudeau said his country would impose tariffs on more than $100 billion of American goods over the course of the next 21 days.
In announcing Canada’s retaliation, Trudeau said, “Today the United States launched a trade war against Canada, their closest partner and ally, their closest friend. At the same time, they are talking about working positively with Russia, appeasing Vladimir Putin, a lying, murderous dictator. Make that make sense,”
Mexico’s President Claudia Sheinbaum said Mexico will respond to the new tariffs with its own retaliatory tariffs, which she will delay announcing until Sunday at a public event in Mexico City’s central plaza. She told the press Mexico has “a plan B, C,and D” to counter Trump’s war.
Here at home in the nation that started this stupidity, Americans are either mildly in favor or decidedly against the measures depending on how pollsters ask the question.
If the question contains the assertion that tariffs will cause prices to rise, only 30% express favor; if the question references bringing back jobs to America, 49% are all for them. Of course, that means 51% are not.
Although there are some who question the imposition of tariffs, the vast majority of Republicans in Congress are supportive and believe their constituents would be willing to suffer the pain of higher prices to enable the President to carry out his agenda, whatever that is.
Please forgive me for suggesting these going-along-with-the-program Republicans are going along with the program out of fear of another kind of retaliation — the kind Donald Trump dishes out to anyone who has the temerity to disagree with him.
These tariffs will hurt the American economy and cause prices to rise. Also, because of deeply rooted globalization, the rest of the world will feel the pinch, too.
Michael Klein was Chief Economist in the Office of International Affairs during the Obama Administration. He is an expert in tariffs and a Professor of Economics at Tufts University. Professor Klein is also Founder and Executive Editor of Econofact, a web-based publication of the Fletcher School at Tufts that publishes economic analyses by leading economists across the country. I asked him for his thoughts on Trump’s tariffs. He wrote:
“Tariffs are like sales taxes that raise prices for all affected goods but, unlike sales taxes, only earn revenue from some of the goods whose prices have risen (those that are imported). Tariffs also invite retaliation, as happened in the first Trump administration and as is happening now. The net effect of these broad-based tariffs is clearly negative and will not bring back jobs – in fact, they imperil jobs in companies that import inputs.”
Is there ever a justification for tariffs?
Maurice Obstfeld is another tariff expert and the former Chief Economist at the International Monetary Fund. He is also a professor of economics at UC Berkeley and a member of the Council of Economic Advisors. In an Econofact Chat with Professor Klein, Professor Obstfeld answered that question by saying:
There are remedies in which tariffs can be available when there’s a disruptive import surge that swamps certain industries, causing high levels of unemployment and leaving little time for the firms and the workers to adjust. So, in the realm of trade policy, there’s a recognized but limited role for tariffs, but tariffs as an industrial policy to bring back manufacturing, tariffs as a tool to increase our trade surplus, these are all unlikely to work, and likely to be destructive, especially when they’re met with retaliation from our trade partners.
Which is precisely what is happening today.
In tonight’s address to a joint session of Congress, it will be interesting to hear Donald Trump boast about what a wonderful thing he did for America today by creating a trade war with our closest allies, our geographic brother and sister. Among the other things he’ll lie about, he’ll give himself a big pat on the back for showing those loser countries just who’s boss. He might mention there could be a smidgen of sacrifice Americans will have to make to bring our friends to heel. But not to worry. It won’t be long, and it won’t be much. Everything will be just hunky-doree when they bend the knee.
And in just a few minutes, a team of weighty pigs will fly past my second-floor windows on their way to the land of Oz.
A word about Econofact
Although I have absolutely nothing to do with it, I have come to appreciate Econofact. In the new world order, where “alternative facts”¹ are alive and well, it can be hard to find intelligent, non-partisan, factual analysis of major issues facing us all. Econofact does that at a high level. The authors may not tell you things you want to hear, but their facts are true and backed up by solid research.
In addition to publishing noted economist authors, founder Michael Klein conducts what he calls Econofact Chats with leading economic luminaries. They peel the onion of economic issues, as he and Maurice Obstfeld did in their chat about tariffs I cited above.
However, Econofact is a non-profit and depends on donations. In a world of worthy causes, Econofact deserves your consideration, especially now, as the Trump administration obfuscates facts. For example, yesterday, the Atlanta Fed revised its estimate for Q1 2025 GDP growth from an expected +2.9% to –2.8%, after which Secretary of Commerce Howard Lutnick talked about revising the analytical method of determining growth. He seems to think if the administration doesn’t like the numbers, it should change the way it calculates them.
Right now, Econofact, which is free, is asking for help by creating a Premium subscription for $50 annually.
In addition to other exclusive benefits, Premium Subscribers will have access to monthly “Ask Me Anything” Webinars featuring prominent economists and economic analysts. If you’re an economics nerd, this should appeal.
I strongly urge you to subscribe to Econofact, and, if possible, as a Premium subscriber.
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¹ The term “alternative facts” made its way into the culture when KellyAnne Conway, Senior Policy Advisor in Donald Trump’s first term, coined it while standing on the White House lawn, answering a question with a completely untrue statement, but calling it true as an alternative fact.
