TGHusker
Well-known member
This topic needs a thread of its own and we watch it unfold. The Felon, who is now our president :facepalm: , appears to think we can dominate the world and exert our economic power on friend and foe.
Unclear Policy Goals
Tariffs & the Great Depression
Canada will Cease to Exist
The Dumbest Trade War
Unclear Policy Goals
The president’s trade assault, which makes no distinction between ally and adversary, is an assertion of U.S. dominance with significant risks.
Until the moment when President Trump announced 25% near-universal tariffs on Canada and Mexico, many on Wall Street, in Washington and in foreign capitals doubted he would. They didn’t see how the changes served the U.S. economic, political or strategic interest.
That Trump did so anyway shows just how profoundly he is rewriting the source code of U.S. economic relations. The postwar bipartisan consensus that the U.S. prospers by fostering cooperation and integration with allies and neighbors is gone. In its place looms the prospect of continuous trade war driven not by traditional alliances and ideology, but the priorities of the day. The winner is the one who can inflict, and withstand, the most economic pain.
What comes next is highly uncertain because Trump’s motives are difficult to discern. He justified the tariffs, plus a 10% tariff on China, as a way to stop the flow of fentanyl and illegal migrants.
Howard Lutnick, Trump’s commerce-secretary nominee, last week said Canada and Mexico “are acting swiftly” on those concerns, implying a resolution could come quickly. The tariffs are to take effect Tuesday.
Yet negotiators from both countries reportedly have struggled to figure out what would satisfy Trump. His officials have set vague-enough conditions that could justify tariffs indefinitely. Even if the tariffs announced Saturday are modified or removed, Trump can reimpose them at any time, and he is still considering broad tariffs on the entire world.
Drugs and migrants might turn out to be a pretext for bigger, long-term goals. Trump claims tariffs will usher in a “golden age” akin to the late 1800s. He sees them as not just a source of revenue and protection, but a sort of financial gunboat diplomacy that could force Canada to submit to annexation and Denmark to surrender Greenland.
“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,” Trump wrote on social media Sunday.
Philip Verleger, a longtime energy analyst, writes in a forthcoming article that Trump “intends to ‘Make America Great Again’…by diminishing the power of every other country. Cooperation is not an objective. His focus is dominance.”
This trade war isn’t like the last
While Trump hit many countries in his first term, China was the focus. Most of the $380 billion of imports, annualized, subjected to tariffs were from China, noted Erica York of the Tax Foundation. By contrast, York estimates Trump’s latest tariffs will hit about an annualized $1.4 trillion of imports—mostly on U.S. allies.
Tariffs & the Great Depression
President Donald Trump has argued that “trade wars are good and easy to win.” But many economists have disagreed that raising tariffs sharply can improve the economy. In particular, experts have pointed to the failure of the Smoot-Hawley Tariff Act, passed in June 1930, to protect U.S. industries from tariff increases.
Although this came several months after the stock market crash of 1929, the U.S. hadn’t yet entered “the full onset of the Great Depression,” says Claude Barfield, a resident scholar at the American Enterprise Institute. The thinking among Congress and President Herbert Hoover was that by raising taxes on thousands of imports no matter what country they came from, the act would protect American farmers and secure the nation’s economy. But experts disagreed.
“Economists around the country argued to the Republican Congress that this would only hurt the world economy, and the United States economy,” Barfield says. (Before the political parties realigned in the mid-20th century, the Democrats were the “free trade” party.)
And they were right. Although it did not cause the onset of the Great Depression, it did help extend it. After President Hoover signed the bill into law, stocks dropped to 140.
Other countries responded to the United States tariffs by putting up their restrictions on international trade, which just made it harder for the United States to pull itself out of its depression. Imports became largely unaffordable and people who had lost their jobs could only afford to buy domestic products. Global trade tanked 65 percent.
In effect, the Smoot-Hawley Tariff Act “prolonged [the depression] and possibly deepened it around the world, not just in the United States but for other countries,” he says.
Ultimately, this influenced the country’s long-term trade policies. Beginning with the Reciprocal Trade Agreements Act of 1934, and continuing with other acts throughout the century, the United States began to negotiate trade policies individually with countries, instead of imposing unilateral tariffs across the board.
America used relief from tariffs as a bargaining chip. “What we would do was to say to a country, ‘If you lower your tariffs on such and such, we will lower our tariffs,’” Barfield says. “So you had then a whole group of reciprocity agreements negotiated in between 1935 and 1941.”
The premise was that negotiating deals with other countries to reduce tariffs promotes economic growth. Since 1945, both Republican and Democratic presidents have mostly sought to lower trade barriers and negotiate reciprocity agreements. Those efforts have been reflected in the General Agreement on Tariffs and Trade, the World Trade Organization and the North American Free Trade Agreement.
Canada will Cease to Exist
"Without this massive subsidy, Canada ceases to exist as a viable Country. Harsh but true!"
He added: "Therefore, Canada should become our Cherished 51st State. Much lower taxes, and far better military protection for the people of Canada - AND NO TARIFFS!"
Within hours of the White House’s tariffs announcement on Saturday, Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum imposed matching charges on imported US goods.
Trudeau announced "far-reaching" 25 per cent tariffs on American products, affecting £86 billion in value, including beer and wine, household appliances, and sporting goods.
The Prime Minister said he would "not back down in standing up for Canadians", but warned of real consequences for people on both sides of the border.
The Dumbest Trade War
President Trump conceded Sunday that there may be “some pain” from his sweeping tariffs on Mexico and Canada, but they will eventually lead to a new “GOLDEN AGE.” Nice of him to promise a glorious future because the pain is already unfolding, and the tariffs won’t even take effect until Tuesday.
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,” Mr. Trump posted on Truth Social on Sunday morning. He also included a blast at these columns for leading the “Tariff Lobby” after our Saturday editorial called his 25% across-the-board tariffs on our friends and neighbors “the dumbest trade war in history.”
We appreciate Mr. Trump’s attention, though we’re anti-tariff and not lobbyists. But bad policy has damaging consequences, whether or not Mr. Trump chooses to admit it. Mr. Trump can’t repeal the laws of economics any more than Joe Biden could on inflation.
Tariffs are taxes, and when you tax something you get less of it. Who pays the tariff depends on the elasticity of supply and demand for the specific goods. But Mr. Trump wants American workers and employers to take one for the team. Hope you don’t lose your job or business before the golden age arrives.
The economic fallout began Saturday evening as Canada said it will retaliate with a 25% tariff on $30 billion (Canadian dollars) of U.S. goods, with another C$125 billion to follow in three weeks. Mexican President Claudia Sheinbaum also promised to retaliate.
Canada’s new border taxes will hit orange juice, whiskey and peanut butter—all from states with GOP Senators. Prime Minister Justin Trudeau said Ottawa’s tariff list would also include beer, wine, vegetables, perfume, clothing, shoes, household appliances, furniture and much more. He said Canada could also withhold critical minerals.
Note that Canada’s Conservative opposition leader, Pierre Poilievre, also called for retaliation. Mr. Poilievre is the favorite to be the next Prime Minister and he rightly said the trade war will damage both countries. But he said Canada had to stand up for its “sovereignty” and protect its economic interests.
Mr. Trump’s tariffs are already roiling North America’s energy markets, which are highly integrated. The President implicitly recognized the risk by hitting Canada’s energy exports to the U.S. with a lower 10% tariff. But that will still hurt Midwestern refiners that rely on Canadian oil. Canada and Mexico could send more of their oil elsewhere for refining, perhaps even China.
Canada’s expanded Trans Mountain pipeline runs from Alberta to the West Coast and has spare capacity. It could be used to increase tariff-free oil shipments to Asia that would hurt California refineries that now import oil from Trans Mountain. California could have to import more oil from the Middle East.
Mr. Trump says the tariffs will revive U.S. manufacturing. But Jay Timmons, CEO of the National Association of Manufacturers, said in a statement that “a 25% tariff on Canada and Mexico threatens to upend the very supply chains that have made U.S. manufacturing more competitive globally.”
He added that, while his members understand the need to reduce fentanyl flows to the U.S., “the ripple effects will be severe, particularly for small and medium-sized manufacturers that lack the flexibility and capital to rapidly find alternative suppliers or absorb skyrocketing energy costs.”
Many more trade groups have criticized the tariffs, including even U.S. aluminum makers who benefited from tariffs in the first term. Canada accounts for more than half of U.S. aluminum imports (owing to its cheap hydropower) that secondary and downstream manufacturers use.
None of this means the Trump tariffs will tip the U.S. economy into recession. U.S. growth may be strong enough to absorb the blow from tariffs, as it was after Mr. Trump’s more modest levies in the first term. But the same can’t be said about Mexico and Canada, where growth is weak and which depend on U.S. markets for much of their GDP.
The tariffs may also not cause a surge in the general U.S. price level. Overall inflation depends far more on the Federal Reserve’s monetary policy. But prices will increase for most tariffed goods, which will be painful enough.
The tariff broadside also adds new policy risk and uncertainty that could dampen business animal spirits. Markets have been pricing in an assumption that Mr. Trump would step back from his most florid tariff threats, or limit tariffs to China.
The hammer blow to Mexico and Canada shows that no country or industry is safe. Mr. Trump believes tariffs aren’t merely useful as a diplomatic tool but are economically virtuous by themselves. This will cause friends and foes to recalibrate their dependence on America’s market, with consequences that are hard to predict. How this helps the U.S. isn’t apparent, so, yes, “dumbest trade war” sounds right, if it isn’t an understatement.
