BOOM: Trump Promises 25% Tariffs on DAY ONE to Canada – Mexico

Wow. Talk about a sea-change and a remarkable one at that. Price increases are coming despite the fact that President-elect Donald Trump likely won on the back of inflation concerns above all else. He just promised a massive new 25% tariff on goods made in Canada and Mexico – two of our biggest trading partners and most essential allies. Additionally, he is not putting tariffs in place to level any trade playing field, nor economic concerns alone. No, he is putting tariffs in place as a means to effectuate other policies – immigration and illicit drug manufacturing. Without regard to whatever he envisions, this promise insures immediate and insane price hikes.

According to CNN, this new policy won’t be phased in to allow for adjustments. No, the tariffs are coming fast  – “Day One”:

President-elect Donald Trump on Monday promised massive hikes in tariffs on goods coming from Mexico, Canada and China starting on the first day of his administration, a policy that could sharply increase costs for American businesses and consumers. The move, Trump said, will be in retaliation for illegal immigration and “crime and drugs” coming across the border.

Of course it is not wrong to want to control illegal immigration and fix the endemic drug problems. But if the goal is to solve immigration concerns, the demand should be made on Congress to pass new legislation to control immigration into the future – no matter who is president. It is a principle, not transactional, nor personal. Moreover, we have seen over and over and over that only medical treatment helps people suffering from addiction. This type of blanket tariff – at a massive charge, does little more than represent misplaced anger paralleled with misplaced justification. To the extent it matters, it won’t work to improve the situation and that’s even before we address the massive impact on consumers.

Consider this: Put yourself in a world in which Trump promised 10% tariffs on goods from every single country except Canada and Mexico along with the following statement: “We need you, Canada and Mexico – to partner with us and address the immigration and drug problem. IF you work with us and show real commitment, we’ll keep free trade agreements in place. If not, then we move you into the same 10% category.” Such a policy would serve the exact same purpose without the punitive rage and just as big a shot at working. Not for nothing but it also helps consumers.

As said above, this is coming fast and represents anger regarding other policies:

“On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,” Trump posted on his Truth Social platform.

“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!”

Pretend momentarily that such a move could keep drugs from coming in from Mexico and Canada. One proper justification to put tariffs in place is to increase domestic manufacturing – and thus it would create a massive incentive to make more illicit drugs here. Have no fear, though – it won’t keep drugs from coming in from anywhere, certainly less than better more targeted policing. There is nothing wrong with shifting resources to put greater border enforcement in place. That is not on the table yet and there is also the fact that the harder the border gets, the more incentive there exists to pay certain people off to look elsewhere. Profits find a way.

There are two massive takeaways that can’t be ignored. As mentioned above, if one wants to impact policy, it is far safer to use the carrot first. If it works, you avoid all the commensurate pain. Tell Canada and Mexico that they are indeed special and if they partner on this with renewed border commitment, they have the advantage. It also helps domestic manufacturers to keep our exports flowing out across the border the other direction. After all – both countries will automatically put identical tariffs in place. And it is not like Canadians and Mexicans don’t drive Ford F-150s while eating potato chips.

Even if tariffs did work to impact the immigration and drug problems, one needs to ask “Is it worth the price to regular Americans?” And Donald Trump is in a better position that anyone else to understand that Americans are particularly sensitive to inflation and will reject increased costs. On “Day One” he might burn up all good-will from people who want him and the nation to do well. Within the space of a week he could have an approval rate of 20% as voters see prices rise immediately. He risks losing the protection of a compliant Congress as they respond to infuriated voters. Even if none of this is set in stone, why take that risk?

We haven’t even taken up the 10% tariff on China which might be one of the most self-defeating moves one can imagine. Consider the response if the incoming administration declared that it was going to put a 10% tax on everything made in China in order to encourage companies to make stuff here. It is nearly the exact same policy under the exact same rationale. It just doesn’t sound quite as cool. It sounds less punitive (Even though it has the same ultimate impact on China) and thus it’s just less fun. It sounds primarily painful to Americans which is almost exactly what happens anyway!

Obviously, Trump hasn’t yet signed the order. It is conceivable that he wants Mexico and Canada to act now to harden borders. Fine – so long as one also expects prices to rise immediately in order to account for what’s coming. Perhaps the immediate response will dissuade him from signing such an order on Day One. Perhaps.

But this is the exact type of thing that can drain all his support on “Day One” when Americans – his voters and all others, then say to themselves, “Well, yes – I wanted the border closed, but that’s your job! I am not paying 25% more for my Ford because you can’t control the border!” Because that’s the rub. People who want the border closed will be forced to ask how much they’re willing to pay for it – directly. He is not looking at alternative ideas to put the same pressures in place. Will Americans see this as him fixing it?

Targeted tariffs absolutely have a place in a good economy – key word being “targeted” on certain goods. They offset unfair advantages. Other than that, it is shocking that a self-declared populist would immediately move to anger said populace. Inflation was and remains a problem. It infuriated Americans who – fairly or unfairly – took it out on the current administration. Now the incoming administration intends to raise and fix those costs on Day One. It is just insanely self-defeating. On all of us.

Additionally, Trump is known for doing exactly what he says he’s going to do. He doesn’t really float trial balloons. That is why his supporters love him. There is every reason to take this as a done deal. Sure as anything, corporations are going to put their plans in place right now – they don’t have to wait until “Day One.”

Oh! And once people see televisions that cost $1200 and “get used to it” – those prices don’t usually come down, even if the costs or tariffs go away. Oh! And one other thing – when a domestic company sees the other guy’s stuff at 10% more? They can up it 5% for no better reason that 5% greater profit. Price increases work that way. So, you know. Happy Holidays.

God Bless: I can be reached at [email protected] and @JasonMiciak and on Blue Sky – the newer “cleaner” platform, less ads, etc.

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