February 17, 2025
The Wall Street Journal dubbed Trump’s trade war as the dumbest in history. Previous tariffs during his first administration costed Americans some $80 billion.
Just a few weeks ago he announced a 25% tariff on both Mexico and Canada with just a 10% tariff on Canada’s Energy Products. He also announced a blanket 10% tariff on Chinese goods and more recently he’s been toying with the idea of reciprocal tariffs with other U.S. trading partners including the EU and Japan. He plans to review the stall of tariffs to Canada and Mexico, but soon he will activate the tarrifs to those countries, and the stock markets will tank, and the prices of imported goods will skyrocket to the American consumer. Tariffs on Canada and Mexico have been temporarily halted but the tariffs on China have gone live and it seems as though Donald Trump is going to continue exploring further tariffs on other countries over the next few weeks.
The interesting thing though is that the president can’t just slap tariffs on any country for any reason as he has to work within existing laws. But what laws does he actually adhere to? The answer is, the only ones that he can break without costing him. Trump strives to break the rules and make his own. Section 232 of the Trade Expansion Act of 1962 allows the president to impose tariffs for national security reasons. Section 301 of the trade Act of 74 allows the president to impose tariffs if a foreign country engages in unfair trade practices and the Tariff Act of 1930 allows the president to impose retaliatory tariffs if a foreign government discriminates against U.S. products but beyond that the tariffs need Congressional approval.
Trump has killed USAID and now trying to kill the Department of Education. Both eliminations are illegal, and judges have provided restraining orders to Trump and his acting president, Elon Musk. Now there are over 100 lawsuits pending against Trumps executive orders, and this is in just the first four weeks of Trumps presidency. Will anything good be reflected in Trumps first 100 days in office?
Meanwhile, Trump and Musk are continuing to piss off U.S. Congress, and is getting resentment also from Republicans. The Democrats in Congress have vowed that if Trump eliminates the Department of Education, they will not vote on any upcoming bills in Congress. Yes, the Republicans don’t need the Democrats to pass bills, or do they? With a slim margin in both the House and Senate, they definitely need the Democrats.
Does Trump abide by Congressional approval? Why would he? He’s trying to create his own laws now that he has presidential immunity. He can just sign his Executive Orders and try to get away with anything he wants without Congressional approval. But, there’s no power that the president has that enables him to place tariffs on countries without just cause. So he declares a national emergency which gives him the right to impose tariffs. He blames Canada and Mexico for illegal immigration and for bringing Fentanyl into the U.S. He argues that China hasn’t done enough to curb the flow of precursor chemicals into the US. Trump will try the best he can to impose tariffs where possible to increase the tax revenue and reduce the trade deficit of the United States. It’s a plan he’s touting as the turning point of the US economy. His goal is to improve America’s strategic and financial position in the world but many economists are seeing it as a turning point for many other different reasons . You can argue that Trump’s tariff plan may likely to be a good thing for America but in the end, he is isolating us from our trading partners, and they will just find other trading partners instead of the U.S. The American consumer will get hurt from this tactic.
A tariff is simply a tax applied to a country’s imports or goods brought into the country from elsewhere. Trump has tried very hard to convince people that it’s these external countries that will pay the tariffs but that is actually false. It’s also quite misleading .
It is in fact the U.S. businesses that buy foreign products have to pay the tariff before the goods are allowed into the country. For example almost all of America’s avocados are grown in Mexico, about 90%. But if a 25% blanket tariff is put on goods from Mexico it means that companies like Walmart will have to pay a 25% additional tax to the U.S. government on their avocado orders before they get that stock so if they previously bought avocados at a dollar a piece then after the tariffs are put in place that Avocado now cost Walmart $1.25. But in reality Walmart doesn’t just eat the additional cost. They pass it on to consumers so that Walmart’s profitability doesn’t take hit. SO, ULTIMATELY THE PEOPLE THAT PAY THE TAX ARE STILL AMERICAN CITIZENS.
The big advantage to the implementation of tariffs is that it is a way on fixing America’s trade deficit while the White House has officially been messaging that these new proposed tariffs are around a national immigration and fentenyl emergency
The real underlying motivation of Trump implementing these tariffs is purely economic and this can be seen because as soon as Donald Trump isn’t talking about China, Mexico or Canada, his messaging completely changes and focuses much more on trade imbalances. Trump’s message to the media after meeting with the Japanese prime minister was the following…
“We have a trade deficit with Japan of over a hundred billion but we’re going to work that out and I think very quickly. Frankly we can do it just on oil and gas. We can work it out so we intend to do it very quickly.”
A trade deficit is one of those fancy economic terms that gets thrown around but it’s really quite a simple concept to understand. Countries around the world make certain goods. When they have an excess they might sell those goods to other countries as exports. They will also buy goods from other countries, i.e. America buying avocados from Mexico now but a trade deficit occurs simply when the country imports more than it exports .This is seen as a problem because over time you lose domestic jobs as more goods consumed in America are made outside of America and that can lead to a decline in American industry and also dependence on other countries which is a big problem in times like when the global supply chain just completely freezes . Overall it just gives foreign countries a bit of added leverage over the United States at the negotiating table as at the end of the day the United States need needs the other country’s stuff. Now in 2024 America’s trade deficit was 98.4 billion with their goods trade deficit reaching a record 1.2 trillion meaning the US is importing $1.2 trillion more goods than their exporting and on a country by country or region by region basis. The biggest trade deficits are seen with China, EU, Mexico , Vietnam, Ireland, Germany, Taiwan, South Korea and Canada and the list goes on
In the case of China alone, the U.S. in 2024 bought $295.4 billion more goods from China than what China bought from the United States and this shows that the U.S. is quite dependent on Chinese made stuff for their economy to function normally . Now that number has actually been falling in 2018 America had a record trade deficit with China of over $400 billion but despite that number improving to Donald Trump. Any trade deficit is still a problem and it’s a problem Trump is hellbent on fixing. Take the recent 10% tariff placed on Chinese goods as an example. The U.S. buys lots of goods from China, like smartphones, computers, batteries, toys and video games consoles. The list really goes on but with a 10% tariff importers now have to sell those goods in America at a 10% markup to avoid any hit to their profitability. Now, that increased price on the imported goods naturally encourages more Americans to buy American made products. The foreign made products are just way more expensive now but even more importantly than that the main effect Trump wants to see from the tariffs is a return of manufacturing to America. The idea is if Americans start buying more American products then hopefully that leads to growth in domestic industries higher profitability for American businesses and more jobs for the American people. Then on top of that, the government also earns a little bit more tax revenue which it may use to lower income taxes for its citizens
It sounds like a perfect strategy but there are some problems. The biggest and most obvious problem is that tariff s increase prices, i.e. they spur inflation. It’s the American importer like Walmart that has to pay the tariff. They’re the ones that raise their prices so at the end of the day, Americans pay more for the goods that they need.
I have already discussed the avocado example that 90% of American avocados come from Mexico. A 25% tariff on all Mexican Goods means avocados are 25% more expensive now but now apply that logic to all the products that America imports from these various countries . From Mexico vehicles, electronics, petroleum, fruits and vegetables. In fact, 18 out of every 100 cars sold in America are made in Mexico. Tariffs up the price to American automaters. Companies like GM, Ford ,krysler, will up the cost of their products by 25%. Agricultural products from China, smartphones, computers, batteries, toys and video games are affectred. It all gets more expensive and for a lot of people that rubs them the wrong way. The Federal Reserve is finally starting to get a hold of this predicted inflation.
Americans are unfortunately struggling much more with the cost of living than they were 5 years ago and now Trump is voluntarily inflating prices and calling at an America First policy.
For some that’s a hard sell so that’s the fundamental argument against the tariff plan and it’s why some economists describe it as a turning point for the U.S .economy, but for all the wrong reasons The Wall Street Journal just the other week even went so far as to call Trump’s plan “the dumbest trade war in history going back to the trade deficits”
American industries do not benefit from tariffs. As an example, Trump announces a 10% tariff on Chinese electronics to try and spur American companies to manufacture electronics in America. But history tells us that this typically doesn’t happen. Instead, companies look for the next cheapest alternative, i.e. the U.S. imposed tariffs on China. During Trump’s first term, the trade deficit with China didn’t disappear . It just shifted to Vietnam Mexico, and India and other lowcost countries.
Cheaper manufacturing alternatives are created elsewhere, instead of boosting U.S. manufacturing. Many companies will simply move their production to another lowcost country so that’s another problem that tariffs create. This is why this time around we’re seeing Trump targeting a lot of countries broadly with tariffs. But be clear, because Trump doesn’t understand this, countries like Mexico, China, and Canada will take their business elsewhere, overlooking the American market because now they would not have to pay any tarrifs.
Trump, out of nowhere announces a 25% tariff on our steel and aluminum worldwide. But at the end of the day for resources like steel there are many buyers and putting tariffs on things like Australian steel for example, will probably just mean that we’ll sell it to China cheaper which helps their economy flourish while still prices rise in America. It’s the same idea behind the formation of the BRICS countries. America wielded so much power over these countries and flexed so hard on them that eventually they just got fed up with it to a point where American sanctions on these countries have fast-tracked a new BRICS payment system that ditches the Swift Network. the US dollar and ultimately reduces the influence that America has. So looking at these tariffs through a diplomacy lens out of nowhere the president of the United States has moved to impose tariffs on America’s two biggest export markets of Canada and Mexico and its largest supplier of goods from China and key strategic economic allies in the EU and Japan. Now of course while no other country will really try and stick it to America outside of the BRICS Nations. Oh, and by the way, because of Trump and his imposed tariffs to Canada, within the last 24 hours, they have joined the EU. Trump has woken up a giant in the name of Canada, and Americans across the country will start feeling the pinch in their pockiet books as the years roll by. That’s unfortunate, because it didn’t have to be this way. But two people named Trump and Musk decided to stick it to the rest of the country, namely people like you and me.
