Further Thoughts on Trump and the Bloody Tariffs 

It’s a big, messy topic, so there is a lot to think about and try to understand. Since my first post on this, I have been writing down additional thoughts that seemed useful as they come to me. However, the actual ‘facts on the ground’ have been changing faster than I can write about them. So, here on the morning of Saturday, March 8 are the few thoughts that seem to me to still be relevant to this mess.

1. In trying to understand whether the proposed strategy of using tariffs to get manufacturing to move back to the US could actually work, it occurred to me that a very helpful thing to know would be whether this has been attempted in the past, what the circumstances were, if so, and whether it worked then. There have been many instances of countries imposing widespread tariffs, most notably during the Great Depression, when the US brought in the Smoot-Hawley tariff act. But clearly the circumstances were very different then, so whatever happened in terms of firm location decisions, I don’t see that it would be very instructive regarding what might happen now. That all being said, the week’s events make the original question – could this tariff strategy work? – relatively uninteresting, as I indicate below.

2. Given his actions over these last several days, I think it is very unlikely the US President is executing a plan that uses tariffs to get manufacturing plants to locate or re-locate in the US, as I suggested might be true in my earlier post. My leading hypothesis now is that he has no idea what he is doing, and that DJT is best understood as a simple stimulus-response machine, like a four-year-old. What he does from day to day will depend on what particular stimulus he gets that day, and his random reaction to it. If he were carrying out the plan I laid out previously, these ‘pauses’ and ‘reprieves’ would be utterly counterproductive, as I noted. Firms are not going to make plant location decisions based on conditions that are liable to change from year to year, if not week to week. I suppose it is still possible that DJT is trying to do this, but that he sucks at it. Can’t rule out incompetence, ever, when discussing politicians. What they are selected to be good at is getting elected, not governing.

3. The Canadian responses, such as they are.

I continue in my suspicion that Canadian governmental leaders are not up to navigating this well, partly due to the general point made in my last sentence of point 2 above. More specifically, I would note the following. My local paper, the day after the first US tariffs were imposed, and then Canadian retaliatory tariffs were imposed, featured a bold headline: ‘We’re Insulted and We’re Angry’, quoting the PM.

Anger and insult are not useful, even when that is what you are facing from DJT. When your neighbor acts like a dickhead, you can yell at him across the fence, of course, but there is no chance that is going to rectify the situation or change his behaviour. We need leaders who understand the world and are willing to think hard about how to respond. The Trudeau quote is bullshit for domestic political consumption; he better have more than that in his toolbox. Both he and Ontario premier Ford have been quoted as saying ‘we are going to win this tariff war’, and that is equally useless. No one wins a tariff war, and the numbers I quoted in my last post make it pretty clear that Canada is going to take more damage than the US in any such war. And by that, I mean Canadians will take more damage than Americans.

That all being said, I will admit that headline is not entirely fair to our PM. He certainly said other things, but as always, 21^st century media focuses on the most inflammatory things they can.

4. I am at this point confident in one thing. Canadians and Canadian firms, as well as Americans and American firms, will take economic hits from the actions of governments on both side of the border, until and unless Trump gets over this tariff obsession.

Note please that I am including in this statement that Canadian government actions will do damage to Canadians, just as Trump’s decisions will do damage to Americans. That is how this shit always goes. And, in time-honored Canadian fashion, some Canadians (and Canadian firms) will get government cheques as compensation. Those cheques will be badly targeted, just as during the Covid lockdowns.