Final (ok, probably not) Thoughts on Trump and Tariffs   

Yea, we’re all tired of this, I’m tired of writing about it, and am working on an article on something more fun – academic fraud – to post later in the week. Stay tuned for that, but in the meantime, frequent reader Ellie made a couple of comments on my last post on Trump’s tariffs that are salient and worth responding to.

She mentioned first that an alternative theory of what Trump is doing is to weaken Canada so that he can get his country’s hands on our not-inconsiderable natural resources. Oil, potash, etc. Her other suggestion is that Trump ‘paused’ the tariffs on autos because he discovered that various plants in Canada produce three pickup trucks that are popular with people likely to be part of his political base, and that some of the parts for those pickups come from Mexico.

Tackling the pickup-truck idea first, that makes sense if DJT cares what his base thinks. Perhaps he does, I saw a clip of him saying he did this to avoid hurting the US auto makers. One might expect the President of the US to understand how the auto industry works, and thus not impose tariffs on it in the first place, but I have said before there is no evidence that DJT regards understanding anything as part of his job description. That all being said, if he indeed imposes the tariffs on auto and parts crossing the US border in a month anyway, they are still going to hurt US automakers and consumers in the same way as they would have if imposed this week. Pickup truck production can’t be moved to the US in a month even if the auto companies wanted to do that. Thus, even if he was responding to his pickup-truck driving base, I’m sticking to my stimulus-response model of DJT.

As to his carrying out a plan to get our resources, that has a nice ring of ‘purposeful strategy’ to it, as did my plant-relocation strategy, but I am doubtful that it works any better. If that is what he is trying to do, once again it seems counter-productive to impose then ‘pause’ then ‘reprieve’, then…..whatever. Perhaps he is really devious, and figures that he can weaken Canada by repeatedly making and retracting tariff threats rather than causing pain to Americans by actually imposing tariffs, but I am not convinced. DJT was clearly after Ukraine’s resources, and he said so on like his second day in office, then supposedly had worked out a deal with Zelensky to make that happen, until the Oval Office blow-up blew that up, too. He has said nothing about Canada’s resources yet, but again – maybe he is really really clever and devious and will not unveil his true motivation until he has us good and weak. But again, that would argue for just imposing the damn things, rather than dithering.

I think for now I’m keeping stimulus-response as my leading explanation of DJT.

Some final thoughts. I am absolutely sure no party in North American has yet been charged any tariff. The administrative machinery for doing this cannot be set up in a day, and so far there has been no tariff that has actually been in place for longer than that, so far as I can tell. Maybe the Canadian government should communicate a strategy of retaliation to Trump in which our retaliation is triggered the first time any tariff is actually paid to the US. This would have the advantage of allowing us to ignore what he says until and unless it results in actual material damage. DJT seemingly likes sowing chaos, we should not help him in that.

Something like ‘The first time a dollar in tariffs on any good covered by the USMCA that President Trump signed is collected by the US, the Canadian government will do the following…..’

Just a thought.

As to the form of any Canadian retaliation, it still seems to me that, as I wrote weeks ago, Premier Ford’s idea to charge a 25% premium on electricity that Ontario provides to northern US states starting Monday is a risky plan. The grid is highly integrated, electricity flows on it across the border in both directions at different times. I hope that, just as I wrote above about DJT, the premier of Ontario understands this, and has considered the possibility that Ontario could see a ‘re-retaliatory’ tax on its imports of electricity from the US when those occur, as they apparently do.

On the other hand, I think it is quite possible that there are products shipped to the US that could have export taxes imposed on them that would damage US people and firms. Not damage DJT, sadly, but as I keep saying, that is how this shit works.

I am thinking of potash and oil, there may be others. Trump lowered the tariff on potash from Canada to 10%, in deference to US farming interests, supposedly. Similarly, it seems imports of Canadian oil into the US will be charged a tariff of only 10%.

If you want to get Trump’s attention by making people in the US yell, then the 10% US tariff on potash should have a 15% Canadian export tax added to it, and similarly on Canadian oil that goes to the US. It makes no sense to let DJT be the one to decide how much US people and firms get hurt. Those lower tariff rates should be taken as a signal that is where the pain can be inflicted. Yes, this will impose inordinate economic harm on firms in Alberta and Saskatchewan, and that sucks. I would support some kind of compensation from Canadian taxpayers to those firms for that, but if you are going to ‘retaliate’ against US tariffs it should be done in a way that hurts the other side. Again, many of the casualties in this kind of war come from ‘friendly fire’, that is the nature of a trade war. If we’ve decided to get in a fight with this pig, we are going to have to get dirty.

I remain certain only of uncertainty…but do stay tuned for the academic fraud stuff. ‘sgonna be GREAT, I promise.