Trump has declared trade war on the world, as he said he would.
Mexico and Canada have been subject to a 25% tariff, except for Canadian oil, which will only be subject to a 10% tariff. China has a 10% tariff on top of anything already charged on US imports from there.
The people of the USA are waking up to seriously inflated prices for some goods and services that they have customarily bought this morning. Inflation in that country will rise, and so might interest rates. The flow of fentanyl, which it is claimed this is all about, will not change at all.
Meanwhile, Canada, which makes the vast majority of its exports to the USA, will take a massive economic hit. To add insult to injury, Trump's order requires that if Canada or Mexico respond in any way (and both already have), then the tariff rates will increase.
That this will reduce the well-being of US citizens, increase US inflation, seriously harm the earnings of US companies and reduce US growth is something that Trump has refused to recognise, but all of those outcomes are likely.
Will it bring jobs back to the US? Not for a long time. Contrary to the assumptions of the neoliberal economists who, no doubt, promoted these tariffs, adaptation can take a long time in the real world. Supply chains built up over extensive periods cannot change overnight, and that is precisely why everything I have noted is likely.
And let's also be clear that the US can make its own fentanyl.
So, why has Trump done this? Firstly, because he can, and for him, that's good enough.
Secondly, he and those advising him very clearly do not know what they are doing here. While tariffs can have an economic role in a small, heavily single-industry-dependent state at an early stage of development, large economies with long supply chains—which is what the US is—can only lose from them.
Third, he thinks he will enrich the US because I believe he has persuaded himself that these taxes will be paid by the exporters to the US when that is not true. They suffer a loss of trade, undoubtedly. But they never pay the US tariff, which can only be paid within the USA. It is a domestic tax.
I stress that I am not saying all tariffs are automatically wrong. I am saying these are. They harm US citizens. They will severely disrupt world trade with decidedly unpredictable consequences, which could be harmful here in the UK. They could easily reignite inflation—although we will not need interest rate rises to counter that (in fact, the opposite might well be true). They increase international aggression and disorder, which is not what we need.
Nothing about what is happening will have a good outcome. But it proves that he will do what he said he would—however harmful it might be, and that is an even deeper cause for concern.
This is going to end in tears and, very often, things that are a great deal worse. The Age of Aggression is not going to be an era that the survivors will look back on with any pleasure.
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I think he is creating a crises to enact legislation for neoliberal interests. Under the cover of this crises we should be watching what his administration is doing.
In short, They are manufacturing a crises to play out Disaster Capitalism (Naomi Klein). Except this won’t be a natural disaster.
Interesting theory, but I really don’t see him as capable of that level of forward planning. If anything, it highlights how simplistic Trump’s way of thinking is.
I think it is more an expression of power – he does it because he can.
Although this is terrible, I don’t think it is going to last long, because it is simply unsustainable. I think it is a bluff, that the US can’t sustain for long. It will hurt all of the economy, including American corporate interests. I was reading the other day an interview with a representative of a cars manufacturing trade union. He explained that some manufactured parts go several times through the borders before they are installed in the final product. So a car part may have crossed those borders 3 or 4 times before it is assembled in the US. In some industries, the effect of this on prices is going to really high.
I would imagine someone like Musk telling him this is unsustainable.
It’s very intriguing that it is 25% for Canada and Mexico, and 10% for China. Besides, not long ago he was saying it would be 60% for China. I think that change is highly calculated. He may have been told that 60% in China would be crazy – a lot of everyday consumer items probably come from there. He wouldn’t last more than one term.
Correction: I meant he might not last his full term.
The people who wrote Project 2025 are capable of forward thinking.
The people who have written all this executive orders that Trump is busy signing are capable of forward thinking – they may be challenged on some of them but they are seeing what they can get away with.
He’s already backed down on some of the increases.
Note though that his last lot of tariffs on Chinese imports are still there – Biden kept them. Retaliatory tariffs by China hit US soya farmers so hard that the US government had to bail them out using the tariff receipts.
Do you really believe he has backed down?
He has delayed by 30 days.
“So, why has Trump done this? Firstly, because he can, and for him, that’s good enough.”
Underlying the above he’s done it because like Sir “Freebie” Starmer and his sidekick Rachel from accounts he’s economically and monetarily illiterate.
American people have paid twice for his last (first term of office) ham-fisted attempt at using tariffs:-
https://www.cfr.org/blog/92-percent-trumps-china-tariff-proceeds-has-gone-bail-out-angry-farmers
He’s now busily prompting crypto-currencies failing to understand that government is a price and savings setter:-
https://moslereconomics.com/wp-content/uploads/2024/08/A-Framework-for-the-Analysis-of-the-Price-Level-and-Inflation.pdf
What is your opinion of the wisdom of Canada for example imposing tariffs in return? Is that cutting off their nose to spite their face? Can Canada “win” a trade war against the US? To me, it seems very risky unless it persuades Trump to change his mind very quickly, which, to be fair, he has done before.
What else is it going to do?
It is very risky for Canada, I think, because Canada depends more on the US than the other way around.
But what is Canada going to do? I mean, what choices are available? 1. Do nothing. 2. Retaliate. Are there any other choices? Canadian voters would not understand doing nothing.
Correct
Canada has a very long border with the USA. Very long, with no fences. Of course the government need have absolutely no involvement with those that help people across borders – that said, the mango mussolini might find his hands rather full if suddenly loads of people cross from Canada – take a look at the border to the west – wide open. Should not be too difficult to spead them out & usefully occupy an already stretched border patrol.
No – considering the percentage of (all sorts of) raw materials Canada exports to US and the percentage of finished goods it imports from the US. US tariffs for Canadian exports are the best example of WTF. Plus – politically this will now set fire to Canadian and Mexican nationalism as well (as you can already witness) which the political parties there will use. Politics isn’t happening only in US, but all around the world.
I think Sanjay makes a good point. This may be just the first salvo of some sort of play or tactic by Trump or it might be window dressing. As in BREXIT, other markets and routes for goods will be found – how many equivalent Holyhead’s and Dovers will there be in America as markets respond by selling elsewhere, breaking new routes?
Mafia Don Don.
What happens to the money taken by the USA as tarifs?
What will it be used for?
Cutting taxes of the wealthy
Also paying American farmers for loss of income! After all they overwhelmingly vote Republican!
https://www.cfr.org/blog/92-percent-trumps-china-tariff-proceeds-has-gone-bail-out-angry-farmers
“Secondly, he and those advising him very clearly do not know what they are doing here”. Could it be that they know exactly what they are doing? Just asking.
Most of it is deflection from what he is doing internally, seizing dictatorial control over the constitutional separations in the USA and preparing the ground for coercion of the non cooperative states.
The tariffs are already having a ripple effect through the USA construction industry.
Very Large construction projects ($20 million USD+) ready to proceed with vertical construction on 1 February 2025 were postponed right after the November 2024 election because suppliers would not guarantee prices on supply and materials. They would only guarantee prices on labor. This will lead to unemployment in the high wage sectors of the USA economy as constructors cannot construct without supply and materials.
Correct. Biden stupidly jacked up tariffs on Canadian lumber:-
https://www.seattletimes.com/opinion/tariffs-on-canadian-lumber-are-driving-up-home-prices/
Increase in new home prices probably a contributory factor in the Democrats losing the presidency!
The main difficulty I have is trying to arrive at any kind of rationale for any Trump decision. It seems his reconstruction of reality is so far off the ‘reasonable’ scale that any decision he makes comes from nowhere or anywhere – the wheel is spinning but the hamster’s missing.
We’re only weeks into his administration and the speed of his erratic decision-making has been frightening. I’m sure if he was an ordinary member of any community he would be regarded as ‘the crazy man’ left to sit alone in the corner of his local pub uttering angry thoughts to himself as nobody else wants to hear it – yet here he is installed as the most powerful man in the world.
I’m reminded of Richard Mulligan’s portrayal of General George Custer in the film ‘Little big man’.
https://www.youtube.com/watch?v=kpbq6nGbs50
With mainly white Canada as 51st state and mainly white Danish Greenland, included in USA, tarrifs for USA taxpayers are ameliorated.
UK might be excluded as the new Stan of Europe.
The above makes no sense to the sane.
Trump’s nastiness continues apace.
This was General Michael Hayden, a retired 4 star General and Director of the NSA and CIA on BlueSky today:
Gen Michael Hayden
@genmhayden.bsky.social
“Fellow NSA – National Security Agency veterans. Look at what’s happened at the National Cryptologic Museum. They covered up with brown paper the photos of Women in American Cryptology. All in response to President Trump’s anti-diversity executive order.”
He posted a picture of the women’s photographs having been covered up in the Museum’s Hall of Honour; others say photographs of people of colour have also been covered up.
Petty, nasty little toerags.
Agreed
Trump, and the other toe rags, may very well be heading in the direction of jobs – and education – being solely for the white males of America and everyone else thrown on the scrapheap.
Given what’s going on, I don’t think that’s as outlandish as it appears.
It’s the Taliban playbook and would appeal to a man such as Trump with the beliefs and attitudes he displays.
It is not so much what happened that is interesting – but the actions of those that applied the brown paper.
We have been here before – Arendt’s description of the Wannsee conference where the German civil service were falling over to accomodate the Nazis and their “Endlösung” project. The actions of US civil servants fall into the same category albeit not with quite the same impact. Still, one has to start with small things involving brown paper, this “normalisation” allows one to move on to the bigger and erm “better” things (obvs depending on the point of view).
I am heartened to see that indeed, civil servants in the USA in 2025 are in fact, by thought and action not so different from German civil servants circa early 1942. Humans eh! they really don’t change.
(some of the above was ironic btw – just in case Americans reading it get the wrong end of the stick).
Trump and co are “flooding the zone” to create disorder, fear, extend their power.
China had had four years to find new markets for exports. China has masses of natural resources and is able sit out a trade war.
China’s “crime” is to challenge the USA arrogance that the US tech companies software should be the world standard and most definitely not open source.
Very rich for the tech bros to beg “Trump protect us” from the nasty EU and China.
It’s ok for them to scrap the internet hoovering up other peoples intellectual property and not pay, then scream we cannot survive unless our intellectual property is protected.
The practicalities of trade will ultimately force the US to back down. Of the 168 models of cars manufactured in the US only 68 are made with more than 60% of parts wholly made in the US. Guess where the rest of the parts come from? Mexico and Canada.
Can existing US production plants meet the massive extra demand? No.
As the Mexican President is telling Trump ” stop the illegal guns entering Mexico”.
Expect Fentanyl production to move to the USA. Then it’s a wholly US problem.
The rule of unexpected/unintended consequences.
Essentially can we look at these tariffs simply as a tax raising measure? There does seem to be an irony that Trump the right winger is increasing taxes. I am sure you are right Richard, this is going to end in tears!
What are American manufacturers with globally extended supply lines going to do in the short to medium term? Seek to use other countries which Trump hasn’t yet hit with increased tariffs but these supplies are bound to be more expensive and the American consumer will ultimately pay more and forming the view they can’t afford to vote for Republicans!
This is a bad idea, but a major distraction from what is really happening. Trump gets all the news headlines and attention he craves. Meanwhile, a junta led by Musk is seizing control of all the infrastructure that the federal government is dependent on; specifically, the payment system at Treasury and the personnel systems.
This is really, really bad.
Both are bad
So explain it to me carefully; a product leaves Canada for the US border. Before it is allowed to enter/ as it enters the US a tariff has to be paid of 25% of the products cost to the representative of the US Gov. at the border. It is the US receiver, not the Canadian/Mexican seller who pays the tariff to the US Gov. and then to recoup his costs he charges his customers 25% more leading to higher prices/inflation? Please clarify for me, my brain is confused!
I think Trump is hoping that some Canadian and Mexican producers who sell a lot of stuff into the US will recognize that their products, once the cost of the tariff is embedded will be uncompetitive with similar products in the US and will either decide to move production to the US or try to concentrate their sales locally leaving more opportunity for expansion of US companies. I have already heard rumblings of some companies being forced to do this. Please don’t!!
I am hoping that he slaps tariffs on so many countries that all those countries could get together and trade with each other , leaving the US out of it.
As a Canadian I am dismayed by the trajectory of our neighbor, the hunting down of immigrants, the hosting of Netanyahu, the appointment of so many no-nothings and the belligerent authoritarianism of Trump himself. There was a deliciously satirical report on Trumps press briefings in the Canadian Globe and Mail; Google “Donald TRump builds an alternative reality in the White House Briefing Room” by Shannon Proudfoot. While its pretty sad sometimes you have to laugh!!!
All your assumptions are correct.
I guess if you are planning a dictatorship, filling your coffers with tariffs of 25% on imports would be a pretty good start
It’s a bit like Brexit madness but the other way round I think?
Thousands of UK SME’s now forced to open up subsidiaries in EU countries in order to continue trading their product into Europe. Opening warehouses, manufacturing facilities and creating new jobs in EU countries just in order to continue doing what they did quite successfully from UK soil five years ago. The other Brexit benefit (to EU countries) is that these UK companies with new EU subsidiaries now pay more corporation tax and social tax to Europe and less at home. Fewer jobs created in the UK and lower tax takings for HMG.
It all harms the UK economy but Farage is never held to account, Labour pretend it isn’t happening and the remaining Brexit fans just blame the EU for punishing us.
In view of Trump’s isolationist policies, could I suggest Canada, Mexico and China hatch a trade deal? Perhaps with the rest of the world as well. But excluding America.