After campaigning on not wanting to start or escalate kinetic wars, Trump looks to be trying to compensate for US military weakness (as in inability to seriously beat up anyone bigger than an insurgency) by launching a massive, multi-front economic war via 25% tariffs on Mexico and Canada (ex oil), our biggest trade partners, and a further 10% increase in tariffs on our #3 trade counterpart, China. For China, an additional Trump blow is ending the “de minimus” exemption for shipments under $800, which Chinese vendors like Shein had taken advantage of to sell directly to US customers.1 Trump has threatened to impose tariffs on the EU too, which has already said it would “respond firmly”. 2
We will first sum up the state of play, and then turn to the looming question: since all experts and businesspeople, save those on the extreme lunatic fringe, know that tariffs increase product costs, which are either passed on to consumers or eaten by suppliers, can cause shortages, otherwise disrupt supply chains, and (in mature economies) are a very very expensive way to create jobs and have had little success in increasing domestic production in the US, what does the Trump team think they will accomplish?
First, a short overview. Note Canada and Mexico have already announced that they are retaliating. China so far has only said it will sue the US in the WTO, which is a wet noodle lashing, but expect more soon. The Financial Times’ overview:
Donald Trump hit Canada, Mexico and China with steep tariffs on Saturday in a move that launches a new era of trade wars between the US and three of its largest trading partners.
Trump issued an executive order applying additional tariffs of 25 per cent to all imports from Canada and Mexico, with the exception of Canadian oil and energy products, which will face a 10 per cent levy. Canada is by far the biggest foreign oil supplier to the US, accounting for about 60 per cent of its crude imports.
Imports from China will face a 10 per cent tariff over and above existing US tariffs…
The tariffs would apply from Tuesday, the White House said.
An administration official said each order contained “a retaliation clause . . . so that if any country chooses to retaliate in any way, the signal will be to take further action with respect to likely increased tariffs”.
In response, Canada’s Prime Minister Justin Trudeau announced 25 per cent tariffs on C$155bn (US$107bn) worth of goods, including US alcohol, clothing, household appliances and lumber…
Mexico’s President Claudia Sheinbaum said the country would also launch retaliatory tariffs and other measures.
It’s far too early to know what the economic effect will be; the impact of the tariffs imposed during the first Trump Administration was marginal due to how few they were and still debated.3 But it takes a lot of, erm, creativity, to depict them as a plus for citizens.
Due to the lousy state of search on Twitter and the Wall Street Journal’s own site, I am unable to again find a useful, high level background video on tariffs. It included detail on how the first term Trump tariffs achieved very little, creating hardly any jobs (<2,000) then at a very high prices, as well as some unexpected additional costs (more expensive clothes driers even though driers were not subject to tariffs). It also pointed out, with examples, that tariffs, once imposed, are rarely reverses since they create their own constituencies. However, claims that tariff costs will be passed on to consumers are simplistic. Even though during the Biden inflation, some companies that weren't seeing cost pressures also put through price increases, in so-called "greedflation" (we have an example of the same sort of conduct during the first term Trump price increases). However, MarketWatch reported that in 2024, on the 70 SKUs they tracked across retailers, the number of price reductions slightly exceeded increases. Critically, WalMart had started rolling back prices to gain market share.
Given how much food the US imports from Mexico and which products are most price inelastic, it seems likely that consumers will be subjected to price increases in food and other small ticket and/or essential items. This will hit already-budget stressed low and middle income consumers. Many outlets are confirming the obvious, that food costs will rise. From Reuters:
Tariff-related price increases would hit consumers’ wallets at a time when beef prices are near record highs and costs for eggs have climbed after bird flu eliminated millions of egg-laying hens. Bird flu cases in dairy cows have also reduced milk output in top-producer California….
The United States imported $195.9 billion of agricultural goods from suppliers around the world in 2023, according to U.S. Department of Agriculture and U.S. Customs data. That included nearly $86 billion from Mexico and Canada, the top two suppliers representing 44% of the total.
Up to 40% of fresh produce sold in U.S. food stores is imported, according to the National Grocers Association.
“We import most of our fresh fruit and vegetables from Mexico and Canada….” said Rob Fox, an economist and director of CoBank’s Knowledge Exchange….'”I can’t go out and plant tomatoes in Illinois in January and hope to replace them.”
About two-thirds of U.S. vegetable imports and half of its fruit and nut imports come from Mexico, according to the USDA. That includes nearly 90% of its avocados, as much as 35% of its orange juice, and 20% of its strawberries…
The threat of tariffs alone can be inflationary, said David Ortega, an economist at Michigan State University.
“Food companies are scrambling to come up with contingency plans…that adds cost to their operations,” he said.
The U.S. normally imports more than 1 million cattle from Mexico annually, though Washington has blocked shipments since late November due to the discovery of a pest in Mexico.
Canadian cattle also are shipped into the U.S. to be fattened and slaughtered. Tariffs or trade disruptions could affect products ranging from ground beef to steaks, analysts said…
“If it goes through anything like threatened, it will definitely push U.S. beef prices up significantly higher,” he [Bob Chudy, a consultant for beef importers] said of tariffs….
Prices for the hamburger meat are up 42% from four years ago.
To get more of a flavor of the breadth of the impact:
"It seems like virtually every sector of the American economy" — Fox News has put together a scrolling list of the "goods affected by Trump tariffs" 😬 pic.twitter.com/nofdk3IrEZ
— Aaron Rupar (@atrupar) February 2, 2025
I have yet to see this Trump remark confirmed, but the flip side is the US is very dependent on China for pharmaceutical inputs and even drugs, and I did not see pharmaceuticals carved out in any of the writeups on the new tariffs levied on China:
Jesus Christ.
Donald Trump says he is going to put tariffs on pharmaceutical drugs.
This will literally kill people.
— CALL TO ACTIVISM (@CalltoActivism) January 31, 2025
Another big tariff-hit category is building materials, such as Canadian lumber. I am not able to gauge how price sensitive those goods are (and obviously some are more so than others). But new home sales are already showing signs of price pressure, as Wolf Richter discussed in the past week: Inventory of New Completed Single-Family Houses for Sale Spikes to Highest since 2007. Builders Prop Up Sales with Lower Prices, Bigger Incentives, Smaller Houses.
One big sector that is likely to see the crunch on the manufacturer side is autos. If you eyeball recent import data from Mexico, cars and auto parts look to constitute about 1/3. But the volumes don’t give an full picture of the impact. From the Wall Street Journal:
Take the U.S. auto industry, which is really a North American industry because supply chains in the three countries are highly integrated. In 2024 Canada supplied almost 13% of U.S. imports of auto parts and Mexico nearly 42%. Industry experts say a vehicle made on the continent goes back and forth across borders a half dozen times or more, as companies source components and add value in the most cost-effective ways.
And everyone benefits. The office of the U.S. Trade Representative says that in 2023 the industry added more than $809 billion to the U.S. economy, or about 11.2% of total U.S. manufacturing output, supporting “9.7 million direct and indirect U.S. jobs.” In 2022 the U.S. exported $75.4 billion in vehicles and parts to Canada and Mexico. That number jumped 14% in 2023 to $86.2 billion, according to the American Automotive Policy Council.
American car makers would be much less competitive without this trade. Regional integration is now an industry-wide manufacturing strategy—also employed in Japan, Korea and Europe—aimed at using a variety of high-skilled and low-cost labor markets to source components, software and assembly.
The result has been that U.S. industrial capacity in autos has grown alongside an increase in imported motor vehicles, engines and parts. From 1995-2019, imports of autos, engines and parts rose 169% while U.S. industrial capacity in autos, engines and parts rose 71%.
As the Cato Institute’s Scott Lincicome puts it, the data show that “as imports go up, U.S. production goes up.” Thousands of good-paying auto jobs in Texas, Ohio, Illinois and Michigan owe their competitiveness to this ecosystem, relying heavily on suppliers in Mexico and Canada.
US and European automakers were already running up against the limits of affordability. For instance, from Newsweek in early 2024, in Americans Can No Longer Afford Their Cars:
Both new and used car prices rose to record highs during the pandemic, as the car industry was experiencing supply chain disruptions and chip shortages. Since 2020, new car prices have risen by 30 percent, according to data shared by AI car shopping app CoPilot with Newsweek. Within the same timeframe, used car prices have jumped by 38 percent….
…cars are still really expensive for many Americans. Just 10 percent of new car listings are currently priced below $30,000, according to CoPilot. Things are not much better in the used car market, where only 28 percent of listings are currently priced below $20,000.
According to an October report by Market Watch, Americans needed an annual income of at least $100,000 to afford a car, at least if they’re following standard budgeting advice, which says you shouldn’t spend more than 10 percent of your monthly income on car-related expenses.
That means that more than 60 percent of American households currently cannot afford to buy a new car, based on Census data. For individuals, the numbers are even worse, with 82 percent of people below the $100,000 line.
The budget squeeze was already hitting sales volumes and pricing as reflected in the level of discounting rising markedly in 2024 over 2023. As readers likely know well, US officials aggressively reject cheap and cheerful Chinese EVs as a solution. That’s before getting to the fact that major automakers, namely Nissan, the Stellantis combine, and Volkswagen are in wobbly shape. Their ability to put through price increases without losing sales is limited.
And there’s a precedent for the Trump tariffs leading to bailouts:
One of Trump's main (purported) goals with tariffs is to pay for tax cuts in the TCJA. But as @BennSteil and @bdellarocca found, when Trump imposed tariffs in his first term, *92%* of that tariff revenue went into bailing out farmers, not paying down the deficit. pic.twitter.com/o4pkqR3gA0
— Ryan Cummings (@weakinstrument) February 1, 2025
Even Trump has admitted that his tariff regime will hurt American but is trying to spin this bug as a feature, and even more insultingly, a noble sacrifice. From The Hill,This will be the Golden Age of America! Will there be some pain? Yes, maybe (and maybe not!). But we will make America great again, and it will all be worth the price that must be paid. We are a country that is now being run with common sense — and the results will be spectacular!!!”
Some contacts on the right wing (who acknowledge that keeping the tariffs on would harm a lot of American consumers and businesses) are spinning that Trump will keep them on only for a short while, that this is yet another bluster/bargaining chip. The problem is he’s blustering with a loaded AK-47 while not observing any gun safety protocols.
Trump may indeed feel emboldened by how his tariff threat agains Colombia regarding its refusal to take military jets carrying deportees lead to a quick climbdown.4 But his demands of Canada and Mexico are unreasonable, and also so extreme that it’s hard to see what his fallback would be.
BREAKING: Trump just posted this wild take.
It looks like he's using tariffs to pressure Canada into becoming a U.S. state. Yes, really.
Why would Canada ever trade universal healthcare, lower crime, and fewer insurrections for that deal? pic.twitter.com/rBgprgInPp
— Brian Krassenstein (@krassenstein) February 2, 2025
The Trump tariffs are such an obvious lose-lose that they’ve achieved the seemingly-impossible task of reversing the terminal slide in prime minister Justin Trudeau’s reputation, as well as solidifying Canadian opposition to other forms of US economic imperialsm.
Canada’s response to U.S. tariffs. Justin Trudeau's best speech.
Canada will place 25% tariffs on $155 billion in US imports in retaliation for Trump tariffs. That is an addition to a nationwide boycott on all US products across Canada. #cdnpoli #tariffwar pic.twitter.com/VJavxmO6nH
— Anonymous (@YourAnonCentral) February 2, 2025
Mark Carney, an unusually Serious Economist by virtue of having been both the governor of the Bank of Canada and then the governor of the Bank of England, advocated Canada imposing dollar for dollar retaliatory tariffs:
The tariffs imposed by the United States today are a clear violation of our trade agreements and require the most serious trade and economic responses in our history.
See my statement: https://t.co/vB8loUKoSY pic.twitter.com/e5IRJLIwwM
— Mark Carney (@MarkJCarney) February 1, 2025
Reader johnnyme posted a link showing that Canada was still formulating its list, as the wags said the priority would be to hit red states hardest:
The first phase of our response will include tariffs on $30 billion in goods imported from the U.S., effective February 4, 2025, when the U.S tariffs are applied. The list includes products such as orange juice, peanut butter, wine, spirits, beer, coffee, appliances, apparel, footwear, motorcycles, cosmetics, and pulp and paper. A detailed list of these goods will be made available shortly.
Minister LeBlanc also announced that the government intends to impose tariffs on an additional list of imported U.S. goods worth $125 billion. A full list of these goods will be made available for a 21-day public comment period prior to implementation, and will include products such as passenger vehicles and trucks, including electric vehicles, steel and aluminum products, certain fruits and vegetables, aerospace products, beef, pork, dairy, trucks and buses, recreational vehicles, and recreational boats.
In his speech, Trudeau not only announced retaliatory tariffs, but also urged consumers to boycott US goods. That seems to be getting traction:
🚨 It’s Tariff Day — Here is how you can replace American Brands with 🇨🇦Canadian Brands.
Save the image and Take this shopping 🛒 #shoplocal #ShopWisely #buycanadian #shopCanadian #ilovecanada pic.twitter.com/L3YJ4c5rr5
— Carbon Tax Johansen🇺🇦🇨🇦🏳️🌈🇵🇸🎾 (@johangreg) February 1, 2025
a local grocer was quick to display #MadeInCanada signs to help shoppers like me choose 🇨🇦 items, not 🇺🇸. how we roll against #tariff madness. feel good that so far in 2025 I’ve gone Amazon-free. now I see that my fave coconut yogurt is Canadian!
🍁 C-A-N-A-D-A 🍁 pic.twitter.com/kSBEqXoR16— Raffi Cavoukian (@Raffi_RC) February 1, 2025
As for Mexico, Trump’s economic war casus belli is that Mexico needs to be more to curb fentanyl coming into the US and stop the entry of migrants. Gee, so why is Trump a crypto tout, when the use of crypto enables crime, particularly drug trafficking? Sadly, otherwise sane people I know maintain that the Mexican government is controlled by gangs, and by implication, Trump-tariff-induced regime change is warranted.
This program is so deranged, particularly in combination with the other intended Trump economic shock of radically cutting or otherwise disrupting Federal funding of all sorts of activities that one has to wonder if Trump is trying to create a US version of the neoliberal shock Russia suffered in the 1990s, which allowed mere mortals to become obscenely rich by hoovering up distressed assets.5
While this sort of pillaging may be what eventually results, this instead seems to be the result of libertarian extremists getting their way, combined with undue faith that taking linear steps will produce the desired outcomes. Long-standing readers may recall how we have often discussed the principle of obliquity. In highly complex systems, and the US economy and the global trade system qualify, the terrain can’t be mapped accurately. Trying to navigate simple paths through it results in worse outcomes than setting high level objectives and adapting as you move forward.
Musk’s cost cutting at Twitter provides an illustration. And keep in mind that Twitter is vastly less complicated than either the Federal government or the trade system. From Techdirt (hat tip Paul R):
Remember how Elon Musk destroyed Twitter by ripping apart its infrastructure without understanding it? Now imagine that same playbook applied to the federal government. It’s happening, and the stakes are exponentially higher. When reviewing Kate Conger and Ryan Mac’s book “Character Limit” last fall, I highlighted two devastating patterns in Musk’s management: his authoritarian impulse to (sometimes literally) demolish systems without understanding them, and his tendency to replace existing, nuanced solutions with far worse alternatives (even when those older systems probably did require some level of reform). Those same patterns are now threatening the federal government’s basic functions…
At Twitter, Musk’s “reform” strategy transformed a platform used by hundreds of millions for vital communication into his personal megaphone, hemorrhaging somewhere between 60-85% of its revenue in the process.
The article describes some of the clearly unqualified DOGE staffers turned loose to fiddle with dials, including a 21 year old who worked for Palantir, a 2024 high school grad, and a lawyer who had the NRA as a client.
Techdirt provides more unsavory details, such as:
Then, later today [January 31], Reuters reported that Musk’s aides have locked career civil servants entirely out of government computer systems.
Aides to Elon Musk charged with running the U.S. government human resources agency have locked career civil servants out of computer systems that contain the personal data of millions of federal employees, according to two agency officials.
[….]
The systems include a vast database called Enterprise Human Resources Integration, which contains dates of birth, Social Security numbers, appraisals, home addresses, pay grades and length of service of government workers, the officials said.“We have no visibility into what they are doing with the computer and data systems,” one of the officials said. “That is creating great concern. There is no oversight. It creates real cybersecurity and hacking implications.”
Officials affected by the move can still log on and access functions such as email but can no longer see the massive datasets that cover every facet of the federal workforce.
Only one of the four DOGE suits sought an injunction and it evidently was not granted. Lambert will have more to say in a post later today, but calling the Trump regime a coup is no exaggeration. I hope you can position yourself to minimize the exposure.
Update 11:25 AM EST. I am sure the conventional account will be that Trump won this encounter with Mexico. But this was a huge amount of threat display for what looks like things Mexico would have done without a big show of force, particularly Trump going as far as authorizing the 25% tariffs as his opening move. So was this always unserious, or was the dark matter here various wealthy US interests? From The Hill:
President Trump and Mexican President Claudia Sheinbaum Pardo said they have agreed to delay tariffs by at least one month, following a call between the two leaders on Monday.
The 25 percent tariffs on Mexico were to be implemented on Tuesday. Both Trump and Sheinbaum said Mexico will send 10,000 soldiers to the border with the U.S. who will be tasked with stopping the flow of fentanyl and illegal migrants….
“We had a good conversation with President Trump with great respect for our relationship and sovereignty; we reached a series of agreements,” Sheinbaum said on X in a post translated from Spanish.
Some other hot takes:
People can make their own judgments. But Mexico also deployed 10,000 troops in 2021 under the Biden administration.
It also detained more than 1 million migrants last year. https://t.co/sm7Ni52MJB
— Aaron Blake (@AaronBlake) February 3, 2025
This suggests that tariffs were never about bringing back manufacturing jobs to the US (not clear that they would have done it) https://t.co/MF0vPQ1Qro
— Matías Vernengo (@NakedKeynes) February 3, 2025
But:
Senior Canadian official speaking to NYT:
Canada is not optimistic it can get the same kind of one month delay from US tariffs that was granted to Mexico.
— Clash Report (@clashreport) February 3, 2025
_____
1 I have not been able to tell from media accounts the revocation of the “de minimus” exemption is limited to the countries just now being hit with new or higher tariffs, or is an across-the-board change. Matt Stoller has a very good writeup in his latest issue of his BIG newsletter and says the change is not exactly about the “de minimus” exemption but that it applies only to Mexico. Canada, and China. However, I would not bet on this being what happens in practice. We’ve repeatedly seen Trump operatives acting well beyond what his executive orders stipulated, starting with DOGE, with additional Keystone Cops level confusion about their application. From Stoller:
Trump has done something that liberals have long advocated, which is to suspend part of what’s called the “de minimis” loophole, an exemption that a person can import up to $800 into the U.S. every day duty free and largely uninspected. If you’ve ever been abroad and bought something as a tourist, you’ve had the experience of flying back to the U.S. and writing down on a form in the airplane what you bought. If it’s above $800 you have to go to a special place and pay duties, if it’s below that you don’t. That’s what de minimis was for.
Commercial importers didn’t use de minimis. Instead, they used “Formal Entry,” which, as it sounds, is far more structured to allow American customs officials to track what’s coming into the country. A commercial importer had traditionally bought in bulk, shipped those goods into the U.S. usually on a container ship or semitruck, and was required to use a licensed customs broker to manage the process. Say you were a bicycle wholesaler. You’d import a thousand bikes wholesaling at $300 from Taiwan or China. You would then list the tariff code of bicycles on your boxes, pay duties, have a licensed customs broker and a bond for liability, have your boxes potentially inspected, and then brought those boxes to a warehouse, where they’d be unloaded and sent to different retail stores for sale.
However, thanks to a 1990s era regulation allowing the consumer not the seller to be considered the importer, ecommerce vendors started sending individual packages where the value was less than $800 directly to end consumers, claiming these were “de minimis” and thus were de facto exempt from all duties, tariffs and customs requirements. So now Amazon can just send that bike to a consumer and avoid any duties and most paperwork while your local bike shop would have to pay tariffs on the bikes they stock. Today there are 1.4 billion package that come in de minimis, most from China. A lot of the four million daily de minimis packages are low-value fast-fashion online purchases. It’s effectively a completely tariff free no-inspection wild west zone of fentanyl and smuggling. This loophole is the basis of the business model of Shein, Temu, and Amazon, who have lobbied aggressively to maintain this kind of open border policy.
That said, there are two parts to the de minimis loophole, and Trump only ended one of them. The first is the tariff exemption, which is now suspended. Everyone has to pay tariffs on everything from China, Mexico and Canada. That’s particularly important for the higher end goods below the threshold, the $750 bike or auto parts, for which a tariff does matter in and of itself. But for low value goods, that $3 t-shirt from Shein, which might wholesale at 30 cents, it doesn’t really matter. In that case, Temu will have to pay 10 cents, which is virtually nothing.
The second exemption was mandating that importers go through the “Formal Entry” customs procedure so that CBP actually can tell what is in each box coming into the U.S. These orders didn’t touch that. That’s not as important for high value products, but this is the killer for the Shien and Temu-style products. These importers would have to radically upend their supply chains to comply, if that customs procedure were changed to require licensed brokers and bonding. Unfortunately, it wasn’t. And that means the flow of low-value de minimis packages will likely come in, mostly unabated. In fact, it means that the big guys, Temu, Shein, and Amazon, who have special customs relationships allowing them to easily pay the now-minimal tariffs, will now have an advantage over smaller importers who don’t.
Last month, on just his second day in office when he announced an investigation into US-China trade, Trump said: “Other countries are big abusers also, you know it’s not just China,” and added that he was also looking at trade with the EU. “We have a $350bn deficit with the European Union. They treat us very, very badly, so they’re going to be in for tariffs,” he said.
Trump doubled down, as the BBC confirmed: Trump says EU tariffs will happen and UK is ‘out of line’ but deal ‘can be worked out’
3 Given how official stats are collected, there are many ways to allocate tariff costs across industries and establishments.
4 Some readers from Colombia claimed that Colombia won the encounter by getting the Administration to agree not to have soldiers involved in the transit ex apparently flying the military aircraft. I did not see any agreement not to shackle or cuff them. Regardless, based on some sampling, the press outside the Collective West (presumably ex Colombia) also scored the encounter as a Trump victory. The poor state of reporting means I have not been able to find easily as to whether the Trump demand included unlimited deportations with no/little prior warning, since press reports earlier had stated that most (all?) countries had had to agree to accept their return.
5 This is no exaggeration. I personally know a then dual Russian-American citizen who went to Russia with $180,000 and is now woth over $25 billion.
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Seems to me Trump is closing the barn door after the horse has already run away. Policies that were put in place decades ago, and that were intended not to make the country stronger as a whole, but to despoil, plunder, and extract profit for special interest, are coming home to roost. It seems it’s all too little too late.
Trump is burning the barn down with the horses still inside. Did you not read what Yves wrote?
She said the only way this makes sense is if Trump is trying to deliberately destroy the US economy to make it easier to despoil, like Russia in the 1990s.
Even Trump has admitted that his tariff regime will hurt American but is trying to spin this bug as a feature, and even more insultingly, a noble sacrifice. From The Hill,This will be the Golden Age of America! Will there be some pain? Yes, maybe (and maybe not!). But we will make America great again, and it will all be worth the price that must be paid
The question, is to what end. Just to burn the barn down, or is it so infested with vermin that that is the only way to kill them, and then, maybe, a big maybe granted, to rebuild it.
He was elected President, not King, and not Arsonist-in-Chief. No mandate whatsoever for any of this.
But he was elected, in part, as Arsonist-in-Chief, not that I voted for him, or the other Uniparty. But, I know many who want it all burned down and they complain he’s not using enough kerosene.
Hopefully they all die in the resulting fires.
There are some, maybe myself included, who imagine that the system must be transformed upward. That is not to say it could be. The key word is imagine. Burn it down is not imaginative.
My imagination would proscribe that. :-/
Hmmm, isn’t it a bit late for that? I mean, what’s left? The “despoilment” that was accomplished since Reagan has left little for the scavengers. Perhaps it’s more that another breakup creates opportunities for the highest echelon to take from the lower echelons – as in Musk, Buffet, Gates, etc. devour the wealth of the remaining, the mere millionaires.
Yup! It’s down to oligarch-on-oligarch violence, to concentrate the last few loose billions into the last few pockets.
HUH? Were you awake during the neoliberal looting of Russia? The USSR was economically weak yet tons of people got very rich, from low-level grifter intermediaries like Jonathan Hay at Harvard who would have gotten millions had he not been caught out, to the person I mentioned how parlayed $180,000 plus his contacts into what is now >$25 billion.
I just caught myself thinking yesterday, is it possible that Trump will turn out to be the US’s Gorbachev?
Gorbachev came out with big words and big poorly thought out moves, and spoke with conviction – and one day there was nothing left but ruins.
It feels like we are riding a sinking ship and there is nothing we can do
A way Trump could blunt the effects of his economic actions, since they are not known yet, is to send Biden’s owed $600 checks to everyone and then $1,000 a month to low and lower middle class households, determined by IRS tax filings. These actions would go a long way in deflating the criticisms.
It’s not for Trump to decide, it’s for Congress. Biden is no longer President, time to get over lingering resentment and focus on what the current President is doing.
The presumptive pretext of fentanyl for the tariffs on Canada & Mexico is so he can declare victory at any point and reverse course without any measurable results. It is an easily moved goalpost. All he needs to do is extract some hand wavey “War on Drugs” concessions and he can say the the tariffs worked.
I also believe DJT is nearly incapable of evaluating second-order effects or blowback (for example boycotts that permanently change consumer behavior or extended stock market weakness) … for all the supposed credit he gets for his 3D chess skills. A week of continued declines in the S&P index (as Monday’s open hints at) would likely have him reversing course and declaring victory on fentanyl grounds.
Stoller pointed out that an emergency is the legal fiction/requirement allowing the POTUS to unilaterally impose tariffs. Indeed it is convenient, and undoubtedly there are other means to address this “emergency.” In fact he did not (again referring to Stoller) impose the inspection requirement that would significantly impact Amazon’s business, along with Ali abandoning and Temu, but would also require the fentanilians to come up with an alternate scheme.
But it’s unlikely to be purely to allow a graceful retraction. In fact, as pointed out here, tariffs become embedded and difficult to withdraw.
Where did edit go? Change “Ali abandoning” to “Alibaba.”
Didn’t even take a day for the War on Fentanyl™ to stave off those tariffs. I do agree, it was part of the “legal fiction” behind the executive order (and thanks for mentioning), but it is and has been the pretext for backing down … as we can see at the end of the day.
My prediction is that the Buy Canada movement will take root longer term to the North, as well as the strengthening of relations between MX & CA.
1. Canada’s currency is vulnerable. A trade war with the USA will cause a currency crisis. USD is a world reserve currency, CAD is not.
2. Today’s Canada is an import-dependent country. We now even need to import food, mostly from the USA. Weak currency, import dependence, and food insecurity make a really bad mix.
3. Canada has made no preparations to become more self-reliant. Nor have we cultivated relations with other major trade partners. Indeed, Trudeau and Freeland have, in recent years, have deliberately antagonized both China and India.
It is very foolish for the Canadian government to engage in a trade war with the USA, while in a position of grave strategic weakness.
But Trudeau, Freeland, and Carney are all about posturing. Carney is the sort of “serious” guy who thinks that a real estate bubble is something good for an economy. Freeland’s the sort of woman who thought she could scold the Russians out of Donbass. And Trudeau rehearses his patriotic speeches with pointers from Baghdad Bob.
Canada would be far better off to temporize like the Chinese. After all, if the tariffs are to last more than a few months, Trump will need Congressional approval. In another year or so, the mid-terms will loom. Why not just play for time? Trump thrives on fuss–why feed him?
BTW why is there talk of “51st State” ? It would 51 thru 60, thank you. Ten stars. Twenty senators.
That is why he keeps on talking about a 51st State. Being only one, Canada would only get two Senators, a coupla Reps and a very few members of the Electoral College so would have zero influence of the US political scene. Trump or any other future President could just steam roll over that 51st State and do whatever they want without having to listen to the locals. The US healthcare and higher education system would see a new market opening up for them to the north and the Pentagon would get a stream of volunteers from a soon to be impoverished 51st State. For Canada, it would be like what Russia was in the 90s.
Adding another California would not be 0 influence.
But the whole idea is an insane South Park plot.
Let’s not forget all that fresh water – if you want a fever dream of hydro-imperialism, google NAWAPA – which some Insatiable types have had their eyes on for a long time.
A “coupla reps”? I don’t think so.
Canada has a population of 40 million people. Why would it accept “a coupla reps”? If it joined the U.S. as a single state, it would make it the single most populous state in the U.S. (California, the current most populous state, has an estimated population of 39 million.)
Assuming that the House remains at 435 members, and that these are distributed (mostly) proportionally by population, as is done currently, the U.S. House of Representatives would have to apportion 435 representatives over a newly expanded population of about 370 million (330 million current U.S. population, plus Canada’s 40 million). That’s roughly one representative per 850,600 people. So a state with 40 million people in it would have about 47 representatives in the House.
Canada as a state would be the single biggest delegation in the US House. California would get 46 representatives, Texas would get 36 (pop: 30.5 million), Florida about 26 (pop: 22.6 million). (The exact numbers may vary a bit because currently seven small U.S. states under 850,600 in population are guaranteed a minimum of one representative, so apportionment is not strictly the state population divided by number of total representatives).
Canada has a larger population than California (40 million versus 39 million), which is the most populous state in the U.S. and currently has the largest state delegation in the U.S. House of Representatives.
Why do you think Canada would accept “a coupla reps” if they came in as the 51st state (not that they actually want to be the 51st state)?
“3. Canada has made no preparations to become more self-reliant. Nor have we cultivated relations with other major trade partners.”
And now we can start. Better now than never. And we should stop relying on off the shelf products anyway, every one of us Canadians knows how to do it.
It is very foolish for the Canadian government to engage in a trade war with the USA, while in a position of grave strategic weakness.
I disagree that we’re in a position of weakness, but are you suggesting we give ourselves over to, submit and become subservient to any and every tyrant or bully that comes along? That has never worked in anyone’s best interest. If we had done, we’d be flying the Nazi flag instead of the maple leaf.
@ Es s Ce Tera,
A national policy of self-reliance is not something to be undertaken in a reactive manner, in a petulant weekend response to a particular US leader.
And how would a bunch of stereotypical globalist neoliberals, such as Carney, Freeland, and Trudeau, possibly be the sort of people to inaugurate a new turn in Canadian political economy? Leaders like Carney and Freeland are the reason why Canada has become so vulnerable.
You say that we’re not in a weak position. But you fail to counter any of arguments I made about Canada’s weakness. Nor do you mention a single concrete strength.
You want us to sound tough. But what’s your plan to win? What’s your plan for when there is capital flight, and CAD falls to under $0.50 USD? Where is your grasp on reality?
The WWII analogy serves my point much better than yours. In WWII, Canada did not oppose the Axis with its own strength. We formed but part of a mighty alliance. So then, where are Canada’s allies in this power-political crisis? This time, it is our mightiest ally who is wroth with us.
It’s not weakness to avoid a fight you can’t win. It took Canada a generation of carelessness since the 1988 FTA, to put ourselves into this fix, and it will take a generation of carefulness, to work our way free.
Like you say, Canada has been in a position of weakness since Mulroney began the free trade process with the US.
Maybe you could explain the differences between Poilievre and Trudeau.
https://m.youtube.com/watch?v=z3dLTmQ4s5Q
Poilievre is a career politician who has never held a real job in his life. He qualified for a government pension at the age of 31. Talk is all he’s got. He’s got a track record of zero accomplishments as a Conservative cabinet minister under Stephen Harper.
“A national policy of self-reliance is not something to be undertaken in a reactive manner.”
This is, essentially, what Trump is trying to do in US, though: do a bunch of crazy things to force US econony off of imports cold turkey, basically shock therapy, Anerican style.
I apologize, yes, I didn’t provide substance to my disagreement. Let’s go through your argument point by point.
1) The USD is a world reserve currency, CAD is not, in a trade war with the US the CAD would be in crisis because it would lose…value?
CAD is commodity driven and in particular tied to oil. Canada supplies 60% of the US gross crude imports which Trump has been reluctant to hit too much for obvious reasons. But let’s look to Russia for an example – when you’re heavily sanctioned by the world, your decreased currency value, let’s call it purchasing power, against the world’s products does what? You are “weak” vis-a-vis what? Russia seems to be providing important lessons on how this works. If you achieve self-sufficiency, it rather doesn’t seem to matter. This is an ideal state to aim for.
2) Canada is import dependent.
By which I think you mean Canada would be utterly unable to feed itself and provide basic necessities without the US? Apologies if not what you meant.
Canada has a trade surplus in national resources and food, is a net agricultural exporter of staple crops such as wheat, barley, canola, pulses. Canada also has a very strong meat and dairy industry, providing pork, beef, poultry, eggs, dairy.
I think we can say we’ve established Canada can feed itself on the staples.
When I think necessities, I also think lumber and toilet paper. And Canada has abundant paper mills, a huge forestry industry which is actually not thriving, crippled precisely because of US tariffs. We can and should find other markets, but in terms of providing ourselves with these necessities, not a problem.
What Canada IS dependent on the US for is highly processed foods, in other words mostly junk which nobody needs, and can do without. Right? Bonus for our health.
And the US is rather dependent on Canada especially for canola oil which is its main source of oil for frying foods, the aforementioned junk.
We are also dependent on the US for high value manufactured goods such as cars. China has them dirt cheap. We should overcome our reluctance to import cars from China. Same with computers.
We *should* diversify away from the US, we see the results of that dependency now. The only solution is to reduce that depency henceforce and forthwith.
3) Canada thus far has not prepared to become self-reliant.
That changes, starting now. Right? We can thank Trump for this.
henceforce and forthwith. vs not something to be undertaken in a reactive manner
There’s meat on both them bones. Gotta be a viable solution somewhere in-between.
That might be the easy part. I suspect before the sanctions hit Russia put together a list of all foreign products on the shelves, probably prioritized in terms of what is necessity, what is desirable, what nice to have, etc., then ensured there were homegrown substitutes in place. Hence why there was hardly any noticeable difference on the grocery store shelves.
Canada removing liquor from the shelves is an amazing start! Now let’s do the grocery store shelves, as the above tweets have noted, we’re already rolling toward identifying Canadian products.
Thank you for the more detailed reply.
Ex-oil, Canada runs a trade deficit with the USA, and with the rest of the world. Therefore, Canada is a country dependent on imports. Moreover, USA is by far the largest consumer of our energy exports.
The pipeline expansion is minor: less than 1 mbd total after expansion. Do you understand how small it is? In no way can that form a strategic shift in our trade pattern. Nor are there any more oil pipelines in the works.
Bear in mind that Canada imports energy, too, because from the 1950’s on, efforts to build a national system have failed.
Do you understand that transportation in Canada depends on refined products from the USA? Canada exports crude, but when we put fuel in our vehicles, that mostly comes from the USA. Refineries are long-term projects, and I don’t think we have any under way.
Therefore, it is a salient fact that Canada is an import-dependent country, and in crucial ways.
BC built a single LNG export plant, but to get even that built, they had virtually give away the gas (i.e. the whole project was basically a temporary regional jobs creation program, similar to the coal export project BC built in the same region during the 1980’s.)
It’s the classic colonial trade pattern, and it’s our own fault.
WRT food, yes, Canada can meet the nutritional requirements of the people from domestic sources. It’s a question of relative impacts on different segments of our society. Do you adequately grasp the situation facing the 3rd to 5th quintiles of our people? Rents and food have roughly doubled in five years. Millions of people in Canada have no margin to absorb higher food prices.
For God’s sake, our country is already pock-marked with shanty-towns. The increase of these has been very remarkable during the past five years. As I write, it is -25C in my small city in central BC. Just a few hundred metres away, there stands a tent city, right downtown, occupied year-round since 2019. I call it, following the customary naming pattern, “Trudeauville.”
For each one outdoors, there are many more not far from it. Right now, two of my former colleagues in Vancouver, employed near the median wage, are in constant dread of the “reno-viction.” If they had to leave their current dwelling, rent anywhere nearby would leave them unable to purchase anything else. If they wanted to survive, they would have to quit their job, and flee their city.
We try to kid ourselves that it’s a substance problem. But that is just a comforting lie, wilful ignorance. The truth is that people are going homeless because they can’t afford a place to live.
I know, and I think others here also know, that Socialism could quickly remedy the food and housing crisis now faced by millions of people in Canada. But think for a second: the government that has overseen the development of this crisis has been a joint Liberal and NDP affair!
Your suggestion, though, is like telling a homeless addict to take up prostitution. The US is the addiction and the pimp. It’s not a solution to increase the addiction, and enter into a sick, abusive, unequal relationship with someone who beats us. The solution is to exit that relationship and try to improve ourselves.
I wouldn’t worry about Roland, he is just another vichy Canadian hopped up on right wing ‘Canada is broken’ memes. He thinks the USD has some sort of magical reserve currency properties, when, like all floating currencies, it just goes up and down based on supply and demand. If the CAD drops because of the trade war, that will reduce the impact of the tariffs on Canada. When the US lost competitiveness against Japan in the 80’s, they intervened to force Japan to *raise* the value of the yen vs the USD. Same story for China today, they intervene deliberately to lower their currency vs the USD to make themselves more competitive. If the US wants to be more self-sufficient in manufacturing (or anything), the elevated USD just makes it harder and harder.
As for Canada, we easily produce enough hard goods to put a floor under the currency, and having the currency lower for longer will be painful (for some) in the short run, but beneficial in the long run (just as the unnaturally high value of the CAD from 2008-2015 produced long term pain once that run ended). And no, we won’t have an issue with affording food. Food barely even registers as an import sector, the cost of food imports could double and it would be painful, but hardly a crisis, presuming the government intervened, as it surely would.
As for preparation to be self-reliant, there is no need to be self-reliant, there is a big world out there that hasn’t lost its mind like the US, although more self-sufficiency is always a plus, of course. The trans-mountain pipeline completion makes oil exports outside of the US much more feasible. The LNG Canada completion means natural gas can and will be exported outside of the US. Port expansions and rail and other infrastructure improvements over the years on the BC coast have also greatly increased the ability to ship in and out whatever is needed without going through the US. A number of free trade agreements have been made over the years, most notably with the EU.
As long as the US is open for business, it mostly makes more sense to trade there, but having those agreements in place makes it easier to fall back when the US loses its mind. Yes, we have been unnecessarily hostile with China and some others, but that was under US pressure, the Trump craziness gives us a chance to change course (eg. ban Tesla, but make an equivalent volume of Chinese owned EVs tariff free to enter the country).
As for pushing back, Roland seems like the Brad Marchand type, if someone punches you, turtle and hope the referee calls a penalty, rather than punching back, because you are afraid of getting hit, but that isn’t the Canadian way, sorry Roland. Canada isn’t going to be one state, and it isn’t going to be ten, just get out of here with that bs.
The US risks sinking behind their own iron curtain, marvelling at the consumer goods (Chinese EVs for example) available in the free world. Canada was on a path to going down behind the curtain with the US, but the madness of Emperor Trump just might give us chance to pick a different path, fingers crossed.
Thank you Some Guy. Well said. The infrastructure improvements along the BC coast that you describe go back some twenty years. Ditto for rail infrastructure improvements.
LNG from Kitimat, check. Container facilities in Prince Rupert with plenty of space for additional capacity, check again. Both with a goal of increased export to the Asian market. Competitive? Absolutely. A full ten days shorter sailing time to Asia than any other place on the west coast.
Canada will be fine.
I agree, dt194, BC has lots of options.
“The expanded Trans Mountain oil pipeline will rely on spot customers to see a positive equity return or return on capital in 2026, according to company filings with Canadian regulators reviewed by Reuters.
“The expanded Trans Mountain pipeline is tripling the capacity of the original pipeline to 890,000 barrels per day (bpd) from 300,000 bpd to carry crude from Alberta’s oil sands to British Columbia on the Pacific Coast.
“The Trans Mountain Expansion Project (TMX), which became operational last month, has reserved 20% of its capacity – or 178,000 bpd – to uncommitted customers, or spot shippers.
“Trans Mountain’s financial projections in the regulatory filings over tolls reveal that the government-owned corporation expects its capacity to be 96% full starting in 2025. This would result in a positive equity return in 2026, according to the company’s forecasts.”
https://oilprice.com/Latest-Energy-News/World-News/Trans-Mountain-Oil-Pipeline-Will-Rely-on-Spot-Shipments-to-Turn-a-Profit.html
This pipeline was rammed through my land three years ago, taking out my orchard and one of my large gardens. But if it can help Canada in this fight, I’ll stop grousing about it.
Maybe the US will blow up Canada’s pipelines like they did with Nordstream. /sarc
To make Canada even more competitive, the federal gov, provincial, municipals should start building residential rental housing with bottom prices rents, and invest/expand public transportation and make it cheap.
BoC could easily fund through governments such investments, without adding onerous interest rates that would enrich private banks shareholders. Boho.
Three things.
First tariffs: I have expressed skepticism in a couple of threads on NC regarding the implementation of the tariffs on Canada. I did not expect them to happen because from the point of view of the US they made no sense at all and would be harmful because at least two thirds of Canada’s exports are either energy (oil, gas, electricity) or various inputs to US industry. It was all bluster and would be resolved via some small border measures that both sides could call a victory. And that was without Canada implementing countermeasures. However tariffs were announced on Saturday. But the Canadian government immediately announced 25% counter tariffs on $150 billion of US products and asked Canadians to stop travelling to the US. Others in the government floated a100% tariff on Tesla cars, effectively banning their sale, and declared that a ban on Canada’s $100 billion of energy exports to the US was on the table. All rather surprising given the government is normally dominated by pathetic sycophants to the US. On Monday Trump announced the suspension of the tariffs for 30 days, meaning the issue is now over and will be promptly forgotten.
Second, Canada’s ability to counter the economic disruption of high US tariffs: not much of a problem although absorbing the immediate disruptions caused by high tariffs would require some thought as was done quite successfully during COVID. Since Canada has its own currency and carries little to no US denominated debt the federal government could fund investments in infrastructure and social spending, easily overcoming the effects of reduced exports.
Third, Canada as 51st state: this too is non-serious Trumpian bluster for his home audience. The idea that Canadians would give up free public healthcare for all, free dental care for many, low cost childcare, legislated vacations and a quite peaceful society for the increasing ugliness of the US that has none of those things, and is violent and militaristic and sends its young people to fight in senseless forever wars is silly.
From the US point of view it makes no sense anyway. The US already has free access to Canada’s resources in exchange for dollars the US creates at will. Why create massive ill will by annexing it? Michael Hudson pointed out in an interview a couple of weeks ago that it was all bluster as Trump made no attmpt to exploit long-standing divisions in Canada between Alberta and the East and Quebec and the rest.
Forgot another important thing Canadians would have to give up if they joined the US: 50 weeks of paid parental leave.
Timber is worth mentioning. That’s going to hurt. US Housing starts and general contracting will take a hit.
Not to mention having to give up 10 yards of their football fields by having to merge with the NFL.
“The idea that Canadians would give up free public healthcare for all, free dental care for many, low cost childcare, legislated vacations…”
It’s not the Trump admin. that Canada has to survive to keep all that…it’s neoliberal economics run wild (all over the world).
Bubbles pop.
@Mikel at 6:29 am
Neoliberalism: agreed but Canada has those things despite our homegrown neoliberals and would lose them if we were annexed by the US. It is indeed up to us to keep and expand them. I have been involved in a 20 year fight to expand medicare to include pharmaceuticals which achieved some small advances recently.
Yes, treat it as an opportunity to approve and build the oil and gas pipelines East and West. Just need to be generous in revenue sharing with the Provinces and first nation. Financing should be relatively easy given the assets, and is not a national debt. The West pipeline serves Asia and the East pipeline serves Eastern Canada and Europe. Building the pipelines and ports will generate plenty of economic activities, but also inflation pressure. Import replacements are straight forward, other than fresh vegetables (offset to some extent by extensive greenhouse and aqua farming).
@Some Guy,
Your Vichy slur is silly. You’re just attacking the bearer of bad news. I have always detested the globalist neoliberal Quisling consensus that has dominated Canadian politics for the past forty years.
But I am not the sort of imbecile nationalist who persuades himself that structural and strategic weakness can be overcome by a vocal demonstration of Mystic Will. And what spokespeople we have: Carney, Freeland, Trudeau! They could make even Zelensky look like a giant. When those saints come marching in, you want to be in that number?
You tout the TMX. But look at the numbers: less than 1 mbd, total. Not much. And do you understand that the BC LNG project virtually gave away the gas for decades, just in order to get a one-time surge in construction jobs to build the project itself? i.e. LNG is not going to be much of a hard currency earner.
You tout the rail and port expansions. But do you understand that stuff mostly serves as a conduit for PRC exports to the USA? And what’s the outlook for that?
“Food barely registers.” Buddy, you need you get out more, and talk to a wider variety of people. You are out of touch with reality. A very large number of people in Canada have no margin to absorb a higher cost of daily essentials. Neoliberal-era precarity is the No.1 fact of life in today’s Canada.
You tout Chinese EV’s. Not a bad idea, at first glance. But then think: reduced Canadian demand for US vehicles actually hurts Canada, because most of those vehicles contain Canadian-made components. In your petulant haste to spite Trump, you would actually damage some of Canada’s little remaining heavy industry.
Your hockey analogy shows that you don’t know the game. You’re the “some guy” who takes the dumb penalty, retaliating to a cheap shot like Trump’s. I’m saying that Canada has to play it smart and cool, like Jean Beliveau.
Israel is already the de facto 51st state and we’re waiting on you up over to accede to our demands, so you’d be #52 which will make for a more asymmetrical standard, and the plan is to have a large star of David superimposed on the middle of old glory, while a diminutive beaver down in the right hand corner of where the white stars bleed into blue will be our acknowledgement and fitting since it bears some resemblance to Blue Ice which is great for keeping beverages cold and a reminder of what new temperature extremes will be like in the winter in the USA, eh?
Is Israel is already the de facto 51st state? Or is it more that the US is Israel’s 7th District? I can guess what Netanyahu thinks and he was just visiting Trump and telling him what his Middle East policies will be.
A de facto U.S. State with 100 Senators, and 434 Representatives.
Think Puerto Rico not 51st state.
As it turns out the mistake was made in 1988 when we voted to more closely integrate with the US.
https://m.youtube.com/watch?v=MYQCb3qrBpo
Trump wants taxation and control without representation! If there ever are serious negotiations (i doubt it but) Canada should count on one state, 2 senators and a population based number of representatives. Maybe an exemption for Alberta and Manitoba.
One can easily name ten current US states with a combined population totalling less than Canada’s. The Canadian provinces are fully analogous to US states, and they would have to be admitted to the Union on a like basis.
It should be borne in mind that Canada is a federation in which the “states’ rights” side have generally gotten the better of it, in their struggle against the central authority. The Canadian provinces are more accustomed to autonomy than their counterparts in the USA.
For example, each province, even Prince Edward Island, has its own Securities and Exchange Commission. That’s federation, Canadian-style.
There is no. way. this. merger. is. going. to. happen.
Can you imagine how complex a unification. would be? Like reverse Brexit all at once. If they ever tried it, they’d give up or just keep pushing the start date back into infinity.
Interesting on a bunch of mini SECs; makes sense why so many shady pennie stock pump n dump schemes come from Canada.
I know vehicle emissions standards are also on the same fractured plan. A bunch of the hardware to delete BroDozer diesel pickups is sourced in Alberta.
Thank you Roland. Yes, Canadian Provinces are much more autonomous vis à vis their American counterparts. What makes Emperor Donald think that there may not be a revolt against Washington diktat in the future? Especially, if a people that are more accustomed to a looser federation are annexed into the more centralized American one. It’s not like the US isn’t polarized already risking a break up all on its own. Not to mention their near break up some 160 years ago.
Further, it’s hard for me to see how the American Federation could ever accommodate Québec.
Americans, you really don’t know what you would be getting swallowing up Canada. Beware. We are a poison pill that would surely result in a breaking up of your far from perfect union.
All this talk about swallowing Canada but nobody is asking the Canadian population at large if they would agree with this idiotic idea.
Would they have to vote on the question until they say yes? And will there even be politicians supporting the idea? Let’s be serious and put this nonsense to rest.
As for forceful occupation and anexation, I would like to see it happen…
Forceful occupation and annexation? That’s about the only way to make this happen.
Just like Greenlanders, on the whole Canadians have no desire to be part of the US
Taking over Canada and Greenland could be an easy hedge against climate change.
Hey, be grateful, he’s offering you a state. You could just be a territory, like Puerto Rico. Then you get to decide primaries only. (/s)
I can’t remember where I saw it, but there was a suggestion that the countries targeted by the new tariffs should impose export tariffs on goods going to the US.
Not to make a point but to help their industries reorient elsewhere and diversify their trade.
We are living in such interesting times.
When I read that oil imports to the US were excluded from the Canadian tariffs that was my first thought. Trump wants oil and fuel prices to decline (he’s promising production increases), but if Canada taxed those oil exports it would directly negate Trump’s desires and directly impact the US economy. That said, I don’t know what the knock on effects would be to Canadians via the reimportation (if any) of refined oil products.
I believe The Rev Kev made that suggestion in the NC Water Cooler, earlier this week.
Others have already mentioned that, without an industrial (and jobs) policy, the United States government doesn’t stand to gain by the imposition of tariffs. Tariffs in the U S of A during the 1800s were designed to shelter growing industries.
Contrariwise, I have a feeling that the tariffs are going to show right away how much the U.S. economy has been hollowed out by NAFTA / USMCA and other “free trade” fantasies. When I was in Chicago in September 2024, I knew in an instant that Kamala Harris was never going to win the election,
How?
A coffee and plain croissant at a nice but not ultrafancy café was priced at USD 9.18. But what truly indicated to me how messed up the U.S. economy is was the tomatoes. Yes, tomatoes. In the third week of September, which is high tomato season in the Great Lakes States, the Jewel food store was carrying only tomatoes from Mexico and Canada. The indy produce market across the street had only one kind of tomatoes from the U.S. of A. They were from Michigan, which is normal in Chicago. They also were too sweet, as if to reinforce the stereotype that U.S. foodstuffs are cloying.
For a number of years, we all saw the sleeves of garlic — from China.
The U S of A can’t even produce its own garlic.
And altering agricultural production isn’t a matter of opening a seed packet and magically growing an asparagus plantation next season.
Yves Smith mentions the auto industry. One wonders if the most important and sturdy parts of cars — the garlic, the drive chains, the alternators — have been outsourced to Mexico. What is left in the U S of A? Design, some assembly, and detailing? Oh, and the marketing department.
So: I’d recommend analyzing the ensuing tariffs chaos to see what gaping holes in the U.S. economy start yawning even wider and ever more publicly.
Without a serious agricultural policy other than monocropping and gigantization, without a jobs policy and repeal of the Taft-Hartey Act, without subsidies for training, without identification of growth industries, the tariff charade may end up an expensive embarrassment — not sure if this is Trump’s Yeltsin moment. Yet the 90 percent will pay for it.
I made a post that seemed to have vanished…but on autos…days on lot is very high fro dealerships right now as no one can afford to but the over priced new cars. Also, repossessions are at a high.
I do not think tariffs will help this much.
DJG, Reality Czar: I have a feeling that the tariffs are going to show … how much the U.S. economy has been hollowed out by NAFTA / USMCA and other “free trade” fantasies.
Oh, very much so.
DJG, Reality Czar: But what truly indicated to me how messed up the U.S. economy is was the tomatoes. Yes, tomatoes. In the third week of September, which is high tomato season in the Great Lakes States, the Jewel food store was carrying only tomatoes from Mexico and Canada.
And this is a shocker, in particular. US Agriculture is the one thing, given the the country’s scale and its historical agricultural capability, that should not be losable even when US industry and know-how has vanished after decades of neoliberalism.
DJG, Reality Czar: not sure if this is Trump’s Yeltsin moment
Maybe more like his King Canute moment?
https://en.wikipedia.org/wiki/King_Canute_and_the_tide
Perhaps the tariff shocker is aimed at Wall street since they are the ones behind the offshoring. The whole situation is way above my pay grade but as you point out we have had plenty of inflation lately under Biden and some claim this is because unrestrained food companies are imposing their own profit tariff on consumers. If our current economic oligarchs are the issue then “confusion to the French”?
Alex Cockburn once quipped that if you lived under the Roman empire would you want competent Romans in charge of conquering and enslaving? Perhaps Trump is the monkey wrench. Not that I am for that or even understand it. Some of us are here to learn.
Every point you mention applies even more to Canada than to the USA. Canada has no industrial policy, nor any agricultural policy (except vestigially, in the dairy sector.)
And unlike the USA, Canada does not enjoy the “exorbitant privilege” that comes from issuing the world’s reserve currency.
The economic policy of the Liberal government under Trudeau has consisted only of the following: massive deficit spending monetized by the central bank, a housing bubble, and massive immigration to drive up rents and hold down wages.
Now Trudeau, Carney, and Freeland think they go tit-for-tat in a trade war with the USA. With the Canadians putting the puck in their own net, Trump could win the game without even learning how to skate.
Salivating, are you?
@JEHR,
Do you dispute my argument? I say that every vulnerability which DJG described in the USA economy applies to Canada, with equal or greater force.
If you dispute my view, then make your case.
And do you think a trio of publicly avowed globalist neoliberals, such as Freeland, Carney, and Trudeau, are the people who can lead Canada on a path of greater national self-reliance? If so, please explain.
As a man who loves his country, I earnestly crave your reassurance.
It is a bitter and embarrassing thing, when an erratic player such as Trump, can make a move which puzzles the kibitzers, and yet leaves you, “mated in three.” Truly, I think that is Canada’s position in this chess game. The game, however, is not the tournament.
Jewel carries a ketchup brand from central Indiana. I’ve driven across IN route 28 to see the plant and farms. If they can grow those tomatoes then they can grow the others for salads. Plenty of space. Get rid of the ethanol in gasoline mandate and that corn and there will be even more good land available.
Also driven from Windsor to Niagara Falls via the back roads just north of Lake Erie to see the vast tomato farms there, too.
Thank you. The mono-culture nature of industrial agriculture in the Neo-liberal era limit source and variety. This is more pronounced in urban areas. Rural areas offer the chance to buy local at the source. For instance, garlic. Everybody grows garlic here in SW Vermont. You can buy it on the side of the road from August to October. Local growers often have more than they can sell, unloading braids in November. Yet, the big box grocery stores on the strip sell the sleeves of Chinese garlic year round. Same with eggs. Everyone’s got chickens. I can buy a four dollar dozen on the side road this morning if I need eggs. Big box retail does not have the luxury of sourcing local, because they rely on massive scale to limit the impact of ever increasing shipping and labor costs.
That graph showing the incoming revenue from tariffs vs the outgoing in the form of relief payments to “farmers” is interesting. Controlling revenue streams is an effective way to control industry.
Thanks for this comprehensive coverage of tariff policy and its impact. I am more and more convinced that these tariffs are designed to do what Trump claims: “pay for” extending the Trump tax cuts. They’re a back-door way of instituting a partial VAT tax on goods coming from designated countries.
No, I did not include that due to the post being overlong already. No way, no how would tariffs even on all US imports provide enough revenue. You forget that the rationale for tariffs is to reduce purchases of the tariffed goods and not to raise revenues. That’s the justification in development economics: to create a protected market so that domestic producers can hopefully grow to be big enough to eventually compete internationally.
https://www.independent.org/news/article.asp?id=15185
True, but this implies the there is someone as rational and informed as you making decisions. This is where it gets tricky. Intent is hard to measure when the subject shows irrational behavior.
I think Yves’s reading of the situation is the most reasonable if we assume Trump is a rationally self-interested sociopath (you can be both profoundly ignorant without being irrational) and is being completely serious: bust up the US (plus our neighbors) and then buy the assets cheap, like Russia in the 90s. The elites have been looting the country for decades, now it’s entering the end stages.
If he’s not serious, this insane stuff could just be a grab for media attention, which is oxygen to that man, and has the virtue of distracting from all the campaign promises he’s breaking.
Would you describe Musk as rational?
Agree with elites looting part and somewhere in the comments here you’ll find me endorsing the late 90’s Russia analogy. The problem is we aren’t privy to the playbook, outside of “project 2025” for whatever that’s worth. Trump is keeping these cards very close to the chest. We are left to predicting the weather.
Yes, I have would describe the wealthiest man on earth as more rational than mys of who is commenting on a blog for free. /s
He may have made an insane mistake with Twitter but that, like the US group government is mostly OPM, other people’s money.
Lol, the supremes would rule in your favor on that first part.
Peace.
D’oh! *Myself
“Buy the assets cheap”, they can only be considered cheap if Humpty Dumpty somehow could be put back together again sometime down the line. According to one credible report, shale oil production has peaked in the United States, so where is Trump going to find the actual energy required to rebuild the United Franchises of Trump?
Alberta has proven resources of about 160 billion barrels of oil in the oil sands.
And the world uses 100 million barrels per day which amounts to 36.5 billion barrels per year, so 160 billion barrels will last 4.5 years. Of course there are other oil producing countries out there but we will hit a limit sooner or later.
The US uses 20 million barrels a year at current rates, so if it’s just the US consuming that amount of oil, in theory we are looking at 25 years, but if Trump wants to revive manufacturing, the whole thing could be gone in 10 years?
@ Yves —
Here’s the WSJ feature (video) on —
Why Economists Hate Trump’s Tariff Plan | WSJ —
from Oct. 17, 2024
WSJ explains how tariffs work and what Trump’s proposals would do.
https://www.youtube.com/watch?v=_-eHOSq3oqI&t=162s
And yeah, they say that you can use tariffs to create jobs, but it’s very expensive.
I think they’re not wrong but arguing from priors, and if Trump were more interested in reshoring US industrial capacity that might arguably take precedence. Except then all Michael Hudson’s arguments apply about how it would also be necessary to bring down extractive living costs that US proles suffer — RE, healthcare, etc. — and Trump’s government of billionaires and financial elites ain’t going to do that.
Re Twitter wasn’t that big loss in revenue because outraged media types and Dems pressured advertisers to boycott? A lot of those people he fired were involved in censorship as described in many articles by Taibbi.
Which doesn’t mean Musk should be involved in reorganizing government since his businesses are heavily dependent on the USG.
Musk went out of his way to be provocative about what he was doing and was hyperpartisan in favor of Trump. IMHO could have implemented 80% or more of his free speech policies and have kept most advertisers.
Advertisers would not have left it it was a market worth advertising in. The bot activity – which is entirely out of control – makes advertising impossible. And the pic in bio, dm for pics bot activity made a lot of brands exit.
He wrecked it. Period.
Thank you. You have better goods than I do.
I have never used Twitter and will not attempt to challenge what you say but if he “wrecked it” then how is it that quotes from Twitter still play such a large role here at NC? Since Musk reportedly paid double what Twitter was worth could it be that the world’s richest man is getting what he wanted out of it in any case? It may not have been about money.
And wasn’t it true that Twitter was already having money trouble pre Musk? Why was it for sale?
Finally let’s not pretend that pre Musk Twitter wasn’t being run in a very questionable way. Taibbi extensively reported on how it had been suborned via censorship requests/demands from Biden agencies–something that is very Constitutionally questionable (private actors can censor while the government is highly restricted in how it can attack free speech).
If Musk didn’t care about money, his coninvestors should not only sue him but push for him to be prosecuted in the biggest fraud in M&A history.
>>Why was it for sale?
Every public company is for sale all the time, that’s what being public means. A board has a fiduciary duty to accept any offer, and even sue to make sure it is honored (remember Musk tried to back out), if a potential buyer is offering way, way more than the market cap.
As I recall he tried to back out because he said they were faking their revenue numbers.
Many claimed during Trump 1 that Twitter made him president and that may be why Twitter tried to suppress the Hunter laptop story which gave us Biden who was even worse. It could be the whole idea of social media is bad if they are going to abuse their power, be it Dorsey or Musk.
I fondly remember his lack of due-diligence. Hmmm. About that…
They were definitely inflating the number of accounts which one would hope would have a close correlation with the number of actual users, who draw the advertisers. I think the numbers were inflated due to all the bots, etc. Same with Facebook if I remember right – Zuckerberg had to admit there were far more accounts than active users. I’m sure that’s the case with any major tech platform.
> I have never used Twitter and will not attempt to challenge what you say but if he “wrecked it” then how is it that quotes from Twitter still play such a large role here at NC?
The quality of posts on Twitter has gotten much worse and accordingly I think NC has suffered from its reliance on Twitter. For example most of Science Twitter has moved to Bluesky and the quality of scientific discourse is much higher on Bluesky now. So at least in some domains I think NC would benefit from reducing its reliance on Twitter and following more posters on Bluesky.
You have a serious misperception about my production process. Twitter is tertiary in my research. I do not use Twitter much to find articles. I use it mainly to make colorful points which can include short videos.
And the overwhelming majority of my tweets come not from looking at Twitter but by having readers send them. My science links in particular were very much provided by readers. We are allocating a smaller portion of our Links to science because we have only 55 and other topics are more pressing. Reflecting that, readers have been sending way way way fewer science links.
I have yet to have a single reader send me a science tidbit from BlueSky. Perhaps you could send some?
Twitter does not ask for more than an e-mail address. Bluesky does. I am not giving any personal info to any platform police. I am not on Facebook or Instagram or TikTok and do not use WhatsApp or Line for the same reason.
FWIW I have begun to see interesting science tidbits on Blue-sky but they are still sufficiently few and far between that I can’t be bothered to save/share.
They ARE becoming more common, however. I could be wrong but this feels like the tipping point when MySpace became a desert and everyone suddenly was on Faceborg.
I have noticed something that should really worry Twitter execs and companies thinking of advertising there: over 95% of all ads are for Temu, which has a terrible reputation. It is the ultimate “if it seems too good to be true, it probably is a scam”. I very very rarely see an even vaguely reputable company show me an advert on Twitter. This is NOT a viable business model long term (which is not to say Blue-Sky has the revenue issue solved either! )
You make a very good point about the ads on Twitter. In comparison to other parts of the web they are very much on the dubious side of the ad market.
I still hang on to Twitter because its still a great way to have a peek into interesting conversations between people who know what they are talking about, there are still lots of good finance people and historians posting there. But as you suggest, it does feel like it’s reaching a tipping point where they could all leave in a very short timeframe. Not that this will bother Musk as he will have already moved on.
Whilst I pride myself on knowing how to “beat YouTube” even when I’m using the Android App (which won’t adequately support the ad/sponsor blocking I have set up on the PC site) – so ads are infrequent and usually skippable – Twitter is another thing entirely. Every fourth post is an ad (usually Temu but there are one or two equally atrocious companies that crop up).
However, as you say, keeping an account is good for seeing what is going on and it remains the site where “if something is kicking off you’ll get the fastest on the ground reports there first”. PLUS CAT PICS/VIDS! Of course their execs should be doubly worried because I might go first to Twitter to see what the issue is….but then due to the sewage content I can go to a better site that has had those valuable 5 minutes to write something a bit more considered and less moronic and won’t cover my screen with ads.
Given what Musk is alleged to have pleged in Tesla stock to acquire Twitter, I am wondering if he really is going to double down on his Trump relationship as it’s the only thing keeping him relatively afloat….though I’m sure a finance guru on here will correct me if I’m wrong!
> So at least in some domains I think NC would benefit from reducing its reliance on Twitter and following more posters on Bluesky.
As always, the quality of posts on any social media platform depends on careful curation. I think it’s also important to “know your enemy” and liberal Democrats have made exactly the same kind of mistake that they always make, i.e. retreating to a bubble that doesn’t challenge their delusions; see Thomas Frank here. Frankly, I prefer the kind of tough-minded non-reactionary who will do battle in enemy territory, and I curate for that.
I am not in the business of making performative gestures in my choice of platform. I am here to serve the readers without drowning in unproductive use of my reading and writing time.
In terms of serving the readers:
1) Twitter remains the best for breaking news.
2) Twitter remains the best for Covid, particularly long Covid, which is my beat.
3) Twitter remains excellent at small nuggets I collect for Water Cooler, like artwork, offbeat stories, etc.
4) Twitter’s user base is an order of magnitude larger than BlueSky and I would speculate far more global. That means more krill for me (serendipity, too).
In terms of productive use of time:
1) I have tried the threading on both BlueSky and Mastodon (forget Threads) and Twitter’s is superior. I can’t be scrolling past n/30 threads when Cory Doctorow posts some masterpiece.
2) BlueSky doesn’t have an iPad version, forcing me to use an App designed for cellphones; ick.
3) How many platforms am I going to have to learn, anyhow?
What is pic in bio dm for pics?
“Picture in biography, direct message for (more) pictures.”
I think that indicates transactions of pictures of a salacious nature. Having such messages spread by automated accounts would signal a not so family friendly environment. Giant US corporations are especially sensitive about their brand being seen around such picture vendors.
Weirdly, I run no special ad control on X and see none of that. Dont’ know why.
The bots weren’t as bad as they are now. The big change was when he bought it. As is the case in so many things, you announce what are you against at the same time you are boosting it.
I think of Musk’s takeover of Twitter as akin to (using a previous era’s example) Rupert Murdoch taking over the NY Post – which had previously been a liberal tabloid (with an awesome sports section!) – in the mid 1970’s. It was his flagship property for decades, was influential, ruthless in pursuit of its owner’s interests… and always lost money. Always.
But so what? As with Murdoch, so with Musk: the losses are a cost of doing business, and in the broader and more holistic sense richly serve their interests.
I went to the doctor a month ago, telling him we had about five more years of relative normal before who knows what happens. Hence this was the last time to build up mental health and mental stamina with therapy or other means to get ready.
Im revising that to two-ish years. That may even be optimistic.
I like the list. Except for Campbells Soup I don’t buy any of those products, no matter the brand or country of origin.
I will be checking in on the Stocks & Jocks Chicago-based financial podcast today, where The Chief hangs out every weekend morning at Menards, Home Depot and Lowes on Bell Road in Homer Glen where he observes by just watching for economic clues, to see if there was a run on lumber over the weekend.
Starbucks v Tim Hortons? Rather have Aunt Bea’s Pickles over either.
Such a weird conceit that the US counterpart to Starbucks is Tim Hortons not Dunkin.
I heard somewhere that Trump likes McKinley. He did rename that mountain McKinley (again).
McKinley added Hawaii and Puerto Rico, and took control over Panama, Phillipines and Cuba. Trump wants to add Canada and control Greenland and Panama (and probably Cuba if he could find a way).
McKinley was pro tariffs and added tariffs. Trump really, really loves tariffs.
McKinley wasn’t dogmatic on bimetall vs gold, but domestic and international pressure lead him to gold, and he became the president for the gold standard (because free silver was on the other ticket, supporting Bryan). Trump has after pressure from the crypto lobby bought into the digital, modern, version of fool’s gold.
And McKinley didn’t finish his term. A pretty good president (for the time) took his place. That guy is on Mt Rushmore.
Dubya’s man Karl Rove was also trying to bring back McKinley. Seems for Repubs this was the golden age of plutocrats.
HBO’s The Gilded Age is a pretty good show about the period–more Downton Abbey (with a lot more juice) than Edith Wharton. While the men were building railroads the women were wearing bird hats. Headgear is a big theme.
At some point will The New Powers That Be start banning some of Mark Twain’s anti-imperial works? I’ve never read his piece “To the Person Sitting in Darkness”, but I understand it has some pointed remarks about William McKinley.
FWIW, there is something Roosevelt (both of them) esque about Trump. Obviously, he too is a rich guy from NYC with a flare for drama who thinks he’s cleverer than everyone else, but the way he stirred up the tariff/Canada/Greenland stuff reminded me of what I read about FDR’s MO going about political negotiations.
While the particulars were different, FDR apparently loved to razzle and dazzle his interlocutors with some grand talk before talking about anything serious so that they would be too distracted when the real topics for discussion came up–much the way Trump throws people off with his loud BS. Some people apparently never fell for this and stuck to their points when FDR was done with his grand talk–which, in turn, got under FDR’s skin apparently. I read about this in two separate books whose titles I can’t recall. One was a biography of George Marshall (one of the people who never fell for FDR’s BS) and the other was about Ireland during WW2 (Frank Aiken, an Irish govt minister who came as a special envoy to US during the war, was apparently another.)
Maybe the rest of the world can set extremely high tariffs on US MIC products and services. That would be a great thing to do…
Be a NATO country. Put a 400% tariff on US weapons. Buy for 5% of GDP, get 1% as weapons and 4% as income for the tax office to be spent* on society.
Everybody wins!
* Yeah I know, the government isn’t dependent on income. But whatever rules are in place to ensure expenditure doesn’t expend to much generally takes tax incomes in account, so in practice it means the government can spend those 4% on other things, with the same expenditure rules.
Wait a minute, doesn’t eliminating the de minimis rule mean more red tape? This should be the opposite of the DOGE philosophy.
Thereby revealing that you did not read the article
As part of this deranged policy implementation, it would not surprise me if part of the secret rationale is to raise revenue in order to “pay for” tax decreases. After all, President Trump is now talking about how this will make us all rich and he also promised the visitors at Mar-a-Lago that he was going to give them tax cuts galore.
It’s not secret. Trump has said as much even though the math does not work.
I found these papers very much on point, especially insofar as they apply to Canada – specifically with respect to the first paper and obliquely with respect to the second: https://ora.ox.ac.uk/objects/uuid:d814c73c-5170-434b-acac-add11b317fe5/files/sfx719n808 and ora.ox.ac.uk/objects/uuid:520795b1-6f2b-4f9f-925b-60f976f80c25/files/s9306sz940 (both co-authored by Kevin O’Rourke).
Not for the first time, the US finds itself impaled and writhing upon the horns of the Triffin dilemma: https://global.oup.com/academic/product/robert-triffin-9780190081096?cc=gb&lang=en&
Was the DeepSeek announcement last week intended as a warning to stop Trump applying tariffs – the combination of the two potentially having significant adverse impact on Western stock markets?
As to the tripping dilemma, please see zephyrum’s comment below: https://www.nakedcapitalism.com/2025/02/trump-declares-economic-war-on-just-about-everyone-that-matters-is-a-smash-up-a-feature-and-not-a-bug.html#comment-4170711
As a second comment, I do not know anything about the triffen dilemma and I found your link to be unhelpful, I opted to search the naked capitalism blog using Google to see what had been said before about it here. It has been mentioned briefly in comments that always related to the gold standard, but it did appear topically in this post from 2017: https://www.nakedcapitalism.com/2017/04/operation-demise-bretton-woods-system-1958-1971.html
And another naked capitalism post, the special drawing rights of the IMF were imitated to be a bancor-like substitute.
Now I’m off to read zephyrum’s comment, as it is more up to date.
Many apologies – all I was intending to do was to provide a link to the latest and most authoritative biography of Triffin, which came out during the pandemic, as it is well worth reading. However, there are many articles available on the Triffin dilemma, and here is one of the more useful ones, published by the BIS: https://www.bis.org/publ/work684.pdf
Ready! Fire! Aim?
Canada and Mexico should block twitter and put a 100% tariff on Teslas.
Enjoying the jokes about Canada throttling power during the superbowl.
Thank you Yves. Intended or not, late ’90s Russia is a real possibility. How that translates in mid ’20s USA is above my pay grade.
Think I’ll transfer most of my investments into Turnip Helper…at least until the shooting starts.
From what I remember of that smell in my grandma’s kitchen, turnips need A LOT of help. Got them through the depression though.
just as the recent 1 1/2″ rains began, i planted pasture turnips across the road, along with whatever wheat and rye seed i had on hand.
my birds like the bugs they attract(so a trap crop, too), and enjoy digging for the actual turnips later in the spring and into summer.
theyre practically wild now in the front pasture…sheep dont care for them.
open up pockets for water and air infiltration, and add organic matter to the top layer.
just one more disaster/depression food i dont really hafta tend to.
boil them twice, second time in milk, and itll take th edge off em.
The last time I ate turnip was 55 years ago as it was standard fare for our family. Ruined every batch of stew my mother made. Now that you mentioned it, I see turnip instead of trump.
Turnips need help, lol, they are really good in stews and soups, with a lot of help of course. I’m going to try Amfortas’ method next time. I’ve had success finishing them in bacon fat on the stovetop.
The last time Trump was in office launching sanctions against China, I think that somebody worked out that it was ordinary Americas who paid about 92% of those increased costs and not the Chinese. This time will be no different. Got an idea here. The US has been using its military/spooks to go around the world and setting countries on fire so that they can swoop in and pick up the pieces on the cheap but Trump considers warfare to be wasteful and the US military is not what it used to be. But what if he is continuing this long-standing policy and using economic warfare instead. So if he busts up Canada, Mexico, the EU, the UK or wherever causing chaos and disruption, he can then go in and pick up the pieces on the cheap. See? Same policy as before but just different methodology. Nobody “important” will get hurt and the corporations in those countries will cooperate to get a share of the booty. Everything old is new again.
Brian Berletic posted an interesting take on the tariffs over the weekend. He feels the tariffs are a result of deep state pressure on Trump to throttle China’s influence on both Mexico and Canada. Since the tariffs make no economic sense that might explain what is happening.
Jack: Brian Berletic … feels the tariffs are a result of deep state pressure on Trump to throttle China’s influence on both Mexico and Canada.
Sure, that would be in there as one motivation, since it’s generally about dominance.
But there’s no overwhelmingly persuasive reason why Trump/US tariffs wouldn’t drive both Mexico and Canada to conclude, given the choice between the US and China, that China offers a better deal in the longer term
In other words, the only way that US deep state strategists would imagine Trump’s measures could work is if they believe that ‘they’ — Canada and Mexico, in this case — have nowhere else to go.
This is the basis of the strategy followed by those US elites who ran the Democratic Party: that the American people had ‘nowhere else to go.’ How well has that worked out?
I don’t agree with Berletic at all here. He incorrectly says the Trump tariffs in his first term were part of that strategy. Huh? On WASHING MACHINES? Oh, and the ones on farm goods led to bailouts?
The US has no serious intent to become an autarky. If we did, we’d have a real industrial strategy, invest heavily in improving K-12 education, and would stop the defense industry pork too.
Yves S.: The US has no serious intent to become an autarky. If we did, we’d have a real industrial strategy, invest heavily in improving K-12 education, and etc.
Oh, agreed.
That said, along with Trump’s threats to BRICS countries that they better keep using the dollar or else — what an idiot! — there’ll also exist (1) the dimly thought-through assumption that the US can reduce the Chinese threat in the rest of the continent outside God’s Own Country (see Monroe Doctrine, Manifest Destiny; etc.) (b) the serious delusion that the Exceptional Nation© can become an autarky.
It can’t, for all the reasons Michael Hudson has cited. But think of it all as a comedy that you can watch while based in Thailand, which will probably remain outside most of the chaos and suffering.
From my occasional forays into conservative economic talk, there seems to be a fanbase of William McKinley among Trumpites, who is credited by many on the right with having brought the US out of the long Depression and sowed the seeds of its industrial might with what was seen at the time as a somewhat excessive use of tariffs. So there may be some behind Trump (I doubt if he’s read any 19th Century economic history) who believe in a sort of domestic shock doctrine, whereby a sharp tariff load would force a fundamental economic shift towards domestic production. I doubt it would work, but this may be the intellectual idea behind Trumps behaviour.
On a broader sense, tariffs work very differently from how most economists think, because as Pettis has pointed out many times, conventional economic views on tariffs are primarily ideological, not based on rogorous analysis. Historically, tariffs have been a highly effective mode of promoting development, but its hard to find any examples of where developed countries have used them successfully (arguably, Russia is an example, even if the tariffs weren’t necessarily chosen by Moscow). The broad impact of tariffs is very similar to a devaluation (it shifts spending from consumers to producers), but in an (arguably) more focused way. The success or otherwise of past tariffs has almost always been down to a wide variety of features and circumstances that may not be replicable.
The one historical reality is that tariffs tend to favour countries running a trade deficit, which is why the US tariffs of the 1930’s were so catastrophic for the US. So it may be that there is a simple calculation that any damage caused to the US will be much worse for those countries running trade surpluses with the US, and so proportionately benefits the US in relative (if not actual) terms. For someone who sees trade as a zero sum game, this may make sense to Trump and those behind him. One thing credited to McKinley by some conservative historians was that he essentially broke the dominance of Britain as the latter clung to its love of free trade, leaving itself very vulnerable to a competitor willing to use tariffs ruthlessly. I don’t think this is true, but it is an article of faith for some on the paleo right.
The puzzling thing for me is why his new Big Tech buddies are so quiet about this. They are supposed to hate trade wars. I wonder if they see this as a ‘smash everything and pick up the pieces’ moment. But then again, Musk is talking about the US military defeating the cartels – if he believes that, he really is stupider than I thought.
I really hate delving too deeply into contemporary right wing thought, partly because the algos begin to think I’m a nazi, and partly because life is too short to spend much time on what they think. However, it is undeniable that since covid there have been a range of new ideas emerging among the paleos, the libertarians, and the old style conservatives, some of which are lunatic, some of which are quite interesting. I’ve no idea of the internal dynamics behind Trumps new supporters, but I do think we are looking at a whole new set of ideas far away from traditional Republicans or conservatives as a whole. So while we can’t discount that this is just Trump being Trump, there may well be a surprisingly coherent ideology behind all this.
This makes a lot of sense to me. Geopolitically, Trump 2.0 seems to be committed to:
1. Israel
2. Re-establishing total control over North American continent
3. Realism vis a vis great powers like Russia and China
4. Leveraging its existing dependents (Europe) to ease decline/retrenchment
But alongside these geopolitical trends seems to be a more *domestic* interest in replacing income tax with tariff moneys, and this arguably doesn’t really align well with the geopolitical aims. The paleo?-con/realist tendencies in geopolitics seem to me to be incompatible with the libertarian fantasies animating most of the DOGE stuff. At least that is my initial impression, which probably misses a lot.
My thinking is Trump’s relative invisibility behind Musk at the moment is the bureaucratic civil war he’s waging through Musk and DOGE. So far, my take on Musk’s IT bros break in to various databases is about surveilling the Democrat NeoCon / NGO / stalking horse imbeds in various Federal bureaucracies, defining the scope and composition of the ‘flex net”.
This will be both about settling scores and control going forward. Like the ripples through Twitter etc. of defunded Ukrainian news papers etc. resulting from the USAID cash stoppage, the Tariff Exec Orders are surfacing other nodes in the Democrat NeoCon / NGO / stalking horse nexus. Systematic Dem-fenestrations at NLRB appear part of the same project.
Haaretz had a strange and maybe plausible story linked the other day about Qatar in Gaza, which if truish colors the Zionist vs Israeli divide. Squaring Musk’s vision of the US as recrudescent Slave Power with the Bannon vision of a white working class might justify in the Oligarchic mind the deliberate precipitation of a general economic collapse, to hoover up distressed assets as Yves suggests, and to create the desperation to make serf-like employment attractive.
Forgot to mention, Trump knows most of these things will blow up in some form.
I think at least two thirds of his initial appointments are unwitting fall-persons for incipient failures of various half baked ideological projects they’ve signed on for.
I seriously doubt Trump has a clear idea of of which, if any, of these ideological experiments may or may not work, but he is generating an impressive apparent energy in The Executive and does have an equally impressive roster of folks to throw under the bus for failures and breakages.
What is really disturbing IMO is not that Elon/Trump rule is going to demolish the political-economic system, it’s that there is no resistance from Dems or really anyone else. None.
The Dems thought the big problem was the gender designation on bathroom doors, not whether or not people had a pot to piss in.
Let’s not forget the importance of a uterus in politics, they thought that was pretty important as well. I read here recently on naked capitalism about the 12 likely candidates in the next presidential election from the Democrats as they see it right now. Two of those were female, which of course included Kamala Harris who’s ownership of a uterus is *not* sufficient to make up for her lack of a brain, ethics, or courage in general.
Common Sense
You wanna tariff expensive stuff that people in the US wanna make and not tariff cheap stuff. Boeing vs Walmart. For example. But only if needed. A light touch.
Or invert it and figure out what you don’t wanna re-shore. Like textiles (Norma Rae).
People who wanted Trump wanted Trump 1.0. Don’t do too much, play a lot of golf, promote the US Economy, refrain from wars. Popular stuff.
There is a very limited future in promoting unpopular stuff.
From WSJ:
U.S., Mexico Agree to Put Tariffs on Hold for One Month
Stocks pare losses; Trump to continue talks with Trudeau on levies planned for Canada
Trump could have taken office, played solitaire all day, and (falsely) given himself credit for the economy being better than under Biden. He’d be lying, or course, about it having anything to do with him being president, but I’d bet my last paycheck that his voters wouldn’t care. Inflation was well on its way to 2%, unemployment was low, GDP was growing. He could have just say in the White House with a beer watching the sunset. We’d have all been a lot better off too.
Instead we get this. A trade war no one wanted or asked for, ridiculous self inflicted economic wounds, and a giant own goal for the GOP. The sheer senseless stupidity of it all boggles the mind.
“President Donald Trump’s new tariff orders against Canada, Mexico and China all contain clauses suspending a duty-free exemption for low-value shipments below $800”
https://www.reuters.com/world/trumps-canada-mexico-china-tariffs-suspend-loophole-behind-fentanyl-shipments-2025-02-02/
Its not clear to me what the freak out is all about on this issue, other than it representing a stark departure from economic orthodoxy and the fifty-year+ trend.
About 80% of the US economy is domestic. 20% is everyone else, these tariffs are going to have small impact as a % of GNP on the US. On the other hand, even if the other countries retaliate, because they are net exporters, the US will net revenue on the trade flow. Further, because their economies are smaller and their exports a bigger share of their economy, the economic impact on Mexico and Canada will be significant.
I saw one estimate that the the tariff would amount to about 13% of Mexican GNP, and the biggest concern I have is that it might significantly undermine the political stability of Mexico, which would not necessarily be a good thing for America. But who knows, they may already have the next Pinochet in the wings intended to capitalize on the crisis.
Tariffs are a reasonable way to tax your trade partners for your trade deficits if you are a 500 lb. gorilla. The problem of being a net importer is that your currency outflows to the trading partners, tariffs are one way of closing the loop.
[I find it interesting that various voices are critical of Clinton doing NAFTA, but now Trump is basically wrecking it, everyone is complaining about it.]
I would assume the US has a Vicente Fox waiting in the wings if the opportunity arises. I’m sure Elliot Abrams is on it.
About that 80/20% split, it’s not homogenous, therefore it will have varying degrees of destruction within society. This would have an amplify destruction here/have little effect there sort of thing.
I’m not seeing anybody really complaining about wrecking NAFTA, rather it’s not knowing what the plan is, and even this uniquely broad and developed intellectual Borg known as the commentariat is reduced to reading tea leaves by the current signal to noise ratio.
The idea may be to gain control of the customs and border policies of both Mexico and Canada, we don’t know the details of the Mexican agreement and probably never will but it wouldn’t surprise if the modern Pinkertons are let loose in Mexico against the cartels .Remember the EU started as a customs union and look at it now.
As the US retreats into some modern form of isolationism forced by circumstances they will seek to control their immediate neighbourhood more closely. Both Mr Trump and Mr Musk work on the Mencken dictum that there is always a well known solution to every human problem ——- neat, plausible and wrong. You couldn’t possibly be holding too much physical cash and krugerrands going forwards.
‘About 80% of the US economy is domestic. 20% is everyone else, these tariffs are going to have small impact as a % of GNP on the US.’
Yeah, nah! It is not the percentage that is important but what is in that 20%. So medicines are in there which I am sure you will agree is vital. Lots of rare earths as well which is critical to high tech devices. It can be a bit like the Pareto Principal which states that for many outcomes, roughly 80% of consequences come from 20% of causes.
Like a magician practicing misdirection, Trump is using the tariff wars as a means of projecting strength and patriotic resolve internationally while reversing stupidly belligerent foreign policies. This is being done to mask backing away from the neocon militarism that has led to losing confrontations with Russia and China. Note the axe Musk is applying to USAID and, presumably, NED. These were primary tools for spreading instability and conflict in “unfriendly” nations.
I think the tariffs are mainly performative and will be withdrawn after “concessions” have been extracted from the targeted nations. Trump will claim victory and this will offset retreats he has to make elsewhere.
“stupidly belligerent ”
All you had to say.
I agree. Recently, Alastair Crooke made a similar remark aboit Trump’s crazy talk about Russia-Ukraine, as preliminary to getting the heck out. Let’s hope Trump is actually good at using his BS artistry as a negotiation tool…
Just like he “de-escalated” with Russia during his first term, unilaterally ending the INF Missile Treaty and sending missiles to Ukraine?
It must be nice to think so…
Thanks for the article. Tariffs seem like a crazy move, but is this part of a larger plan? Trump seem to be ending programs like USAID that send dollars overseas. Tariffs increase the dollar price of imported goods and services, which given any price elasticity of demand will reduce dollar flows overseas. By the Triffin dilemma the US must find a way to supply dollars overseas, but what if it does not? A reduction in international dollar liquidity. In the short term one might imagine a stronger dollar, and a dollar shortage. There is some evidence this has already been happening.
Many institutions around the world have significant dollar-denominated debts. There must be 50 or more countries at risk of default. What if dollar swap lines from the Fed were contingent on meeting Trump’s requirements for obeisance and loyalty? It’s going to be tough on emerging economies if they don’t play ball.
Among commercial enterprises, a vast number of financial arrangements having nothing to do with the US are denominated in dollars, and the participants need dollars to fulfill their obligations. This may not throw sand in those gears directly, but it conceivably makes such operations much more expensive. If that’s the case new arrangements may be negotiated differently, but that takes time.
And then there are vast off-balance sheet swap arrangements and derivative obligations.
Domestically things might become a bit…challenging. At least until weaker trading partners capitulate. But I suspect it will be nothing like the pain felt internationally.
Interesting times.
Executive actions have the most legitimacy when the president acts with the implied or express authority of Congress. However, executive orders may still legally shape policy if the law or Congress has been silent on an issue.
Because Congress is rarely silent on major issues, executive orders are most common in areas where the president has been granted discretion by Congress. Regardless of the president’s relationship with the federal legislature, executive orders will only allow a very small policy window in which to make changes. With every new president’s use of executive orders, their power and reach are tested in different ways.
In my unlearned opinion – Unfortunately the economic literature and the teaching of finance and the economy that has been taught in the ideological context of neo-liberalism, or, as I know it by other names ( rentier capitalism, predator capitalism, FIRE sector economics, financialized capitalism, gambling, grifting etc.) has been going on for such a long time and has excluded the political economy and the part that governments play in spending not for profit but as a fourth leg of production which lowers the cost of living and working rarely existing in any curriculum an aspiring politician would learn – todays politician is attracted and required to raise huge sums to buy office —– what I am getting at is, that a biggly large knowledge base is intentionally or structurally excluded from consideration when executive actions are taken whence, I see no opposition to scope and reach in judicial, constitutional or legislative means because all is viewed only through the lens of neo-liberal economic structure. Many good references and great depth can be found in Michael Hudson’s many books…. I find his- “J is for Junk Economics – A Guide to Reality in an age of deception” a good guide to classical and new economic word definitions a good start to common definitions that currently mean opposites or ‘social naming disorder’ as he says.
Fortunately, or, unfortunately these many actions will bring sharp relief to issues that have been kicking around as fodder for a ‘for us or against us’ and fear based, money fueled, extremes deaf to the middle, internally divisive polity. I hope it is the tic of the pendulum signaling some change away from the disarray – I think it may come, this change in only two ways or, the third not at all (not at all is impossible)…the two ways is with great pain or great humility.
I hope I didn’t fumble the vocab to bad
Great post Yves. Thanks for the rather deep dive. This is really good: “The problem is he’s blustering with a loaded AK-47 while not observing any gun safety protocols.”
Are the tarrifs even legal? https://www.yahoo.com/news/trumps-tariffs-legal-may-not-152714612.html Legal questions seem to be a moot point with the Trump/Musk presidency.
I see Wolfstreet mentioned. I took a look at discussions of tarrifs over the weekend.
Wolf was inspired to rant and post an article about it.
The rant:
Wolf Richter
Feb 3, 2025 at 3:59 am
The trade balance didn’t improve because Corporate America tried by hook or crook to subvert the tariffs, and they lobbied mightily to get exemptions, and were given exemptions, they routed trade through Vietnam to get around the China tariffs, etc. etc. Corporate America hates tariffs, billionaires hate tariffs, the billionaire-owned media hate tariffs, such as Murdoch’s WSJ, Barron’s, MarketWatch, Fox, etc., Bezo’s WaPo, Buffett’s newspaper empire (20?), Sulzberger family’s NY Times, etc. They all fought and will fight Trump tooth and nail on tariffs. Some of those billionaires are in Trump’s inner circle now, so we can be assured that the new crop of tariffs will also be subverted.
The article:
https://wolfstreet.com/2025/02/03/what-trumps-tariffs-did-last-time-2018-2019-had-no-impact-on-inflation-doubled-receipts-from-customs-duties-and-hit-stocks/
It’s interesting because it seems somewhat contrarian to prevailing views.
We will see.
Could be right: https://www.msn.com/en-us/news/us/u-s-tariffs-on-mexico-to-be-paused-for-a-month-trump-says/ar-AA1ykOKY?ocid=spartandhp
Mm-hmmm….
https://www.marketwatch.com/livecoverage/stock-market-today-dow-s-p-and-nasdaq-100-to-dive-after-canada-and-mexico-hit-with-tariffs/
“As stocks continue to hold well above their session lows, a big question now is whether Canada will score a delay for planned U.S. tariffs like Mexico just did. President Donald Trump said in a social-media post that he spoke with Canadian Prime Minister Justin Trudeau this morning and they plan to speak again at 3 p.m. Eastern.
One betting market is giving an 81% chance that Trump will remove tariffs on Canada before March, up from just a 38% chance before the delay for Mexico. On the other hand, a senior Canadian official told the New York Times that they are not optimistic that a real off-ramp from tariffs exists for Canada the way it materialized for Mexico.”
The comments later this morning Wolf had some more to say:
Bman
Feb 3, 2025 at 4:24 am
Your analysis doesn’t include retaliation from America’s trading partners.
Wolf Richter
Feb 3, 2025 at 10:01 am
1. They “retaliated” last time, and it’s included.
2. All countries ARE using tariffs, RTGDFA, and have been using tariffs against the US for eons.
3. China has big tariffs surrounding its protected industries, and US companies have to produce in China (in joint ventures and with required technology transfer and loss of IP) in order to sell in China. That’s how you develop and protect a manufacturing base.
4. The US has allowed its manufacturing base to be destroyed by globalization mongers for three decades. China has done the opposite, as have other countries, and now the US has a $1 trillion a year trade deficit, while the globalization mongers laughed all the way to the bank.
5. It’s a scandal what happened, three decades of connivance by the US government and Corporate America to destroy the manufacturing base so that corporate profit margins could fatten, while the most important economic sector – manufacturing – with its huge primary, secondary, and tertiary impact on employment, wages, household incomes, tax receipts, knowhow, infrastructure, etc. was shifted to overseas locations. That this was encouraged to happen was a huge scandal that spanned across both political parties. And those idiots are still spreading the same BS today.
But what I think Musk’s dependence on China is at odds with what is written and said as the intentions of this policy and others.
As I commented on the Colombia ‘coffee clash’, this tariff tantrum with Mexico and Canada is more of the political stunt gone mad from Trump. Just as Russia learned to cope with US sanctions, Mexico and Canada will discover ways to disentangle themselves from the US octopus. And Americans will be the poorer.
While government, in general, is inefficient in some areas, it is still composed of mostly dedicated staff who have REAL knowledge of how to make the system function. That is why this spontaneous Trump stunt (coup) will do no more than make life difficult for everyone: Trump has no qualifying skill or knowledge to lead a complex system (federal government).
You’ll know the breakdown is complete when tomorrow does not look like today!
I’d like to know how Musk plans to steal billions by controlling the government. That’s how he made his fortune in the first place, so I would assume that is his primary motivation here.
Trump promised a new “Golden Age”–and as Vance noted, true Christian love begins with family and friends, and trickles down from there.
Billions are pocket change. You don’t become a trillionaire with that way of thinking. Go big, or go home.
I recently sold a house that I inherited. Good timing, as what I read here and elsewhere seems to indicate a recession or worse is on the horizon.
Guess I’ll have to use the proceeds to pay for inflated prices on everything, including my cancer treatments. What an interesting time to be alive! /s
Trump seems increasingly to be in six impossible things before breakfast mode.
He’s also been railing against countries running a trade surplus with the US while also threatening anybody who tries to undermine the US dollar as global reserve currency, even though the latter requires the former to function.
This.
Thanks for posting this.
I realize the stated reasons for the tariffs are drugs and immigration, but one has to assume this is to help re-industrialize America. I do not see how re-industrialization can succeed without massive industrial policy, a restructuring of tax policy, and a means to flush out the current generation of leaders in the C-suites and Wall St that have repeatedly failed and been bailed out. So this effort will fail.
But it will succeed as a recruitment tool for BRICS, and a further economic weakening of Western aligned nations.
I have been reading and hearing here and there that Canadians are deciding to cancel their vacations in America and stop buying American things whenever/ wherever they can. Individual Canadians in their . . . thousands? . . . millions? . . . will do so regardless of whatever the Musk/trump Administration does about tarriffs.
I wonder whether Canadians will begin focusing their efforts against goods from parts of America that voted for Trump and against vacations in those parts of America that voted for Trump in order to inflict maximum focused pain on those people who voted to inflict this pain on Canada? Or will they mistake America-as-a-whole for a still-functioning country with a still functioning democracy and just decide to boycott the whole thing?
It is their choice and their right to make it.
As for me, I will continue buying whatever Canadian things I have been buying up to now, and if they get 25% more expensive, then I will just have to buy 25% less of them.
Yves’ “errm” creativity immediately reminded me of the following post at another web location:
This creativity is correctly “an artistic rendition of the truth”, to which a reader noted:
“I will never call anyone a liar again. Instead, I will use your elegant euphemism.”
Lying is such a crass word, especially since virtually everyone with power does it. They are verbal artists!
I am sure the conventional account will be that Trump won this encounter with Mexico. But this was a huge amount of threat display for what looks like things Mexico would have done without a big show of force, particularly Trump going as far as authorizing the 25% tariffs as his opening move.
It is almost as if Trump is a bully, and relishes in displays of force, especially when unnecessary, because it makes him look big.
Ian Welsh:
https://www.ianwelsh.net/
“Trump is planning on putting tariffs on Europe, too. He put higher tariffs on Canada, supposedly one of America’s closest allies, than on China. Hitting the majority of America’s vassals/allies all at more or less the same time, with them retaliating with their own tariffs means an end to the American created world economic system. It will also lead to the end of NATO and, in time, other alliances. Europe’s mainland isn’t practically subject to threat of invasion from the US the way that Canada and Mexico are, they don’t have to put up with this, but threats to Greenland make it clear that the US is more likely to invade an actual EU member than Russia is.
Hard to have an alliance with a nation you’re in a trade war with who is threatening to invade one of your countries and who, by all accounts, is serious about it.
And while the tariffs are all justified on “national security” which is “letter” legal, everyone knows that’s bullshit. Trump is violating the purpose of the WTO, USMCA/NAFTA and other trade treaties the US has signed.
There’s no way the world trade order survives this and no way the American empire does either, since it’s based on an alliance system and bases around the world, many of which are in countries Trump is declaring his trade war on. Even countries who escape tariffs for now can’t feel secure. Ironically it’s the tariffs on Canada which will do the US the most international harm: everyone knows that Canada has been a completely supine vassal giving to the US everything it wants. Canadian exports, minus oil and gas, are less than its imports from the US, so there’s no legitimate re-balancing argument, even. Foreign leaders have read reports making this clear.”
…..much more below…..plus charts!
O Canada
BRICCS: there, fixed it.
Would you believe there is talk in Canada about going into the EU instead? Gawd!