Donald Trump just imposed 25% tariff Almost all goods produced by the two largest trading partners of the United States – Canada and Mexico. He also established a comprehensive tariff of 20% on Chinese goods.
As a result, the average tariff level in the United States is now higher than Any time since the 1940s.
Meanwhile, China and Canada Retaliate immediately Oppose Trump’s duty, the former imposes a 15% tariff on American agricultural products and the latter imposes a 25% tariff About $30 billion American goods. Mexico vowed to install its own retaliatory tariffs.
This trade war could have far-reaching consequences. Trump’s tariffs have sparked Stock market sell-off and cooling of manufacturing activities. Economists estimate that trade policy will make typical American families over $1,200 a yearwith the price of countless commodities rising.
All of this raises the question: Why did the U.S. president choose to subvert trade relations on the North American continent? The bet on this issue is high, because it can confirm that Trump’s massive tariffs are still in effect. Unfortunately, the president himself seems to have no idea of the answer.
In recent weeks, Trump has provided four different and contradictory reasons for his tariffs on Mexico and Canada, which makes no sense:
1) Trump’s tariffs on Canada and Mexico are designed to ensure U.S. borders
Formerly, North American tariffs are designed to be withA drug war“It’s not a trade war. Trump claims our northern and southern neighbors have been teaching to Fentanyl and undocumented immigration Entering the United States – This constitutes a “national emergency.” Trump has imposed huge tariffs on Canada and Mexico, aiming to force both countries to reduce the movement of drugs and immigration.
But this policy is unreasonable. Play in Canada Almost no characters In trafficking of fentanyl. The Mexican government has Strengthen law enforcement Oppose drug cartels while preventing immigrants from entering the United States (Often by cruel means). These efforts seem to have slowed fentanyl imports significantly. They have not successfully closed the fentanyl trade altogether. But this is not a reasonable requirement: If the United States cannot stop drugs Infiltrate your own prisonHow did the Mexican government so meticulously monitor its entire country to prevent extremely light narcotics from crossing its northern border?
However, if Trump’s tariffs were merely a diplomatic tool that influenced border policies between Mexico and Canada, they could be short. Canada and Mexico can propose plans to combat drugs and immigration, and Trump can declare victory for He seems to have done it last month When his initial response to Mexico and Canada offers delayed those tariffs.
But these tariffs are not just about winning the drug war, at least according to the president.
2) Unless the tariffs are actually to force companies to relocate production to the United States, thus ending the trade deficit
On Tuesday morning, the president poses Truth Social“If the company moves to the United States, there will be no taxes!!!”
Here, Trump believes that his tariffs are not meant to crack down on temporary devices for fentanyl imports, a lasting means that could force companies to transfer factories to the United States. After all, if tariffs are only temporary, there is little reason for companies to change their investment decisions based on them.
Trump’s speech on Tuesday was consistent with his previous comments on the issue. Last month, Trump Tell His social media follower: “We paid hundreds of millions of dollars to subsidize Canada. Why? There is no reason. We don’t need anything they have. We have unlimited energy and should build our own cars and the wood is beyond our use.”
He further Give this “The United States has a significant deficit with Canada, Mexico and China (and almost all countries!) and owes $36 trillion, and we will no longer be ‘stupid nations’. Making your products in the United States, no tariffs!”
These remarks suggest that the United States should permanently maintain huge tariffs on Canada and Mexico because it requires little to no need for their products and is currently “subsidizing” these countries by engaging in a trade deficit with them.
But that is a terrible reason for Trump’s policy on multiple levels. On the one hand, the president’s tariff application for Canada and Mexico all Commodities – including agricultural products that cannot be produced on a large scale in the United States, such as pawpaw and other tropical fruits.
Trump’s responsibilities also increase the cost of foreign-made parts for U.S. manufacturers, thus creating a suppressive effect of positioning factories in the United States. according to An estimateTrump’s tariffs on Canada and Mexico will increase the annual cost of the U.S. auto industry by $60 billion. This will force American auto companies to raise prices, thereby undermining their competitiveness in foreign markets. Meanwhile, overseas-based auto companies will be able to buy Mexican and Canadian parts at a lower price.
This basic dynamic – tariffs increase production costs for U.S. companies – leads Trump to backfire during his first term: According to 2019 Federal Reserve AnalysisTrump’s tariffs reduce Manufacturing jobs in affected industries.
Additionally, the idea of operating a trade deficit with a country is related to “subsidies”, which reflects a serious misunderstanding of economics. You buy more items from the grocery store than you buy from the grocery store. In this sense, you operate a “trade deficit” with the grocer. But that’s not, when you hand over the currency in exchange for a shopping cart full of food, you just make a charitable donation to stop and shop.
3) Unless Trump’s tariffs are designed to force Canada and Mexico to moderately modify their deal terms with Us
Trump advised Tuesday morning that his real dissatisfaction with Canada is that it has been taking unfair trade practices against the United States. “Canada does not allow American banks to do business in Canada, but their banks flood the U.S. market,” Trump Write About the Truth Society. “Oh, it seems fair to me, doesn’t it?”
For Trump’s tariffs, this is not a good reason, for two reasons. Currently, North American trade is bound by the United States-Mexico-Canada agreement, a trade agreement conducted by Trump himself. The United States will have a chance to renegotiate That’s 2026. Looking to improve the terms of North American trade through orderly legal processes rather than a trade war, this will make the people of these three countries poor.
Fundamentally, though, Trump’s claim that Canada has banned American banks from doing business within its borders is wrong. In fact, Bank of America has been operating in Canada More than a century.
4) Unless Trump’s tariffs are intended to force Canada to become the 51st state
Last month, Trump Posted On social media, “Canada should be the 51st state we cherish. Taxes are much lower, military protection for Canadian people are better taxed, and there are no tariffs!”
Trump repeatedly mentioned his desire for Canadian annexation when he spoke of his 25% tariff on the country. Canadian Prime Minister Justin Trudeau Already said He believes Trump takes “the country that absorbs us” very seriously. After meeting with Gil McGowan, the leader of the Alberta Labor Federation, Say on X“I can confirm that Trudeau said his assessment is that what Trump really wants is not fentanyl or immigration, or even a trade deficit, and what he really wants is to dominate Canada or take it directly.”
Covering a country so that you can conquer it is not a morally legitimate goal of trade policy. It also doesn’t work. Canadian The vast majority of objections Join the United States. They are unlikely to feel warm with the concept after seeing the U.S. government deliberately causing economic pain to them.
5) Unless Trump’s tariffs are designed to boost revenue
Finally, the Trump administration has repeatedly suggested that high tariffs be regarded as a means of increasing income, allowing the United States to lower its income tax rate. The tariff is actually the business tax on foreign goods paid by the import company, which then transfers the fees to the consumer. Trump has proposed the idea of replacing income tax entirely with tariffs and proposed creating “External tax services” Collect responsibilities.
You cannot offset permanent tax cuts with temporary tariffs. So if Trump’s goal of tariffs on North America is to generate income, they may stay for a while.
But this is not a good idea. Replacing income tax with tariffs is highly regressive because working-class families have a higher share of their income, higher than wealthy goods. However, fundamentally speaking, using tariffs as a source of income is incompatible With all other trade goals from Trump.
If the president wants to use these responsibilities as a tool to force Canada and Mexico to increase border security, or to open up the protection sector of the economy – then once these countries comply with his will, he needs to be willing to raise tariffs. In this case, tariffs will not generate long-term revenue.
If Trump actually wants to remake the U.S. economy (let the company move all its factories to the U.S.), tariffs will provide more and more revenue over time as American consumers buy less and less foreign goods.
And if Trump’s real purpose is to force Canada to join the United States, all relevant taxes on Canadian goods will be cancelled after Canadian goods enter the league.
All of this makes it difficult to say exactly that Trump and the two closest allies of the United States bombed the trade relations. Obviously, the president’s reasoning is deeply confused. In short, Trump has decided to keep the people of the United States, Canada and Mexico poor for no good reason.
