Jim Hartman
In his inauguration speech, President Trump promised “a golden age of America” declaring “we will tariff and tax foreign countries to enrich our citizens.”
It was not a new theme.
“I am a Tariff Man,” Trump declared in a 2018 online post.
Today, he says “tariff” is his favorite word and represents “a very powerful weapon that politicians haven’t used because they were either dishonest, stupid or paid off in some other form.”
Trump launched a trade war against America’s three biggest trading partners, drawing immediate retaliation from Mexico, Canada and China. That sent the stock market into a tailspin as the U.S. faced the threat of rekindled inflation and paralyzing uncertainty for business.
Amid an escalating Canada-U.S. tariff tit-for-tat momentary truce, the White House rushed to raise tariffs on China and on aluminum and steel made abroad.
Also promised are increased import levies on the European Union, and on new, foreign-made cars, microchips and pharmaceuticals.
Trump has similar plans for potentially every country the U.S. does business with, saying broad “reciprocal” import taxes are coming April 2 consistent with levies other countries charge U.S. manufacturers to export their goods.
Peter Navarro, Trump’s senior counselor on trade and manufacturing, is the mastermind behind the trade war.
Known for hardline views on China, Navarro was an economics professor at the University of California, Irvine for over 20 years. He ran unsuccessfully for public office five times in California as a Democrat.
Navarro served four months in prison after conviction for contempt-of-Congress in 2023.
Joining the Trump administration in 2017, Navarro pushed for an escalating trade war pitting the U.S. against adversaries like China while simultaneously fighting with our trading partners, like Mexico, Canada, South Korea and the European Union. Creating a united front of allies in dealing with China would have been far better.
Navarro’s trade positions are at odds with most economists and the business community. Mainstream economists see tariffs as merely a means to an end, giving Trump leverage to negotiate deals that would result in freer markets.
Navarro has a different view. He advocates a permanent regime of tariffs, barriers and quotas to “balance” the trade deficit, discourage imported goods and encourage domestic manufacturing.
Trump is following Navarro’s model. That’s a rude awakening for financial markets. They wanted Trump’s second term to be like the first, giving priority to tax cuts, deregulation and economic growth. Carefully considered tariffs would come later.
In Trump’s first term, sweeping tax cuts preceded the imposition of selective tariffs. That meant the economy had solid momentum when the negative impact of tariffs hit.
This time the order will be reversed. The tariffs could be much wider while the amount of new tax relief will be smaller. New duties soon will cover $1.4 trillion of imports, nearly four times the first-term total, according to the Tax Foundation.
That’s a recipe for an economic downturn.
The conservative Wall Street Journal editorially opined: “The Dumbest Trade War in History,” blasting the 25% tariff on Canada and Mexico as based “on a whim.”
A tariff is a tax that will hit every cross-border transaction, and the North American vehicle market is interconnected. Some cars cross a border eight times as they’re assembled.
The Anderson Economic Group found the 25% tariff will raise the cost of a full- sized SUV assembled in North America by $9,000 and a pickup truck by $8,000.
Tariffs will also cause mayhem in the cross-border trade in farm goods. Mexican food exports make up 23% of total U.S. agricultural imports while Canada supplies 20%.
Most economists believe tariffs will ultimately result in rising inflation, farm and business bankruptcies, and lost jobs. Trump is impulsive and the administration’s back-and-forth tariff plan spooked markets.
Tariff uncertainty caused consumer sentiment to nose-dive in mid-March and recession fears increased.
E-mail Jim Hartman at lawdocman1@aol.com.