Don’t Impose Tariffs on Canadian and Mexican Imports

This another report that saddened me, this one by Jeff Cox at CNBC:

In an early sign of an intensified focus on trade, President Donald Trump said Monday that tariffs could be levied against Mexico and Canada as soon as early February.

“We’re thinking in terms of 25% (levies) on Mexico and Canada, because they’re allowing a vast number of people” over the border, Trump said. The president called Canada “a very bad abuser” and said a target date for the tariffs would be “I think Feb. 1”

The remarks were made to members of the press as the newly minted chief executive offered a slew of executive orders aimed at everything from regulations to free speech to immigration.

While it’s been no secret that Trump plans on implementing across-the-board duties on U.S. trading partners, the timing and extent has been in question. There had been some speculation that the tariffs could be delayed and might be targeted at certain essential items rather than being more broad-based.

In his remarks, Trump provided no further details on how and when the tariffs could come.

While I understand the idea of raising the ante, I don’t think that imposing tariffs on imports from Canada or Mexico is the way to do it. The main effect of that will be to raise consumer prices in the United States, a perverse outcome. A lot of those imports are oil.

China is a special case. A Pigouvian tax in the form of a tariff is an appropriate remedy. Canada and Mexico not so much.

7 comments… add one
  • walt mofffett Link

    A lot of OEM car parts and cars come from both nations. Lets hope this just a negotiating tactic.

  • steve Link

    He, and his cult, appear to truly believe that it is the exporting country which bears the costs of tariffs. If you believe that then there isn’t much downside to tariffs so wont be surprised if he goes ahead.

    Steve

  • Grey Shambler Link

    What he believes in is incentives.
    Bluster or bluff won’t be effective in the long run but incentives……
    The election is over, his “cult” would be “the American people”.

  • steve Link

    Query- Trump negotiated the USCMA trade deal which he announced as the best trade deal ever. It has a 6 year re-negotiate clause. If he goes ahead with tariffs isn’t he breaking the terms of the trade agreement?

    “What he believes in is incentives.”

    That seems to be based at least partially upon his belief that the exporting country will pay the tariff which will give them an incentive to change. That’s not true. US consumers will pay the tariffs.

    Steve

  • PD Shaw Link

    Trump threated 25% tariffs on Mexico in 2019. Specifically, tariffs that started at 5% and ramped up to 25%. About a month later they were indefinitely suspended in light of Mexican leaders meeting and making various pledges.

    He doesn’t appear to have any legal authority to impose tariffs to aid of immigration policy. Section 232 tariffs (national security justification) of 25% on steel and aluminum were imposed by Trump, and maintained in different form by Biden, but that requires a year long investigation. Eight investigations were conducted under Trump and only those two resulted in grounds for tariffs. The tariffs were directed at specific countries, but Canada is the largest importer of both steel and aluminum and Mexico is the third largest for steel. Tariffs as to both countries were lifted with agreement on USMCA.

    The tariffs on China are based upon Section 301 (unfair trade practices) that have a long history of agreement across multiple administrations. What to do about the practices has been disputed.

    Biden’s policy was largely in continuity. There are tariffs on steel and aluminum against the EU, Japan and UK that exceed an import quota. Biden significantly increased tariffs on China (100% on electric vehicles)

    My prediction: In a month there probably won’t be any new tariffs on Canada and Mexico, and if they are they will only be on steel and/or aluminum pursuant to pre-existing authority. He may initiate an investigation for broader tariff authority. He may formally announce a threat to impose tariffs that ultimately is withdrawn by the time it was supposed to go into effect.

  • Drew Link

    I think PD has it closest. I might throw in lumber.

    It’s negotiating. He is fighting mercantilism. I think he understands the limits. Relax.

  • I’m not in a tizzy about it. Just putting in my two ¢

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