Tariffs …. Good or Bad?

[mtalbot_ca]

Hello all !

Being from Canada, the current tariff position adopted by the USA is not well received. I believe that this topic was not well covered during the last presidential election. Tariffs took Roots really during the past month. Any thoughts from Realcenters?

Cheers.

[tdtwedt]

Peter Schiff's view...

25% tariffs on goods coming in from Mexico and Canada are not a disaster for Canada or Mexico. There will be declines in U.S. sales, but those countries can still consume those goods domestically or export to other nations. So companies making those goods will see profits fall for the portion of their sales that go to the next highest bidders.

But Americans will be paying higher prices on all Canadian and Mexican imports they buy, or for higher-priced domestic substitutes where available. But many lower-income Americans will be priced out of the market for those goods entirely.

So the tariffs portend more negative consequences for Americans than they do for Canadians or Mexicans. If either Mexico or Canada retaliates with tariffs of their own, the effect will be the same. Their own citizens will suffer more than Americans. That is the unique nature of a trade war. Each side suffers most from its own offensive.

The best way for Mexico and Canada to win is not to retaliate. That would include not providing any subsidies to exporters or any attempt to weaken their currencies. That would only reduce the sting tariffs have on Americans, shift the burden to their own people, and prolong the trade war.

https://x.com/PeterSchiff/status/1885686004646129978

[mtalbot_ca]

One thing I just learned is that the Tariffs can be imposed by the country both as an importing or exporting tax. So oil exports from Canada could be taxes by the US (paid by the importer to the US) and be taxes 15% at the export (paid by the importer to Canada). This is not good….

[pmbug]

25% tariff will be disruptive to existing cross border supply chains. If you believe Trump's rhetoric on the issue, they were imposed for specific reasons and could be revoked if those reasons are mitigated (ie. the tariffs may not necessarily be a permanent thing). Meanwhile, there will be pain as markets work to find a new equilibrium. Given what's happening with gold and silver, it looks like the tariffs might cause some significant deleveraging in at least some commodity markets.

[Lemon Thrower]

Trump's philosophy, with apologies to Teddy Roosevelt, is to talk very loudly and carry a big stick, so that he doesn't have to use the stick.

From the U.S. perspective, Canada has not been helpful with the border, with its military commitments, and balance of trade.

My expectation is that once Trump comes to a more fair arrangement with Canada and Mexico the tariffs will disappear.

Long term, I like the idea of tariffs replacing the income tax. It shifts the cost of government to others. Of course, people who don't pay much income tax would have a different view.

[thecrazyone]

I feel like going after these countries are just low hanging fruit. I think China is the one to get new rules imposed on.

[Lemon Thrower]

I feel like going after these countries are just low hanging fruit. I think China is the one to get new rules imposed on.

low hanging fruit is the right way to think about it. His goal is not to impose tariffs on Canada and Mexico. Its to get Canada and Mexico to meet expectations in other areas. The threat of tariffs is just a tool but no one can be certain that Trump isn't serious, he's two unpredictable.

[thecrazyone]

Will this activity push gold up higher? There's already fears about impacts to the market.

[mtalbot_ca]

I did not know that Canada is the biggest client of the US, closely followed by Mexico. See: https://tradingeconomics.com/united-sta ... by-country

[natsb88]

Regardless of whether they are being used as a bargaining chip or a futile attempt at protectionism, tariffs are a tax on Americans, paid by Americans, to the federal government. Foreign countries do not pay US import tariffs on the goods they export. US companies pay the tariffs and necessarily pass them on to their customers. The net effect is higher cost goods for Americans and new revenue for the federal government.

The retaliatory tariffs from Canada and Mexico on US goods will likewise harm their own populations the most, but will also hurt demand for US-made goods. Where Trump is slapping tariffs on all of the US's major trading partners, Canada Mexico and China can trade amongst each other and cut us out of the equation to some extent (less so with energy and food).

The common trope is that tariffs will reshore manufacturing. The reality is that US manufacturers face gigantic regulatory hurdles and labor/benefit/compliance costs that are an order of magnitude greater than places like China and Mexico. These tariffs will cost Americans billions of dollars in federal taxes, but are nowhere near "leveling the playing field" to the point where manufacturers are going to invest trillions of dollars in new supply chain and manufacturing infrastructure here. Manufacturers know these policies are likely to go away or be greatly diminished in four years, and in many cases, even if it were economically viable, it would take that long or longer to design, permit, build, outfit, and activate new manufacturing, which would be highly automated with minimal "blue collar" employees. The handful of US manufacturing jobs "created" as a result of tariffs during Trump's first term were in specific industries that lobbied for it and cost Americans millions in federal taxes for each position. There will be anecdotal stories of small pockets of jobs created by Trump's tariffs, but the reality is that we simply aren't going to start manufacturing televisions, cell phones, small appliances, toys, most tools, hobby items, etc. here as a result of tariffs.

The nostalgia of everything being better when the US assessed many tariffs comes from a time when there were very low or no federal income or corporate taxes, much lower regulatory burden, and the technology and capacity for global trade was nothing like we have today. There is no serious proposal to address most of the factors that make mass manufacturing of so many things in the US impractical, therefore tariffs are just an additional tax on Americans that will exacerbate existing inflationary pressures. If Trump wants to bring back American manufacturing, he has to fix federal monetary policy in such a way that future administrations can't fire up the printers again (stabilize costs and wages), he has to slash federal spending to balance the budget, he has get congress on board with eliminating the income and corporate taxes, he has to slash federal regulatory burdens on businesses (licensing, environmental permitting and EPA overreach, FDA/USDA overreach, abuse of the intellectual property system and other frivolous lawsuits, nonsensical ADA requirements and lawsuits, OSHA overreach, and so on), he has to reform all of the disjointed welfare/benefits programs that create welfare cliffs that incentivize people not to work, he has to decouple healthcare from employers, etc. I know he claims to be working on some of those issues, but without addressing all of those factors, which would require major legislative cooperation, we will get the negative consequences of the tariffs without any meaningful reshoring of manufacturing. Enacting tariffs first is putting the cart before the horse.

Interestingly, the 25% Canada, 25% Mexico, 10% China tariffs will likely have the effect of increasing our direct trade with China. Over the last eight years or so there has been a huge boom in warehousing and "manufacturing" in Mexico, by which I mean companies have been shipping major components and nearly finished goods from China to Mexico, doing often trivial "final assembly" in Mexico, labeling the goods "Made in Mexico," and then shipping them into the US. This started as a way to circumvent Trump's original China tariffs and continued to build up during the extended possibility of a dockworkers strike on the US west coast ports. If the 15% differential in tariffs sticks around, it may shift that dynamic in favor of direct imports from China.

There are also lots of warehouses in Texas and elsewhere along the border that are stuffed with front-loaded imports. A number of major retailers started anticipating this tariff possibility 6-12 months ago and ordered and imported as much as they could ahead of time. Of course smaller companies don't have the capital and logistics available to make that gamble, so this is another example of federal actions disproportionately harming small businesses.

Credit where credit is due, I agree with a number of Trump's executive orders and appointments this time around. But he's still wrong about tariffs.

[Lemon Thrower]

by that logic, personal income taxes are a tax on foreigners paid by foreigners.

as it pertains to gold, the tariffs are not moving the price. Its the failure of DC to reign in its budget deficit during good times, and the Fed's inability to impact long term rates. The snowball had already been rolling down the hill after the political shenanigans with SWIFT, and then stealing Russia's dollar reserves. The move in gold started 2 years ago when they froze those reserves. The price is being moved by central banks, not by retail (retail prices have come way down). The US isn't importing gold or silver, we produce a lot here, if anything we are selling it.

[tdtwedt]

Here’s what could get more expensive under Trump’s tariffs

The sweeping tariff could make more expensive a host of items that the U.S. imports from its neighbors. Among the common Mexican imports that will now get pricier to bring into the country: fruits, vegetables, beer, liquor and electronics. And from Canada: potatoes, grains, lumber and steel.

https://www.cnbc.com/2025/02/02/heres-w ... riffs.html

[mtalbot_ca]

The nostalgia of everything being better when the US assessed many tariffs comes from a time when there were very low or no federal income or corporate taxes, much lower regulatory burden, and the technology and capacity for global trade was nothing like we have today. There is no serious proposal to address most of the factors that make mass manufacturing of so many things in the US impractical, therefore tariffs are just an additional tax on Americans that will exacerbate existing inflationary pressures.

. Interesting. Thanks for sharing.

[Lemon Thrower]

The nostalgia of everything being better when the US assessed many tariffs comes from a time when there were very low or no federal income or corporate taxes, much lower regulatory burden

I think everything would be much better without an income tax and a lower regulatory burden. I think that is a reasonable view, Constitutional, and not merely "nostalgic."

[Lemon Thrower]

Well that was fast. Mexico is going to the stop the fentanyl coming across the border, and Trump has stopped the tariff on Mexico.

https://www.zerohedge.com/markets/trade ... 000-troops

[thecrazyone]

And they are supposedly sending 10k troops to the border. Hopefully they're not the same ppl who were planning to cross it.

[68Camaro]

The nostalgia of everything being better when the US assessed many tariffs comes from a time when there were very low or no federal income or corporate taxes, much lower regulatory burden, and the technology and capacity for global trade was nothing like we have today. There is no serious proposal to address most of the factors that make mass manufacturing of so many things in the US impractical, therefore tariffs are just an additional tax on Americans that will exacerbate existing inflationary pressures.

. Interesting. Thanks for sharing.

Tariffs have two useful related purposes: 1) as punishment for bad behavior that you want changed, and 2) as leverage applied to cause a damaging (to you) behavior to change. In #1 it is best employed in cooperation with a consortium of other states that want to isolate the bad actor, like the west had done with Iran. In #2 it is best employed in limited use and or when you have a major trade deficit with the country being tariffed; the idea being that the tariffs encourages a solution that is both quicker and better than you would otherwise get.

Trump appears to be using appropriate strategies. In the case of Iran they had been working until Biden undid them, so they are being reapplied. In the case of China, the US was getting more than it was losing. In the case of Mexico, it seems to have worked, and the tariff is canceled (well, paused, but no doubt that it worked). The case of Canada remains to be seen. The provincial governments seems willing to work with the US, especially the western half of Canada. The Canadian Federal government however, doesn't want to play, but Trudeau is exiting soon, so he just needs to save face somehow and he will cave.

[silverflake]

Here is my over simplified, not-an-economist view on how tariffs will affect ME (and it's all about me, right? wink wink) - If the tariffs make items that I buy more expensive, then at least its in my control whether I pay it or not (I choose NOT to buy that item...). Of course that may be difficult if the tariffs are on energy and/or fuel. But I'd rather have a tariff as a sort of proxy "sales tax" than have an income tax. An income tax taxes production, a sales tax (tariff?) taxes consumption. Thus I can just consume less (if I choose) and the tariffs will have a smaller effect on me. I unfortunately cannot affect my income tax except through theoretically voting for someone who will try to lower it.

Good luck, keep stacking in the meantime.

[Lemon Thrower]

comedic relief
https://babylonbee.com/news/trump-annou ... nley-cupkl

[mtalbot_ca]

Let’s play!

[natsb88]

I think everything would be much better without an income tax and a lower regulatory burden. I think that is a reasonable view, Constitutional, and not merely "nostalgic."

I'd rather have a tariff as a sort of proxy "sales tax" than have an income tax.

Sure, I would also very much like no income tax and a lower regulatory burden. Making those changes in conjunction with assessing tariffs would be a defensible economic strategy. Unfortunately, Trump is levying tariffs that are not at all contingent upon any of those other changes. He is just piling more taxes on top.

Looks like we get at least a month reprieve to negotiate with Mexico and Canada now. Hopefully something similar happens with China, but I'm not holding my breath.

[Lemon Thrower]

Tariffs have two useful related purposes: . . . .

Tarriffs have an additional purpose - to level the playing field.

If US manufacturers have to comply with safety and pollution regulations, but a manufacturer in China can save 25% because those laws do not apply to them (nor does global warming somehow, go figure), then a 25% import tariff simply levels the playing field and makes production in the US competititve. Another example would be a company in Canada or Europe that pay lower taxes than in the US because Canada or Europe underfunds their military and free rides on the U.S. Now, these are political arguments, and reasonable people may differ on where things stand. But what is inarguable is that tariffs can serve a third purpose - to balance inequities in trade or regulation.

[tdtwedt]

China retaliates with additional tariffs of up to 15% on select U.S. imports starting Feb. 10

China’s finance ministry said Tuesday it will impose additional tariffs of 15% on coal and liquified natural gas imports from the U.S., starting Feb. 10.

China will also levy 10% higher duties on American crude oil, farm equipment and certain cars and trucks, as well as enacting export controls on certain products related to critical minerals.

https://www.cnbc.com/2025/02/04/china-l ... eb-10.html

[tdtwedt]

Peter Schiff..

In retaliation for Trump's 10% tax on Americans who buy Chinese goods, China will tax its own citizens 15% on U.S. coal & liquefied natural gas, and 10% on U.S. crude oil, farm equipment, SUVs, and pickup truck purchases. A better response would have been selling U.S. Treasuries.

https://x.com/PeterSchiff/status/1886760407534072113

[68Camaro]

Tariffs have two useful related purposes: . . . .

Tarriffs have an additional purpose - to level the playing field.

If US manufacturers have to comply with safety and pollution regulations, but a manufacturer in China can save 25% because those laws do not apply to them (nor does global warming somehow, go figure), then a 25% import tariff simply levels the playing field and makes production in the US competititve. Another example would be a company in Canada or Europe that pay lower taxes than in the US because Canada or Europe underfunds their military and free rides on the U.S. Now, these are political arguments, and reasonable people may differ on where things stand. But what is inarguable is that tariffs can serve a third purpose - to balance inequities in trade or regulation.

That's the traditional excuse for tariffs, which people have argued create trade wars. It can be done "constructively" as part of my 2nd purpose, but if just an escalating tit for tat without negotiations, it can be destructive. Depends on the skill of the implementation.