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The Great Canadian Tariff Thread

Ford backed down on the electricity tariffs, so I expect Trump to back off on expanded steel and aluminum tariffs. You never know though, he's quite unhinged and extremely unpredictable...
 
trtcttc said:
The question is why? What does the US want to accomplish that will require Russia? Russia's primary value is its natural resources, which primarily supplies Europe, and would run counter to this admin's stated goals of increasing US resource production. It's like how they want to restart Keystone, while simultaneously wanting to tariff Canadian energy to increase domestic energy. Russia does have a security council vote, but so does China, and one veto is all it takes.
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I think it would be a power play, China is the only country that could actually challenge the US in military or economic power, removing Russia as a dependable Chinese ally would be a benefit to the US. Trump wants power and that seems to be all he wants.
 
Surrealplaces said:
Anyone want to take a guess at what his motivations are? or is a case of him being plain stupid when it comes to economics?
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Given how bent Trump is on decreasing the US national debt I have a sneaking suspicion that he’s using tariffs as a way to gain extra cash flow to pay off these debts.

However I wouldn’t be shocked if he either is

A: Using the tariffs as a way to weaken our economy to further push the narrative that we would be better off is the United States Annexation us.

I believe that his narrative on taking back the Panama Canal, Greenland, Canada, Gaza, Etc. is his attempt to forever solidify himself in US history as a president that expanded American national interest and expanded their empire (this could be of course tied to him wanting to secure rare earth minerals and resources as well). Rather that a president who was twice impeached and convicted of a few dozen felonies.

or B: He is genuinely convinced that enacting a protectionist ideology in regards to American trade will bring back manufacturing jobs and strengthen the “American Main Street”.

I’ve seen some other far fetched theories online that are also increasingly entertaining. My favourite being that he sees Canada as a divided nation and he’s using the threat of tariffs to drum up Canadian Patriotism.
 
AtlanticAvenue said:
Given how bent Trump is on decreasing the US national debt I have a sneaking suspicion that he’s using tariffs as a way to gain extra cash flow to pay off these debts.

However I wouldn’t be shocked if he either is

A: Using the tariffs as a way to weaken our economy to further push the narrative that we would be better off is the United States Annexation us.

I believe that his narrative on taking back the Panama Canal, Greenland, Canada, Gaza, Etc. is his attempt to forever solidify himself in US history as a president that expanded American national interest and expanded their empire (this could be of course tied to him wanting to secure rare earth minerals and resources as well). Rather that a president who was twice impeached and convicted of a few dozen felonies.

or B: He is genuinely convinced that enacting a protectionist ideology in regards to American trade will bring back manufacturing jobs and strengthen the “American Main Street”.

I’ve seen some other far fetched theories online that are also increasingly entertaining. My favourite being that he sees Canada as a divided nation and he’s using the threat of tariffs to drum up Canadian Patriotism.
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Nah. He is trying to maintain ratings for The Apprentice Executive Branch Edition 2 by staying at the top of newsfeeds
 
CalgaryTiger said:
I'd say he was planning a massive tax cut and to then cover it with tariffs but in that scenario you don't do the tariffs first, you do the tax cut and the tariffs. Even Danielle knew you use a tax cut to disguise the worse thing that you're also doing.

I think it is about resources and resource control. Ukraine, Greenland, Canada (resources). Panama Canal, Northwest Passage (resource control). Minerals are this centuries oil.

It is why he's ignoring Mexico, they have nothing he wants. We are going to have to fight like hell to keep our resources.
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He is ignoring Mexico as it has a functional government and isn't an avatar for woke. Canada is the easiest of targets. Most of this likely wouldn't have happened if Canada had held an election last year with a majority.
 
DougB said:
He is ignoring Mexico as it has a functional government and isn't an avatar for woke. Canada is the easiest of targets. Most of this likely wouldn't have happened if Canada had held an election last year with a majority.
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Guess you've never heard of cartels. If you truly believe that there's some ocean front property in Mexico City you can buy.
 
EU are in the tariff war now, the US will isolate themselves very quickly if Trumps madness isn't checked. Based on the article above, Republicans just eliminated any chance of keeping Trump in check, they have given him absolute power. This is getting scary.
 
I actually would have thought the tariff policy would deviate based on how much he hates on us, and apparently respects the Mexican PM, but that really hasn't happened. I think we get a few more angry tweets, but that's the only material different tariff approach. Trump's tariffs on Mexico and Canada have largely remained the same - 25%, on most goods, first on, then delayed, then on again, then delayed with exceptions - regardless of the two countries different seemingly public approaches to Trump's threats. The results are the same for both countries.

This suggests to me it's not really what either country is doing that is driving this, which shouldn't be a surprise - the justification for blowing up the current signed trade deal has always been made up.

I don't think he or his team have some grand strategy plan - but I do think they legitimately think that tariffs are a great policy to bring back American manufacturing. This is what makes things so dicey - tariffs at this scale will cause economic turmoil, inflation and job losses, and the Americans really don't seem to care. Again, tariffs are not the means, they are the end. They are just failing to convince an increasingly skeptical market and business community so have to keep backtracking.
 
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There's a theory that Trump is a Russian agent helping to destabilize the US. I don't personally believe it, but I have to say that if he is, he's executing the playbook perfectly. Deteriorate alliances with Canada, Mexico and Europe. It doesn't leave any other meaningful alliances.
 
CBBarnett said:
I don't think he or his team have some grand strategy plan - but I do think they legitimately think that tariffs are a great policy to bring back American manufacturing. This is what makes things so dicey - tariffs at this scale will cause economic turmoil, inflation and job losses, and the Americans really don't seem to care. Again, tariffs are the means, they are the end. They are just failing to convince an increasingly skeptical market and business community so have to keep backtracking.
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That's quite possible. He's always been a supporter of tariffs going way back. In the 80's he was pushing to tariff Japan, even taking out full page ads in newspapers to push the idea.
 
I think he clearly is looking at Tariffs as a revenue source, but he has to know that this will lead to anti-American policies from everyone he tariffs, which will devastate the economy.
 
Mountain Man said:
I think he clearly is looking at Tariffs as a revenue source, but he has to know that this will lead to anti-American policies from everyone he tariffs, which will devastate the economy.
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The longer this goes on, the more I think they really don't care about how unpopular tariffs are, internationally or domestically. There's probably some truth to the idea they want to use tariffs to pay for stuff like further tax cuts, but I also think they really do believe their own "American exceptionalism" propaganda - massive, unstable and unpredictable tariff policies don't usually improve your economy, but this time they will work because of how special we are!

The reality is that tariffs are almost always self-defeating.

Here's how I am thinking about this stuff. For today's example, aluminum.

The US consumes 5 million tonnes annually. It produces less than 1 million tonnes, so it imports 4 million tonnes, mostly from Canada. Now those 4 million tonnes are 25% more expensive. Domestic US production will be incentivized to increase but can't do that overnight (new mines, production facilities take time to build), and probably can't ever meet demand due to supply constraints - the US might simply not have enough aluminum reserves to mine.

The reason Canada sells the US aluminum is that we can produce it cheaper and at volumes they demand. If the US could produce it cheaper and at those volumes, they wouldn't import it. It's classic economics 101 example of "comparative advantage" - we are cheaper to mine and create the aluminum, the US is cheaper to build stuff with it for the next part of the production chain. Everyone benefits by paying lower costs throughout the process and getting the jobs for the steps they are more competitive at.

And that's the problem - the US is now taxing their own companies that build stuff with aluminum. Domestic prices of aluminum will also rise with the increased demand (this is actually intentional, the goal of the tariff is to make the higher domestic prices more attractive for investing in mines etc.). But in the meantime, everyone that uses aluminum is paying more. That cost must go somewhere, passed on through the production chain to consumers and end users. This is obviously inflationary but not to be overlooked is just plain disruptive - random price jumps of 25% make it very easy to destabilize low-margin production processes to the point production doesn't make sense at the new higher input prices.

Another downstream impact is that as all US produced goods that use aluminum are now more expensive,. they are less competitively priced for export. This encourages other countries to substitute from other countries. That's even before any of the retaliation that other countries will apply themselves on American goods, weakening demand for US further. This risks further job losses.

This is why tariffs are so hated by free market economics thinking - trying to do something seemingly simple like tax one thing, disrupts many others connected processes all to a net downside for the economy. It's completely self-defeating.

In summary:
The US might get a few more mining jobs and aluminum production jobs one day - but at the cost of forcing every product and industry that uses aluminum to be more expensive and disrupted. The disrupted jobs and value-add activities vastly outweigh the possible benefit from the increased mining jobs.

The US team must know all this - this is pretty basic free trade economics. But either:
  1. They think increased domestic production of aluminum is a inherent positive (i.e. national security), that exceeds the downsides.
  2. They think the increase tariff revenues will be worth the downsides.
  3. They don't actually believe in free trade, because they don't think it applies to their "exceptional" economy.
  4. They actually want something else - a domestic political win story somehow, concessions on other things (like borders, annexation and destruction of Canadian sovereignty).
It's probably some messy combo of all 4 of these things, but the only thing for sure the tariffs are not about is border security and fentanyl.

Best case scenario for Canada is the chaos the US creates becomes too much politically for the US eventually declares they won and retreat and try to move away from the tariff issues entirely. Long term the damage is permanent already. No one will trust an American trade deal for a generation.

I think it ultimately this whole mess will be good for Canada to resolve many sticky dumb problems we have but were never motivated to solve like internal trade barriers and renewed devotion to execute infrastructure mega-projects. None of this will be as cheap as having a stable free trade setup to the US - but there's not much choice anymore so best get on with it.
 
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CBBarnett said:
The US team must know all this - this is pretty basic free trade economics. But either:
  1. They think increased domestic production of aluminum is a inherent positive (i.e. national security), that exceeds the downsides.
  2. They think the increase tariff revenues will be worth the downsides.
  3. They don't actually believe in free trade, either because they don't think it applies to their "exceptional" economy.
  4. They actually want something else - a domestic political win story somehow, concessions on other things (like borders, annexation and destruction of Canadian sovereignty).
It's probably some messy combo of all 4 of these things, but the only thing for sure the tariffs are not about is border security and fentanyl.
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Definitely part of it is a messy combo of the 4. I believe that some or many of the yes men around Trump probably realize tariffs aren't good. It's economics 101, with a few variable here and there, but generally tariffs aren't good.

As far as his base goes - in particular the maga folks, they firmly don't understand tariffs, and believe this is the best thing for the US. I've been caught in up some social media battles and discussions, and managed to have some civil discussions with a few maga supporters, and those people in particular firmly believe this is the best thing for the US. They live in areas where factories have closed over the years, and many work minimum wage service jobs etc.. I get their frustration, bit there's also a reality here, that they just don't understand.
For the people at the top and in Trump's circle, I'm worried they have other motives.
 
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