Donald Trump's Frivolous Trade War
Ronald Reagan warned us about starting trade wars against our allies, and now the American people will be one of the many losers.
When it comes to international trade, I am of the Ronald Reagan school of thought. As a believer in free trade, I am one to regurgitate Reagan’s message against economic warfare with our allies, which is why I have been appalled with Donald Trump’s trade policy. Trump is once again beginning to implement tariffs without really knowing the consequences of them.
Donald Trump’s forte is entertainment. That catapulted his career in real estate and television, and it translated to politics years later. There is no question that he thrives in the spotlight, and this recent trade war between his administration, Canada, and Mexico is no exception. For all the support he’s won with his base, however, President Trump’s trade war is already beginning to hurt everyday Americans.
Wanting Canada and Mexico to strengthen their borders with the United States, President Trump imposed 25% tariffs on imported products from those countries. Trump is upset with Mexico about the US-Mexico border crisis. The feeling is the same with Trump when it comes to Canada, citing a fentanyl problem coming from north of the border. These tariffs are supposed to remind Canada and Mexico who the main power in the region is. However, it may do Americans more harm than good.
Among the resources we receive from Canada are crude oil, petroleum, and motor vehicle parts. Canada also exports different meats and poultry to the United States. Through President Trump’s USMCA (United States, Mexico, Canada Agreement), the United States receives transport equipment and machinery from Mexico. On top of that, Mexico exports goods like fruits and vegetables to the United States as well.
For those unfamiliar with tariffs, here’s a quick rundown: A tariff works as a tax on imported goods from the countries. As Trump’s tariffs go into effect, this would mean the oil, machinery, and food we import from Canada and Mexico will begin to cost more for American consumers than they already do.
Canada also exports grain and livestock— which is essential for farming — to the United States. All of a sudden, the cost of farming will increase significantly. Anyone who knows economics knows that this will trigger a chain reaction which will lead to farm goods costing more for the American consumer. Eggs prices in the United States have already skyrocketed as a result of a massive shortage. This comes in the wake of a bird flu epidemic which has greatly affected American farmers. If President Trump follows through with his 25% tariff, costs will continue to rise on top of the already existing problem of scarce and expensive eggs.
President Trump has also announced that the tariffs will include steel and aluminum imported from Canada. This will be detrimental for steel companies, and in turn, steel workers across America for the very same reasons.
There is another economic reason as to why this trade war is a mistake. And it’s because Canada and Mexico are beginning to look elsewhere to establish free trade relationships.
Canadian opposition leader Pierre Poilievre — who is on track to become their next Prime Minister — has responded to Trump’s tariff threats by saying they need to look inward for more trading opportunities in an effort to become less dependent on American exports.
Furthermore, both Canada and Mexico, with tariffs being levied against them, also plan to retaliate with 25% tariffs on imported American goods. This will make it harder for us to export our goods that we send to those countries, which will lead to the same chain reaction that eventually leads to ordinary Americans bearing the brunt of the consequences.
Nobody wins in a trade war. In this case, one of the many losers will be the American people. Most economists agree that tariffs do way more harm than good for the countries that implement them. And this situation is exactly what Ronald Reagan warned us about. He urged us not to fall for rhetoric by demagogues that makes us want trading conflict with our closest allies. Unfortunately, it’s become abundantly clear that his words have fallen on deaf ears.
President Trump and his base may believe these tariffs will work towards the greater good in the future, but I do not believe the supposed end will justify the means. Reagan, in his address to the American people about tariffs, referenced the Smoot-Hawley Tariff Act in the 1930s as an attempt to alleviate the effects of the Great Depression. As we know from Ferris Bueller’s economics teacher, it didn’t work and sank the United States deeper into the Great Depression.
President Trump should shift course and reconsider his position on economic relations with our allies. However, he is exactly the demagogue that Reagan warned us about all those years ago. And the American people will face the biggest consequences of these new tariffs, just as Reagan predicted. These tariffs may be great in appealing to Trump’s base, but as we’ve learned from the past, they are not effective, and they certainly are not conservative.
To offer a counter-view, tariffs can function as an essential tool to protect American industries and jobs. Global free trade is idealized, as it can and has hurt domestic industries where foreign competitors exploit trade imbalances (e.g. manufacturing, automakers, agriculture, pharmaceuticals, renewable energy, consumer goods, etc.). President Trump's recent tariffs on Canada and Mexico may very well prove to be a necessary measure in order to safeguard the aforementioned domestic sectors from unfair competition. In a 2019 report from the U.S. International Trade Commission (USITC), steel and aluminum tariffs aimed to protect domestic production, as it had been heavily undercut by low-cost foreign imports from China. The DoD has noted time and again, that over-reliance on foreign suppliers for critical materials can compromise national security.
Regarding Reagan: his free trade stance was not absolute, he implemented protectionist policies when they aligned with national interests (e.g. 1983 tariffs on Japanese motorcycles). Trump's tariffs, however disruptive, possess similar goals of sector revitalization (steel, aluminum, textiles, electronics), a vital component of domestic infrastructure and security. Moreover, the renegotiation of NAFTA into the USMCA was design to reflect contemporary realities of international trade, adding stronger labor and environmental provisions to protect U.S. interests. The Peterson Institute for International Economics points out how this recent iteration provides superior IP and labor rights clauses, both of which benefit the American workforce.
On retaliation: while Canada and Mexico may impose tariffs on U.S. goods, this is a common consequence in trade negotiations, which have historically sparked new negotiations with better terms (e.g. the 1930s Smoot-Hawley Tariff sparked retaliatory actions initially but led to trade policy shifts in the long run). I think the long-term benefits of more equitable trade agreements, even at the cost of short-term disruption, strengthen our global position. In essence, these tariffs function as a strategic tool to protect domestic interests. Empirical evidence suggests that the economy can benefit from these policies over time, as trade deficits will be reduced, fairer trade practices will be encouraged, and more resources will be invested internally to effectively compete against foreign imports.