Tariffs Raise Prices, Spark Conflicts, and Make Everyone Poorer
We rely on Canadian energy and lumber, and Canadians rely on our products. It's the proverbial win-win.
Back when conservatives championed ideas rather than outsourced their thinking to their leader, they touted a simple saying: "Ideas have consequences." Conservatives also understood that while people should always be free to make their own choices based on those ideas, they should be responsible for the consequences of their decisions.
By all means, follow the advice of that YouTube quack who argues that vaccines include microchips that control the population. But when your kid is hospitalized with measles, that's on you. Unfortunately, in a democratic society, the population must endure the brunt of ludicrous ideas imposed by elected officials. (Check out my columns about the awful ones in California.)
We're now at the "good and hard" part of H.L. Mencken's definition about democracy being "the theory that the common people know what they want and deserve to get it." That's certainly the case with economic policy. If you occasionally check your retirement accounts and did so after the last two times President Donald Trump imposed 25-percent tariffs on Canada and Mexico, you will have noticed that they dropped precipitously.
The markets understand the basic truth about tariffs, which are taxes consumers in our country pay for imported goods. They raise prices, reduce our access to foreign goods and spark reciprocal tariffs that then punish our country's farmers and manufacturers. They lead to less growth and more unemployment. They increase bureaucracy by requiring officials to calculate duties and enforce them. They create hostilities and have led to actual war.
As economist Robert Higgs explains, "Fiscally, protectionism is a poor source of government revenue that dries up completely as tariffs are increased so much that they reduce trade flows to zero. Morally, protectionism is vicious because it coercively substitutes the ill-informed and ill-directed judgment of government officials for the judgment of people making deals with their own private property."
Given MAGA is an emotional movement based on resentment rather than a precise set of policy ideas, it's no surprise the president's ardent supporters dodge and weave alongside his ever-changing justifications. Our nation has some serious disputes with Mexico involving immigration and drug smuggling, so I'll focus instead on our government's juvenile trade war with Canada.
Trump threatened them to gain ill-defined concessions from our friendly, highly developed and peaceful allies to the north. Then, after it was clear Canada had already conceded to whatever it was our president demanded, he suspended them. His supporters claimed tariff critics didn't understand that this was just a brilliant negotiating tool. But then this month the president imposed them anyway. True to form, MAGA shifted back to arguing that tariffs are great policy in and of themselves.
Some of the more unusual MAGA folks don't seem to care about inflation or the stock market, but are mainly concerned about crushing satanic pedophiles in the deep state. But most people care about the economy. After the tariff announcement, the Atlanta Federal Reserve revised its annualized growth predictions to "a stunning -2.8%, down from +2.3% last week," according to Reuters. Then again who can trust Reuters, when you can get your information from Newsmax or TASS?
Last week, the administration suddenly exempted certain agricultural products and suggested that it might broadly suspend tariffs again. Who knows where things will stand by the time you read this. But markets hate uncertainty. This yo-yo effect is rattling them.
It's hard to understand the idiocy of picking a fight with Canada, except in the context of an administration that likes to punch down. Don't Americans realize the blessing of sharing the world's largest undefended border? Canadian provinces are pulling U.S. products from store shelves. Yet the Trump administration and GOP lawmakers are right on cue echoing anti-Canada taunts. This is sillier than the 1995 John Candy comedy, Canadian Bacon, where American hockey fans started a war after insulting Canadian beer.
We rely on Canadian energy and lumber, and Canadians rely on our products. It's the proverbial win-win. Any infinitesimal issues between our countries can easily be handled through diplomacy. Canadians are infuriated, and rightly so—not just by tariffs but by the administration's disrespect toward their sovereignty. Serious nationalists should respect the national aspirations of others.
By constantly referring to the Canadian prime minister as "Governor Trudeau," Trump has given new life to the Liberal Party, which is now competitive after having recently been down in the polls by 26 points. During her visit to a library that straddles the Quebec and Vermont border last week, Department of Homeland Security Secretary Kristi Noem kept stepping over the line into Canada and saying, "The 51st State." Canadians shouldn't be dogged by such imbecility.
When we're at war with another nation, we impose trade restrictions to punish the other country. Why would anyone in their right mind choose to punish ourselves for no apparent reason? It's a disastrous idea. Then again, voting has consequences.
This column was first published in The Orange County Register.
