Summary
Trump announced that 25% tariffs on imports from Canada and Mexico will take effect on February 1, though a decision on including oil remains pending.
He justified the move by citing undocumented migration, fentanyl trafficking, and trade deficits.
Trump also hinted at new tariffs on China.
Canada and Mexico plan retaliatory measures while seeking to address U.S. concerns.
If oil imports are taxed, it could raise costs for businesses and consumers, potentially contradicting Trump’s pledge to reduce living expenses.
I do ultimately think tariffs will be good for the US. I feel bad for other countries I guess, but I think the US needs to be more productive.
California, seen as a relatively “progressive” state, has a sales tax on everything, and pretty extreme sin taxes. A tariff is like a sales tax, and a sin tax on specific imports.
The way you increase productivity is via exports, not artificially increasing the cost of goods. A sin tax is when you want to stop people from doing things so you make it more expensive. If you want to increase American cement production, you subsidize production.
Adding a tarrif to Canadian cement imports increases cost for imported cement, and encourages domestic producers to increase costs to match. If the competition just got 15% more expensive, there’s no reason for me to not raise my prices 14%.
If the government comes in and says they’ll pay me $15/ton of cement I produce, that encourages me to produce more cement and lower the price to sell it. Now I’m producing more, and I need to hire another machine operator and the economy grows because the lowered cost of cement makes people more willing to do things that need cement.
Tariffs are really only good for counteracting other countries subsidies. If Canada were paying manufacturers $20 a ton to produce cement, then applying a $20/ton tarrif makes the prices unbiased.
It’s why our agricultural subsidies are viewed poorly by food scarce nations: we lower the overall market cost for food, and they can’t afford to subsidize their own production, and returning equilibrium on imports would starve people, so they’re trapped in a cycle of being dependent on imported subsidized food while living next to fallow farms.
Canada and Mexico aren’t subsidizing their export industries, and a lot of what we’re trading is in things we can’t or don’t want to handle. You can’t increase American uranium production, off the top of my head.
We had a position of trade strength, which meant that we could afford to import more than we produced because our intangibles were worth more, and what we exported was worth more. Import steel and export tractors. Now we’re saying we want to stop importing steel, making it harder to export tractors, so that we can bring back low paying dangerous jobs.
If you want to see productivity grow trumps way, go get a job as a farmhand picking spinach. Because his policy is basically that we need less engineers and more farm hands.
I’m glad you started your dissertation with “the way you x is via y” because it immediately informed me that I was reading the work of an expert genius and as a smooth brain, when a genius writes, I read.
One question, wouldn’t higher prices on imported cements sort of make local cements automatically cheaper, giving them an advantage without asking them to cut corners? In a free market you will often see a “race to the bottom” on goods, whereby manufactures and producers will cut costs so low that they lose money, so long as there is some other incentives that would lead to profit. Video game consoles are a common example. The console is sold at a loss with the expectation that they will make up the difference on the consumables, games and related services.
If local competitors can produce for lower cost than competitors it may drive more people, who generally just want to save money, to local businesses, creating demand, driving growth.
Tariffs only makes thing more expensive for everyone.
Let’s say you import steel at X$/ton and it cost Y$ locally where X < Y. You add a tariff T to make the imported steel on par with local steel.
Local steel still is as expensive and any production that uses imported steel now cost more.
Nothing went down in price, only up.
Now, there is a discussion to be had about buying local, but the immediate effect is that things will cost more even if manufacturers switch to local steel because they pay more for the same quantity no matter what.
This is a simplified version of the situation, but it explains the issue.
This assumes the local product wasn’t already cost competitive. If they are close and you slap a tariff on the import that adds further incentive to pick local. Assuming local would capitalize on the added revenue via reinvestment/expansion, it would create jobs and more demand, may even make the product or services even more affordable.
Video game consoles are sold at a loss on occasion because the marginal cost of game sales is extremely high. There’s no associated product to pair with cement that would drive you to sell it at a loss.
My point was that yes, it will drive people to local businesses, because they will be cheaper. Local businesses have no reason to keep their prices the same if the competition just got more expensive however.
I’m glad you found my comment informative. I’d hate to think I was talking to someone who wanted to say their opinion and then got defensive if someone disagreed with them. It’s a sign of someone with at least a wrinkle or two that they’re open to discussing their thoughts.
For more insight from people even more knowledgeable than me:
https://www.businessinsider.com/what-are-tariffs
https://www.businessinsider.com/krugman-trump-tariffs-immigration-deportation-grocery-prices-wealth-taxes-policy-2025-1
https://paulkrugman.substack.com/p/the-end-of-north-america
https://taxfoundation.org/research/all/federal/trump-tariffs-trade-war/
Well the console example demonstrates long term payout strategies. Another example is in free to play games with microtransactions. You develop a game at a cost, you give it away for free, and you hope that it’s good enough to hook people and get them to spend on “hats”. It’s a lot of money up front to make more later.
I think the problem is that these tariffs are, for the most part, untargeted. They aren’t a “tax” on “specific imports”. They’re a blanket tax on all imports from many countries.
I thought it was targetted but again in California its all items sold are taxed and some at a higher rate.