Shooting oneself in the foot

Seeing the world’s largest economy take a blowtorch to itself is painful even for the casual observer, but the tragedy is that the consequences are going to be negative for everyone. US President Donald Trump has chosen to target the only two counties bordering the USA, as well as China, In his executive orders imposing the tariffs, 25 percent on Mexican and Canadian goods, and 10 percent on Chinese, he said that the tariffs were being imposed until the national emergency on fentanyl was over. There is no doubt that the USA faces a serious opioid crisis, but Mr Trump took no other measures to deal with the emergency that he declared. Particularly, he took no measures dealing with the demand for opioids in the USA that drives the crisis.

It is disingenuous on Mr Trump’s part to claim that he has imposed the tariffs only because of drugs. There is a desire to protect American jobs, which he relentlessly said during his campaign were moving to Canada and Mexico. However, it seems that the tariffs will have three effects: first, they will raise prices for US consumers. Second, they will not save any jobs. Finally, they will see prices rising on goods nominally made in the USA, which use components made in one of the three affected countries. The US auto sector with prices rising an average $3000 a car, according to one estimate. The real issue for Mr Trump has to be immigration from Mexico, which includes people coming to the USA from Central and South America  but who use the Mexican border to make the crossing, often enough illegally.

It is not merely a trade tiff among four countries. As the West has not recovered from the post-pandemic bout of inflation, any fresh inflation, especially in the USA, will affect the whole world. The USA is simply not able to produce economically, because its labour is over-priced and insufficiently productive. Mr Trump should realize that no amount of tariffs can remedy that. Mr Trump should reallize further that the problems he wishes to rectify by taking a blowtorch to the world’s economy are domestic: fentanyl demand is not created by China or Mexico, and illegal immigrants find work in the USA because ‘native’ Americans no longer want to do jobs involving manual labour, or dirt. Mr Trump should seek solutions at home rather than throw responsibility on the rest of the world.