WASHINGTON — Just weeks after turning the strong economy he inherited into one at risk of a recession, President Donald Trump on Tuesday further escalated the dispute with America’s largest trading partner that is underlying much of the present economic anxiety.
“I have instructed my Secretary of Commerce to add an ADDITIONAL 25% Tariff, to 50%, on all STEEL and ALUMINUM COMING INTO THE UNITED STATES FROM CANADA, ONE OF THE HIGHEST TARIFFING NATIONS ANYWHERE IN THE WORLD. This will go into effect TOMORROW MORNING, March 12th,” Trump wrote in a rambling social media post Tuesday morning, ending, again, with his desire to take over Canada as the 51st U.S. state.
Then, hours later, the crisis appeared to defuse when Ontario Premier Doug Ford and U.S. Commerce Secretary Howard Lutnick agreed in a joint statement that Canada would not, after all, add a 25% surcharge to electricity being sold to some Northeastern states, and the U.S. would not immediately impose the even higher tariff on imported Canadian steel and aluminum.
How long this truce lasts is unclear, given how quickly and without apparent provocation Trump has declared he would impose tariffs and then postponed or undone them soon afterward.
“This is really bad for whatever manufacturing renaissance he’s trying to create,” said Douglas Holtz-Eakin, a conservative economist and a top adviser to Republican presidential nominee John McCain’s 2008 campaign.
He added that it was the on-again, off-again, partially-on-again, fully-on-again whipsaw of tariff pronouncements that are roiling the financial markets and making business planning impossible. “I don’t think he’s learned or much cares about the effect of all this on the markets,” he said.
“Canada has barely any tariffs on the United States,” said Jason Furman, a top economist in former President Barack Obama’s White House. “And their response to our tariffs has been proportionately on the low side. Any escalation will be shifting from shooting ourselves in the foot to shooting ourselves in the arm.”
Trump, of course, has never exhibited a familiarity with international trade in his adult life. For decades, he slammed Japan and then China for “ripping off” the United States — conflating the existence of trade deficits with being taken advantage of by those countries.
At some point, he began to claim — and perhaps actually to believe — that tariffs imposed by the United States are collected from the exporting nations. In reality, tariffs are collected at the port of entry from the person or firm importing the goods. Those costs are then passed along to consumers in the form of higher prices.
Trump also appears to have forgotten that the trading relationships with Canada and Mexico that he now disparages as unfair to the United States were codified by Trump himself just seven years ago when he celebrated the United States-Mexico-Canada Agreement.
“It’s a whole different ballgame, and it’s going to be great,” he said in a Michigan speech in early 2020 of the USMCA trade deal.
MARTIN BERNETTI/AFP via Getty Images
For years, Trump had disparaged the USMCA’s predecessor, the North American Free Trade Agreement, as unfair to the United States. In fact, though, USMCA was largely a renaming of NAFTA, with some minor tweaks to things like the rule defining how much of a car had to be made in the free trade zone to avoid tariffs. Other sections were copied and dropped into USMCA, whole cloth, from the Trans-Pacific Partnership, the trade deal negotiated by Obama that Trump also called horrible.
This history notwithstanding, Trump now claims that the USMCA also somehow cheats the United States — a position that, like his other false statements, his aides and staff must adopt as their own.
In the White House briefing room Tuesday, for example, press secretary Karoline Leavitt, who had said weeks earlier that Trump believed tariffs were paid by the exporting nation, restated that falsehood as fact.
“Tariffs are a tax hike on foreign countries that have been ripping us off. Tariffs are a tax cut for the American people,” she said, and then berated a reporter who challenged her lie.
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Meanwhile, Trump is likely to get tacit approval for his trade war whenever Congress passes a funding bill for the rest of the budget year. House Republicans inserted a provision that strikes the ability of any member of Congress to demand a vote on tariffs that a president has unilaterally imposed.
Andrew Bates, a spokesperson in President Joe Biden’s White House who previously worked in the United States Trade Representative’s office, said Trump has done nothing to lower consumer prices as he promised while campaigning and is, in fact, doing the opposite with his trade war.
“Trump could turn a lot of this around with a word, but he knows he can’t cut taxes for the rich without tariff revenue from everyone else,” Bates said.