Gavin Bade
Appearances
The Journal.
Trump’s Tariff Whiplash
I think the big looming question is what happens with China. Trump's going to hit them again with more tariffs. And they hold a lot of cards here. We still have a lot of reliances on them for different critical products, whether it's processing critical minerals or many products that U.S. manufacturers need for their factory processes.
The Journal.
Trump’s Tariff Whiplash
And if you have to pay more tariffs on those, that's going to hurt American manufacturing. So I think how China responds on those American choke points is going to be very interesting. But I will say this, you know, there's only so many times that Trump can threaten tariffs, threaten to put them in place, and then, you know, get his negotiation done and back down, right?
The Journal.
Trump’s Tariff Whiplash
At some point, he runs the risk of being the boy who cried tariff.
The Journal.
Trump’s Tariff Whiplash
So we're talking about 25% on Canada, 25% on Mexico. Those are our two biggest trading partners. With the exception of crude oil and energy products, they'll get a 10% tariff. That's our colleague Gavin Bade. And then a 10 percent additional tariff on all imports from China, which is our third largest trading partner.
The Journal.
Trump’s Tariff Whiplash
Trump wants to use tariffs in the classical sense of building American manufacturing. So he was elected talking a lot about how manufacturing has gone overseas, whether automotive manufacturing or even lower down the value chain. And he's saying, you know, I'm going to put these tariffs back in place so that companies like the automotive companies have to build their factories here.
The Journal.
Trump’s Tariff Whiplash
So a tariff, you can just think of it as a fee that is paid on a product when it comes into this country.
The Journal.
Trump’s Tariff Whiplash
Like a tax, right? It's a tax or a fee that you pay at the port of entry. The theory behind tariffs is you want to make products from other countries more expensive to make the products that you make in your country more competitive. So historically...
The Journal.
Trump’s Tariff Whiplash
almost every industrialized country including the united states has used tariffs to protect what they would call infant industries industries that are just getting started and they want to create growth for them right and so think about you know when any industry the steel industry in the united states was starting for instance you had really high protective tariffs all throughout the 19th century to protect it from competition from overseas markets
The Journal.
Trump’s Tariff Whiplash
It was a surprise in certain ways. He'd always said that he was going to do really intense tariffs on the campaign trail. Then he came in on the first day and he put out a policy memo saying we're going to study all of our trade deals and all of our trade policies. And so for a moment there, we all thought, hey, there's going to be a process here. They're going to do economic studies.
The Journal.
Trump’s Tariff Whiplash
And then only a few hours after he issued that memo, he came out and made that tariff threat.
The Journal.
Trump’s Tariff Whiplash
So there's a few general motivations here. Generally speaking, Trump has said the first and foremost, it's about the illegal fentanyl trade that they say has killed tens of millions of American citizens. That's maybe an inflated measure, but killed a lot of American citizens, right?
The Journal.
Trump’s Tariff Whiplash
They say that this fentanyl and the precursor chemicals are produced in China, shipped over to the United States, and then manufactured in factories in Canada and Mexico and smuggled over the border, right? And so he has said his tool for getting them to stop this is to put tariffs on them until they make it stop. But this is sort of a non-trade issue that he is using trade tools against.
The Journal.
Trump’s Tariff Whiplash
So dollar for dollar, we're looking at a tariff action that is larger than anything Trump did in his first term. And he did it all in one day. I think he did more than even some people inside the White House thought he would.
The Journal.
Trump’s Tariff Whiplash
That's one motivation. The second motivation is what he would call illegal migration through Mexico, mostly from Central and South America, from other nations as well, through Mexico. He has said he wants Mexico to stop that completely. And until they do... He's going to put tariffs on it. So again, a non-trade issue that a trade remedy is being used for.
The Journal.
Trump’s Tariff Whiplash
And then there's a number of lingering trade disputes from this U.S.-Mexico-Canada agreement that he signed, right?
The Journal.
Trump’s Tariff Whiplash
The new NAFTA, yes. So Trump signed this in 2020. He said it was the best deal ever and now is contravening it by putting tariffs into place, right? So he would say, although they made the automotive rules much tougher there, it's still a concern of his that there is still automotive manufacturing in Mexico and Canada. He would rather see that come over the border and be back in the United States.
The Journal.
Trump’s Tariff Whiplash
Canada and Mexico have basically said, tell us what you want us to do on this and we will do it, right? They've set up new fentanyl and migration working groups. And, you know, the administration all throughout last week was pretty publicly optimistic, right? You heard Caroline Leavitt, the press secretary, say, you know, Mexico's making some great progress on migration.
The Journal.
Trump’s Tariff Whiplash
There were a lot of U.S. industries, especially like the automotive industry, which does a ton of trade with Canada and Mexico, who had been begging him to put an exemptions process into this, basically a process to get a carve out from the tariffs.
The Journal.
Trump’s Tariff Whiplash
They were saying, look, we have continental supply chains that we have put in place because of the trade deal that you negotiated with Canada and Mexico in your first term, the so-called U.S.-Mexico-Canada agreement that replaced NAFTA. We made our supply chain, said the automotive industry, according to that deal that you negotiated and signed.
The Journal.
Trump’s Tariff Whiplash
So at least the cars that we make that are compliant with that deal, please make them exempt from these tariffs. Trump said, no, thanks. I would rather hit all of the automotive consumers with tariffs, all the automotive companies with tariffs.
The Journal.
Trump’s Tariff Whiplash
Tuesday, tomorrow, very, very quickly. So he promulgated them. He made the announcement on Saturday night after, you know, promising and getting everyone whipped up into a frenzy over the past few weeks. There was a lot of frantic lobbying around Washington, you know, Canadian and Mexican officials flying here, meeting with senior U.S.
The Journal.
Trump’s Tariff Whiplash
We have not heard as much from the Chinese government yet. I think they are playing their cards very, very close to the chest. By contrast, Canada and Mexico have had a much more forceful response.
The Journal.
Trump’s Tariff Whiplash
There's a lot of U.S. products that flow south of the border into Mexico as well. So, you know, and I think like thinking about your grocery store list, like a lot of that stuff is going to be impacted by the tariffs Trump put into place on Mexico.
The Journal.
Trump’s Tariff Whiplash
I think a lot of people are still trying to sort through the magnitude, but they pretty uniformly say higher prices. And that means, you know, lower economic growth for the American economy.
The Journal.
Trump’s Tariff Whiplash
Yeah, I mean, just off the top of my head, I mean, I just, I'm thinking about all of the kind of winter vegetables that we get in from Mexico, right? All of the tomatoes, all of the avocados, things like that. I'm thinking about how integrated the meatpacking industry is over the U.S.-Canada border and how many times, like, you know, a cow crosses the border multiple times between the U.S.
The Journal.
Trump’s Tariff Whiplash
and Canada in a lot of cases before it's processed into whatever, a hamburger or beef jerky or whatever, right? Then thinking about automobiles, the average car will cross the U.S.-Canada border eight times right before it is actually a car. And every single time that automobile or that auto part crosses the border, it's going to need to get a tariff paid on it.
The Journal.
Trump’s Tariff Whiplash
officials, trying to convince them otherwise, saying, you know, we'll do anything to get around these tariffs. You know, what do you want?
The Journal.
Trump’s Tariff Whiplash
It could be really, really drastic, these impacts, right? I think the biggest question is how long do these tariffs stay in place? You know, a lot of continental industries, you know, especially like think about the automotive industry. They've been stockpiling cars in anticipation of this. So having, you know, getting cars on the dealership lots just so that they have some inventory.
The Journal.
Trump’s Tariff Whiplash
that's going to last a couple weeks, right? Not more than that. And if these duties stay in place longer than that, we're looking at dramatically higher prices, not just for cars, but like for tomatoes, for meat products, right?
The Journal.
Trump’s Tariff Whiplash
I would say within a couple weeks, right, if not immediately. It depends on the goods. So, you know, I think it's difficult for me to say with certainty how long it's going to take because, as I said, we're really in uncharted territory here when it comes to this magnitude of tariffs being enacted this quickly. So all I can say is bad and soon.
The Journal.
Trump’s Tariff Whiplash
And that, dear listeners, is how fast things change in Washington in the second Trump administration. Things can turn on a dime here. You know, this is just, it's just emblematic of how unpredictable these things are.
The Journal.
Trump’s Tariff Whiplash
It certainly seems that way. I mean, Canada and Mexico have said that they are ready to respond. Canada is going to slap tariffs on U.S. shipments, you know, the same day that we do. And Mexico has promised to do the same.
The Journal.
Trump’s Tariff Whiplash
Yes, and I think that that is, I mean, the threat of the tariffs in one form or another is going to remain on almost every nation throughout the world throughout Trump's term, right? Because if he gets mad at you, he's shown that he is willing to risk significant damage to the U.S. economy to make a point. And I think that's what he's doing here, right?
The Journal.
Trump’s Tariff Whiplash
Could they have come to this agreement without, you know, imposing tariffs and spooking the market and sending everyone into a tizzy? Maybe. But that confusion and that panic is a feature of the system for Trump, not a bug.
The Journal.
Trump’s Tariff Whiplash
Well, I think there's a few different ways to look at it here. This is tariffs for punitive measures, right? These are punitive penalizing tariffs, things that are connected not to a trade irritant, but to one of Trump's other bugaboos, right? Migration, fentanyl. So that's one thing where you see these really bellicose tariff threats. But I think we should conceptually separate that from...
The Journal.
Trump’s Tariff Whiplash
other tariffs that Trump has talked about. For instance, last week he said, we're going to put tariffs on semiconductors. We're going to do it on pharmaceuticals. Those are tariffs that are to remedy what are specific trade irritants for Trump.
The Journal.
Trump’s Tariff Whiplash
And then third, there's still going to be, we've heard, you know, we believe, still going to be a broad-based tariff of some sort that is mostly aimed not at rebalancing trade, but but raising money for the U.S. Treasury, raising money so that Trump can do tax cuts and pay for them with tariffs. That is a strategy that we haven't really seen in over 100 years in the United States.
The Journal.
Trump’s Tariff Whiplash
And actually, the Trump administration anticipated this, and they put a provision in these tariff orders that says if Canada, Mexico, and China hit back, then they're going to make the tariffs even higher. So you can really see how this could spiral into even more of a trade war than we're having already.
WSJ What’s News
Markets Rattled as U.S. Tariffs Go Into Effect
They are quite exposed right now. I mean, the U.S. is the biggest export market for both Mexico and Canada. So this is all battle stations right now. This is a pretty big economic shock to the entire North American economy, the U.S. included.
WSJ What’s News
Markets Rattled as U.S. Tariffs Go Into Effect
Meistens nur, dass sie das weiter kämpfen werden, bis die Fentanyl-Toten runterkommen. Ich meine, es ist sehr schwierig zu wissen, was Trump genau will, um diese Tarife zu lösen. Ich habe gerade mit Senator Bill Hagerty hier im Senat gesprochen, einer von Trumps naheliegendsten Allies. If these tariffs go away, do we have any idea what the effect might be?
WSJ What’s News
Markets Rattled as U.S. Tariffs Go Into Effect
Du würdest einen großen Rettungsschein sehen. Du würdest einen Bump in den Stockmarkt sehen. Du würdest eine Menge Rettung in den Versorgungszahlen und Märkten sehen, wenn er einen Deal auf diesen Punkt machen konnte. Aber erinnere dich, das ist nur der erste oder zweite Salvo dieser Handelskriege.
WSJ What’s News
Markets Rattled as U.S. Tariffs Go Into Effect
Wir haben eine ganze Menge Tarife nächstes Monat auf alles, von Automobilprodukten bis zu pharmazeutischen Produkten. Und dann hat Trump gestern neue Landwirtschafts-Tarife vorgesehen, über die wir noch keine Erkennung gehört haben. Also kommt hier noch viel mehr.
WSJ What’s News
Markets Rattled as U.S. Tariffs Go Into Effect
This is only the first or second salvo of this trade war. We have a whole handful of tariffs coming up next month.