The Dumbest Trade War in History

The Dumbest Trade War in History
Trump will impose 25% tariffs on Canada and Mexico for no good reason.

President Trump will fire his first tariff salvo on Saturday against those notorious American adversaries . . . Mexico and Canada. They’ll get hit with a 25% border tax, while China, a real adversary, will endure 10%. This reminds us of the old Bernard Lewis joke that it’s risky to be America’s enemy but it can be fatal to be its friend.

Leaving China aside, Mr. Trump’s justification for this economic assault on the neighbors makes no sense. White House press secretary Karoline Leavitt says they’ve “enabled illegal drugs to pour into America.” But drugs have flowed into the U.S. for decades, and will continue to do so as long as Americans keep using them. Neither country can stop it.

Drugs may be an excuse since Mr. Trump has made clear he likes tariffs for their own sake. “We don’t need the products that they have,” Mr. Trump said on Thursday. “We have all the oil you need. We have all the trees you need, meaning the lumber.”

The Wall Street Journal

Trump’s tariffs are a $1.4 trillion gamble with the economy and prices

President Donald Trump is on the verge of hitting America’s three biggest trading partners with sweeping tariffs, a far more aggressive use of his favorite economic weapon than anything he did during his first term.The looming import taxes on Mexico, Canada and China will be a major test of Trump’s unorthodox use of tariffs, which he’s described as “the greatest thing ever invented.”It’s an enormous gamble, arguably a bigger one than any economic policy Trump enacted during his four-plus years in the White House. And this strategy has the potential to upend the thing many voters care about the most: the economy and the cost of living.

Trump and his supporters often point out, correctly, that tariffs during his first term did not cause problematic inflation.But those were different tariffs, applied in a very different world at a very different time.
Trump set in motion tariffs on $1.4 trillion of imported goods on Saturday. That’s more than triple the $380 billion worth of foreign goods that were hit with tariffs during Trump’ first term, according to estimates from the Tax Foundation.Hitting Canada and Mexico with blanket tariffs could cause supply chain chaos in the closely interconnected North American economy, leading to higher prices.“To impose tariffs as high as 25% on our closest trading partners risks decimating the North American economic powerhouse—which the US relies on. Why would you want to burn your own house down?” said Christine McDaniel, a former trade official in President George W. Bush’s administration who is now a senior research fellow at George Mason University’s Mercatus Center.

The oil industry has pleaded with the White House to shield crude from the tariffs because Canada is the largest foreign source of oil. Analysts have warned that tariffs could increase gasoline prices in the Great Lakes, Midwest and the Rockies. That’s why the White House trimmed tariffs on Canadian energy to 10%, instead of the full 25%.Grocery store prices are a major pain point that weighed on voters this past election. But Mexico is America’s largest foreign source of fruit and vegetables, while Canada is No. 1 in grains, livestock/meats and sugar/tropical products.Trump’s tariffs on Mexico, Canada and China, along with those countries’ retaliatory tariffs, could wipe out 1.5 percentage points from US gross domestic product growth (GDP) in 2025 and another 2.1 percentage points in 2026, according to estimates by EY chief economist Gregory Daco

Trump says America has ‘all the trees,’ and doesn’t need Canadian Lumber


President Donald Trump has frequently quipped that “we don’t need” products from Canada.That includes oil, autos and, of course, lumber.“We don’t need the products that they have,” Trump said Thursday as he signed executive orders in the Oval Office. “We have all the oil that you need. We have all the trees you need.”While trees are bountiful in the US (we have 300 billion of them), economists and homebuilders caution that America does not currently have the industrial capacity to meet the demand and that taxing — or worse, cutting off — Canadian lumber imports could further exacerbate the ongoing housing affordability crisis.
Softwood lumber, which is sourced from the likes of pine, spruce, firs and other conifers is prized for its light weight, workability and strength.

“Whether it’s lumber tariffs or tariffs on any other import, these can impact the supply chain,” Erickson said. “And we’ve seen in the past that tariffs on lumber, these are paid for by new homebuyers in the cost of their home.”Housing in the US has becoming increasingly unaffordable in recent history, as supply has lagged demand. And that demand has become increasingly heightened in recent months as hurricanes and wildfires have destroyed thousands of homes across the US.Of the estimated $184 billion of goods that went into new single-family and multifamily construction in 2023, about 7%, or $13 billion, was imported, according to NAHB estimates.

Lumber, at $8.5 billion in imports, represents the lion’s share of that, according to the NAHB, which noted that 70% of those lumber imports came from Canada.In 2006, the US-Canada Softwood Lumber Agreement allowed Canadian provinces to collect export taxes on lumber purchased by US companies.That agreement, which was active until 2015, resulted in softwood exports declining by nearly 8%, US lumber producers gaining $1.6 billion and US consumers losing $2.3 billion, Rajan Parajuli, an NC State associate professor of forest economics and policy, told CNN Business.The price of softwood lumber increased from roughly $350 per thousand board feet to more than $1,500 per thousand board feet, he said.