A trade war arrives, based on flawed economics

Opinion

Hey there, time traveller!
This article was published 05/03/2025 (190 days ago), so information in it may no longer be current.

Well, it’s here. It’s Trump tariff time.

Make no mistake: no matter what anyone says, there is absolutely nothing that Canadian politicians could have done to prevent the arrival of the Trump tariffs. It doesn’t matter if we’d completely stopped fentanyl at the border, or if the U.S. trade deficit with Canada had magically disappeared.

Those were just excuses to allow Trump to do what he was always going to do anyway.

Trump has been bullish on tariffs as some kind of great saviour for the American economy for months now: he is fond of talking about former U.S. president William McKinley’s 1890 tariffs as an economic wonder.

But the early economic response to Trump’s tariffs is anything but wonderful.

The effects on the American stock market were downright frightening, with an almost two per cent drop in the Dow Jones Index in the hour or so after markets opened. (If you can take any small pleasure out of the collapse, it might be that Trump’s right hand man, Elon Musk, saw his stake in Tesla temporarily dropped in value by US$15.4 billion in just the first hour of trading, with Tesla’s shares dropping at a rate almost three times as fast as the rest of market’s fall.)

What could have made things different? Could a fellow Republican president have talked Trump into a different direction on trade? Like, perhaps, Ronald Reagan?

“America’s most recent experiment with protectionism was a disaster for the working men and women of this country. When Congress passed the Smoot-Hawley tariff in 1930, we were told that it would protect America from foreign competition and save jobs in this country — the same line we hear today. The actual result was the Great Depression, the worst economic catastrophe in our history; one out of four Americans were thrown out of work,” Reagan said in a national radio address in 1988.

But perhaps Reagan was speaking about Donald J. Trump, not to him: “Our peaceful trading partners are not our enemies. They are our allies. We should beware of the demagogues who are ready to declare a trade war against our friends, weakening our economy, our national security and the entire free world. All while cynically waving the American flag. The expansion of the international economy is not a foreign invasion; it is an American triumph, one we worked hard to achieve, and something central to our vision of a peaceful and prosperous world of freedom.”

The problem is, though, even the words of a fellow Republican like Reagan will not change Trump’s mind, or his direction.

Maybe, you’d think, Trump might listen to his idol, McKinley, who turned to global trade liberalization and away from tariffs in a speech in Buffalo shortly before he was shot and killed: “The period of exclusiveness is past. The expansion of our trade and commerce is the pressing problem. Commercial wars are unprofitable. A policy of good will and friendly trade relations will prevent reprisals. Reciprocity treaties are in harmony with the spirit of the times, measures of retaliation are not.”

The truth is, Trump won’t listen to anything he doesn’t want to hear. And all he really wants to hear is praise, while tariff-driven higher prices hit Americans of modest means, who can least afford them, the hardest.

To add to that, for the nations that have to deal with him, there is the fundamental problem that the current president of the United States of America cannot be trusted to sign a trade deal or any other treaty: his own signature on the USMCA trade deal, was, in his own words, done by a fool, so he’s free to ignore it.

Hard days ahead.