Voters sent President Donald Trump back to the White House, in part because of the rising cost of living under the Biden administration, which stretched families’ finances to the breaking point. But just weeks into his second term, the newly inaugurated president is enacting a policy that will increase costs at a time when Americans can least afford it.
Trump has announced 25% tariffs applied to Mexico and Canada that will take effect Feb. 1.
“We have to do [this] because we have very big [trade] deficits with those countries,” he explained. “Those tariffs may or may not rise with time.”
The president’s main gripe is that we have “trade deficits” with Canada and Mexico. This means that we buy more goods from them than we sell to them. On net, due to trade with these countries, money flows out of our country, and goods — such as lumber, materials, and food — flow in.
This isn’t actually a bad thing. It doesn’t, contrary to Trump’s insistence, mean we are “getting ripped off.” Yes, we are sending money abroad on balance, but we are getting things we need and enjoy in exchange for it. That’s not a “rip off” any more than I am “ripped off” by my grocery store simply because, on net, I give it money, it gives me goods, and it doesn’t buy anything from me in return.
Another common complaint about trade deficits is that they mean more jobs are “sent overseas.” But that’s not true: There is no statistical correlation between U.S. trade deficits and unemployment levels.
Yet these proposed tariffs aren’t just pointless. They could be truly harmful.
Why? Well, part of the cost of tariffs gets “passed on” to consumers via higher prices. So, after years of increased costs stretching finances to their breaking point, everything from cars to housing to food could get more expensive thanks to Trump’s tariffs because all these products rely on goods imported from Canada or Mexico.
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According to the nonpartisan Tax Foundation, this will all have a detrimental effect on the economy. It ran a model estimating the economic impact of Trump’s proposed tariffs and found that they would shrink the size of the economy and destroy 286,000 jobs. It further estimates that the new tariffs will cost the average U.S. family $670 in 2025. And that’s not even counting the effect of tariffs that Mexico and/or Canada hit us with in response!
Trump has shown that sometimes, the threat of tariffs can be an effective negotiating tactic. But actually imposing tariffs on friendly nations such as Canada and Mexico is a big mistake that will cost Americans dearly.
Brad Polumbo is an independent journalist and host of the Brad vs Everyone podcast.
This article was originally published at www.washingtonexaminer.com
