Trump drags even Canada into his devastating trade wars

July 1: On This Day In 2018

Trump initiated trade wars with several countries, including our closest allies. As the PIIE points out, Trump’s trade war was more or less “with the world."

With hindsight, what were the demonstrable benefits? There aren't many high-quality research studies online which point to overwhelming net gains for the U.S. And upon our asking, a former staffer in Trump's trade department was unable to point to any either.

However, there's lots of research which shows the harm suffered by American consumers.

As the Tax Foundation concluded, “The Trump administration imposed nearly $80 billion worth of new taxes (per year) on Americans by levying tariffs on thousands of products…amounting to one of the largest tax increases in decades.”

They added that these impacts “understate the cost to US households because they do not factor in the lost output, lower incomes, and loss in consumer choice the tariffs have caused.”

So, again, not to editorialize, but when Trump said in the debate that it’s the foreigners who pay for his tariffs, he’s either knowingly lying -- because this has been explained to him repeatedly -- or he’s non compos mentis.

Trump’s spat with Canada spat went like this: Early in 2018, Trump announced tariffs on steel and aluminum imports from all trading partners—including key strategic allies like Canada, the EU, Mexico and South Korea—citing national security grounds. Then, a week later, he exempted Canada and Mexico. Then he reversed course again, rescinding those exemptions and prompting Canada to retaliate.

OTDI 2018, our northern neighbor levied tariffs on almost $13 billion of American products, including steel and aluminum, agricultural products (another blow to American farmers reeling from Trump’s Chinese trade battle) and consumer goods.

Experts took a dim view. As the nonpartisan Council on Foreign Relations observed, a trade war with Canada “would be enormously damaging not just to the two countries but to the integrity of the global trading system.”

Note: Biden has kept many of Trump’s tariffs in place for now, though we believe it’s because it would be too difficult to remove them politically. And we believe, unlike Trump, Biden wouldn’t have started the war in the first place. Biden has added a few new tariffs on China, but targeted them to boost American competitiveness for the 21st century, not simply as the blanket punitive measures of an unthinking bully.

Trump is only getting worse: For his 2024 campaign, he has vowed to drastically increase his blanket tariffs yet again. As IE reported just two months ago:

“Aggressive tariff rises under a possible second Donald Trump presidency would likely result in a reduction in U.S. and global output,” Fitch Ratings concluded. Trump has threatened a 10% increase in tariffs across the board, with a 60% increase on imports from China.” And not only would we suffer, but so would our neighbor: “Canada would be one of the main casualties of a U.S.-led trade war that weighs on global economic output, they said.

"Get Ready for Trump Trade War 2.0" Foreign Policy warned.

To summarize Trump '24: "Adding up these harms, the Tax Foundation’s Erica York calculates that the Trump tariff “ring” would amount to a $300 billion annual tax hike, reducing the size of the U.S. economy by 0.7 percent and eliminating 505,000 jobs."

Dive Deeper

• Get a blow-by-blow account from the Peterson report

• Consider some context from The Council on Foreign Relations

• The 2024 status, as reported by Investment Executive

• The 2024 analysis from the TF

• Cato's commentary
  

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Summary: Trump drags even Canada into his devastating trade wars