Crossed Wires: Trump’s tariffs a gamble on disorder and disruption

The very word tariff is likely to put most citizens to sleep, but a sudden 200% increase in the price of a bottle of pretty average French wine at a modestly priced mid-Western restaurant would jolt anyone awake (yes, that number is a real Trump threat).

No one can accuse Trump of inconsistency in this area. He has complained about foreign countries since 1987 when Japan was his bête noire, at a time when it was beating the US in every kind of manufacturing – from automobiles to consumer electronics.

Trump was not even in politics at the time, but this did not stop him from taking out full-page ads in The Washington Post, The New York Times and the Boston Globe, which read, “Why are these nations not paying the United States for the human lives and billions of dollars we are losing to protect their interests?” followed by “...the world is laughing at America’s politicians as we protect ships we don’t own, carrying oil we don’t need, destined for allies who won’t help.”

His irritation with the rest of the world (some dictatorships excused) has clearly festered and grown. It is no longer “you need to pay your fair share for our help”, which is an entirely reasonable position. A seemingly endless slew of foreign gripes now forms the core of his foreign policy, backed up by aggressive tariff actions against even (and this is the head-scratcher) America’s closest partners, friends and allies.

Vox Magazine writer Eric Levitz recently tried to analyse whether there was any economic rhyme or reason behind some of the tariffs. He found little or none. Take Canada, on which a 25% tariff on all goods was recently levied. The original reason given by Trump was the flow of drugs (specifically fentanyl) and illegal immigrants across the border – except that there is little evidence of any such flow happening at any scale.

Then he said:

“Canada doesn’t allow American Banks to do business in Canada, but their banks flood the American Market.” 

Which turned out to be utter nonsense. US banks are all over Canada.

Was the tariff prompted by Trump’s oft-stated lust for US ownership of Canada as the 51st state, captured so elegantly in the following tweet of his? 

“Canada should become our Cherished 51st State. Much lower taxes, and far better military protection for the people of Canada – AND NO TARIFFS!”

Or maybe the tariffs are intended to nudge Canadian firms to set up operations in the US, to wit: 

“The USA has major deficits with Canada, Mexico, and China (and almost all countries!), owes 36 Trillion Dollars, and we’re not going to be the ‘Stupid Country’ any longer. MAKE YOUR PRODUCT IN THE USA AND THERE ARE NO TARIFFS!”

This was tweeted out to the world at large, not just to Canada. Not the finest example of the art of persuasion, but then it is Donald Trump.

There was one final possibility offered in the Vox article. Trump has spoken repeatedly about an “External Revenue Service”, by which he means the collection of funds from other countries – tariffs and taxes by any other name.

One could surmise that Trump sees this as one way to pay off America’s vertiginous debt. Unmentioned, of course, is the fact that all of these punitive tariffs will be paid for by the US consumer when prices go up – which is a certain outcome of tariffs. It turns out that it is simply a consumption tax on US citizens to service government loans.

So what is really going on here?

Why is he doing this?