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Economics, Policy & Regulation- Bracing For A Tariff War

Tariffs like Sanctions are just another means, another method, of waging warfare. Economic warfare. Trump is, in fact, declaring war against all other nations. Including Canada and Mexico.

Tariff Man’ Returns To Center Stage

Trade tariffs have been a cornerstone of US policy since its earliest days, long before the 2018 tweet in which then-President Trump dubbed himself a “Tariff Man” and made them a central theme of his first administration. The first US president, George Washington, signed a law mandating a 5% tariff on most imports.

Trump stands out as the first modern US president to make tariffs a central pillar of trade policy, significantly shaping economic direction since the globalization of the 1990s. “The first wave of tariffs was a big shift in US trade policy,” says Michael Pearce, deputy chief US economist at Oxford Economics. “Until that point, tariff revenues had been a small and declining share of the economy. Then, tariff revenues more than doubled during Trump’s first term.”

Tariffs had reached record lows before the onset of the subsequent trade war. According to the World Bank, US tariffs were among the lowest in the world, with a simple-average Most-Favored Nation (MFN) rate of around 3.4%.

By 2018, however, the US role in global trade had shifted dramatically—from leading the charge in reducing tariffs to spearheading tariff increases.

The trade war initiated by the Trump administration marked a sharp departure from [the previous] trend,” says Aakarsh Rattan Ramchandani, analyst and chief strategy officer at Bigdata.com, an artificial intelligence platform developed by RavenPack. Our “analysis highlights how the 2018 tariff increases reversed years of progress in trade liberalization, creating ripples across global markets.”

The tariffs introduced by Trump in 2018 prompted retaliatory measures from major trading partners, including China, the EU, Canada, and Mexico. Despite the change in leadership in 2021, the administration of President Joe Biden retained most of these Trump-era tariffs and, in some cases, expanded them. For example, tariffs on electric vehicles were increased from 25% to 100% in 2024, underscoring bipartisan support for the growing wave of US protectionism.

Biden was the tariff President too!

Everything must be on the table to protect Canadian competitiveness

Although the Trump administration has yet to impose its much-anticipated tariffs on Canada, we shouldn’t assume that the president’s threat of “economic warfare” isn’t already underway.

The art of war isn’t just about direct attacks or invasions. It can take different forms, including psychological warfare—or psyops.

The issue of tariffs is a good example. The economic harm to Canada doesn’t depend on the actual imposition of tariffs. Even the threat itself is bound to have damaging effects. It creates heightened uncertainty for businesses and investors that’s likely to have the effect of essentially freezing capital in the short term and causing firms to rethink their binational distribution of production over the medium term.

The key point here is that Donald Trump’s capricious claims and evolving threats can impose real costs in and of themselves. One gets the sense that he and those around him understand this. There may in fact be a method to the madness.

read entirely at the second link

If you missed the Michael Hudson piece;

Cutting off your nose to spite your face!

Hubris is at work in this dystopian fantasy. As the world’s hegemon, U.S. diplomacy rarely takes account of how foreign countries will respond. The essence of its hubris is to simplistically assume that countries will passively submit to U.S. actions with no blowback. That has been a realistic assumption for countries like Germany, or those with similar U.S. client politicians in office.

U.S. domestic politics is equally unstable. Trump’s America First political theater that got him elected may get his gang unseated as the contradictions and consequences of their operating philosophy are recognized and replaced. His tariff policy will accelerate U.S. price inflation and, even more fatally, cause chaos in U.S. and foreign financial markets. Supply chains will be disrupted, interrupting U.S. exports of everything from aircraft to information technology. And other countries will find themselves obliged to make their economies no longer dependent on U.S. exports or dollar credit.

Trump assumes the world hasn’t changed. He’s mistaken.

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