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This week in Trumponomics: Tariff Man goes berserk

If President Trump thought tariffs would solve the opioid epidemic or eradicate poverty or cure cancer, he’d undoubtedly try them. Don’t give him any ideas.

Trump’s reliance on tariffs became parodical this week, as he announced escalating tariffs on Mexican imports as a means of addressing the immigration problem on the southeast border. This sounds like a satire of an actual policy, since tariffs are a bad idea as an economic tool and a worse idea applied to immigration. Yet Trump is actually doing it. Laughing is probably better than crying.

The idea here is to apply pressure on Mexico to head off immigrants trekking to the United States from places like Honduras and Guatemala. Tariffs on Mexican imports will start at 5% on June 10 and rise gradually to 25% by October. Trump hasn’t specified what Mexico must do to avert his tariffs, except that the problem must be “remedied.” So they’re open-ended tariffs Trump can essentially turn on or off as he wishes.

Financial markets, already reeling from Trump’s trade war with China, tumbled on the lousy idea, while business and consumer groups warned of dire consequences everywhere. For these reasons, this week’s Trump-o-meter reads SAD!, the lowest rating.

Source: Yahoo Finance
Source: Yahoo Finance

Trump, who famously described himself as “a Tariff Man,” obviously thinks such taxes are an effective policy tool. Very few experts agree. The United States imports $350 billion worth of products from Mexico, with cars and car parts accounting for more than a quarter of that. Tariffs would make all of that more expensive, with American businesses and consumers paying the bill. The United States exports $270 billion worth of stuff to Mexico, and that might be subject to retaliatory tariffs.

Here’s a sampling of concerns about Tariff Man’s latest move:

The Business Roundtable, which represents hundreds of CEOs: “Imposing unilateral tariffs on Mexican imports would be a grave error.”

The National Association of Manufacturers: “These proposed tariffs would have devastating consequences on manufacturers in America and on American consumers.”

[Check out the Yahoo Finance Trumponomics Report Card.]

Oxford Economics: “Trump’s Mexico tariff move could cut US 2020 growth to under 1%.”

Economist Torsten Slok of Deutsche Bank: “U.S. trade with Mexico is all about cars. This would cripple the auto industry.”

It’s worth acknowledging that the surge of migrants flocking to the southeast border is a genuine problem. But there are better ways to address it. The most obvious is for Trump to cut an immigration deal with Congressional Democrats that would provide funding for his beloved border wall, along with more resources for processing migrants. But Trump is unwilling to grant some Democratic demands. Trump could also do more to address the problem at its source, in the impoverished, violent countries migrants are fleeing. And he could work on solutions with Mexico diplomatically.

Thing is, Trump loves tariffs, even though the ones he put in place before the Mexico move are already costing the typical American household $831 per year, according to the New York Federal Reserve. It’s part of Trump’s M.O. to make such threats as a negotiating tactic, then pull back. But pulling back only works when the other side gives in. In China’s case, the other side may not give in, instead allowing Trump to continue punishing his own people with higher tariffs as the 2020 election approaches. Let’s hope China and Mexico don’t talk to each other.

Confidential tip line: rickjnewman@yahoo.com. Encrypted communication available. Click here to get Rick’s stories by email.

Read more:

Your paltry savings from the Trump tax cuts

The Trump stock-market rally looks like it’s over

Why Medicare for all is doomed

Where Obama beats Trump on the economy

How Trump is blowing it with voters

Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman

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