by Rod Williams, March 4, 2025- President Trump's 25% tariffs on imports from Canada and Mexico and an additional 10% tariffs on imports from China went into effect at midnight last night. In anticipation of the effects of this, the stock market took a dip of about 1.5% yesterday. That may not seem like a lot, and we will have to wait and see if it recovers or if there is further decline, but that is reason to be concerned. Also, Canada and Mexico are not taking this lying down. Canada is threatening to cut electricity they send to America and may leave some cities in the dark, in the event of a heat wave and may leave American car manufacturers without the electricity they need to keep their plants open.
It is estimated that the new tariffs will cost the typical household about $1250 a year. Many products will see price increases including fruits and vegetables and houses and cars. The cost of a new pickup truck will increase by about $4000 and the price of an electric vehicle will jump about $12,000. Yet Trump supporters support the tariffs.
I don't know what it is that causes Trump supporters to believe everything Trump says. Maybe it is because they saw Trump play a smart guy on The Apprentice and they think he is smart. Maybe because we have had preached to us for so long a message of egalitarianism, that we think it is elitist to defer to people who are better informed. Maybe we have been conditioned to question experts, whether it is about vaccines or economics. Maybe it is because there are simply a lot of ignorant people in America. If I was saying what I said in the above paragraphs to the typical Trump supporter, after getting a "fake news," I would be told that everyone is entitled to their opinion, and they disagreed. Yes, everyone is entitled to an opinion but there are informed opinion and uninformed opinion. The opinion of the overwhelming majority of economist are that tariffs are bad for the economy.
In addition to believing Trump that tariffs are a beneficial, many MAGA people also believe that when we impose a tariff on a county that it is that country that pays the tariff. That is simply not so. When a good is imported, it is not the exporter that pays the tariff, but the importer. This is simply a fact. The importer then makes a payment to the Federal government. Of course, the importer cannot simply eat an additional 25% in cost, and they must pass that cost on to the consumer.
Not only do tariffs cause the price of the imported item to increase but it can cause the price of items not subject to the tariff to increase in price also. As people switch to the item not subject to the tariffs, that creates more demand for those items which can lead to higher prices. Some things are true whether you believe them or not. You may not believe in gravity but step off a buildings ledge and you will fall. Some economic facts are as true as the facts of physical science.
Below is a video from the Wall Street Journal that explains tariffs in easy-to-understand simple terms. It addresses some of the arguments in favor of tariffs and explains why those arguments are wrong.
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