Tariff man, tariff man. Raise your costs because I can. Put a tax on every good, exactly like I said I would. Beware here comes the tariff man!
So we’ve now passed our latest tariff deadline and just look at the results! 50% tariffs on Brazil (even though the balance of trade is actually in our favor) because they were mean to our favorite South American strongman when he attempted to overthrow the election (sound familiar?). 50% tariffs on India because they buy Russian oil. Nevermind how critical they are to the pharmaceutical pipeline, or the fact that China buys twice as much Russian oil as India. Pesky facts. The European Union, Japan and South Korea are all going to make massive investments in the U.S. handing more than a trillion dollars to Trump to do with as he pleases. Or are they? Don’t hold your breath. I’m sure they all watched the Chinese make a huge agricultural purchase commitment in Trump’s first term, followed by whiffing on it when he lost interest and/or left office. How long do we think it will be before these “commitments” raise their ugly heads and become negotiations Part Two- the Sequel?
Meanwhile, we decided to screw Canada just because we can. We claim that’s because they haven’t done enough on fentanyl or immigration, even though the statistics plainly show that is completely absurd. While carve-outs for the USMCA seriously reduce this impact, it was important to make a big show of sticking it to Canada because after all, who wants tourists? Or oil, electricity, fertilizer or lumber? Not us! They didn’t even offer to buy Donald a jet so what kind of ally are they anyways? We’ll show them. Just wait until we spend hundreds of billions of dollars on a Golden Dome defense system. What did you say? The longest border we have to defend against attack, and the most likely direction for any missile strikes against us to come from is over Canada? Oops.
Meanwhile, Mexico and China remain in the queue. Both have obtained deferrals or extensions, China because they clearly showed they would wield the rare earth lever and jack up tariffs to match us. Mexico because well you know. Trump is either scared of Claudia, trying to make nice with her because of the border or just waiting to drop the hammer. Who knows? The rationale used for Canada only applies about 100 fold to Mexico but who cares about rationale. This is about making political statements and short term revenue generation on the backs of American citizens. China is clearly the biggest offender when it comes to unfair trade practices but you know.
So let’s recap. European, Japanese and South Korean cars are now all allowed to come into the country at lower cost than American automakers can match, given tariffs on steel, aluminum and vehicles coming from Canada or Mexico. God knows that will drive reshoring capacity. My prediction? Whomever is President after Trump’s term will be executing a huge U.S. auto industry bailout. Not only are they now uncompetitive given this tariff structure (as shown by their earnings reports), but Trump is also dictating they can’t build EV’s, the entire future of passenger vehicles in the world, so any capital they do expend will be on products no one else in the world wants. A sure recipe for success. Meanwhile breakfast got more expensive (orange juice and coffee from Brazil, the biggest supplier of both), toys, clothing and shoes will be nonexistent or inordinately expensive come Christmas and guess what? Tariffs on semiconductors and pharmaceuticals are yet to come. While the number of carve outs for these will likely mitigate their impacts in the short term, and I’m sure industry will follow the Apple lead and buy him off with an investment promise, the potential effect on drugs in particular can’t be overlooked. Another nail in the U.S. Health Care coffin. Not that getting lower prices on drugs isn’t worthwhile, and yes we are getting screwed on this vs. the rest of the world, but when did investing billions of dollars duplicating capacity in the highest labor cost environment in the world lead to lower prices? Oh well, guess I just don’t get the new math.
But don’t worry we’re going to add all sorts of high paying wonderful manufacturing jobs in the U.S. because tariffs will drive decisions to restore production. Just because we have 4-500,000 open manufacturing jobs we can’t fill now is no reason to doubt this. Manufacturing just isn’t “cool” anymore, because the younger generations (and investors) are bedazzled by AI, manufacturing job benefits like real pensions and grade A health care plans have slowly vaporized and they have tended to be physically hard jobs historically. Meanwhile, manufacturing employment has dropped all of this year (great trend eh?) and will continue to do so. Even if hundreds of thousands of jobs were possible, what is the whole sales pitch for AI and automation? That it will reduce jobs filled by people, factory jobs especially in assembly line operations being one of the prime candidates. So forget the jobs thing.
What is it really? A way to settle ideological grudges with other countries and a means to drive up short term tax revenues to mask the growing deficit. This latter benefit will backfire, as the inevitable stifling of import demand and the associated costs will slowly but surely erode tariff revenues over time. Export markets will shrink as well, especially agricultural products continuing the erosion of farm profitability that started in Trump’s first term as countries turn away from the U.S. as unreliable, and instead buy food from Brazil, Argentina, Canada, Russia/Ukraine and others. Too bad farmers. Meanwhile, the U.S. has made ridiculous energy commitments we can’t possibly meet, particularly in LNG, resulting in higher prices right back here in America, and hastening the day when we wake up and say, whoa, we’re out of natural gas! What happened?
Latest update- August 14, 2025. The Producer Price Index took a completely unforeseen turn and shot up 0.9%. Oops. Just as Goldman Sachs predicted, businesses have been absorbing the majority of the tariff costs but maybe they can’t do that anymore and this is the first inflation spike heading for consumers. Buckle up it’s going to be a bumpy ride!