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Trumponomics, Part I: Meltdown

Another day, another tariff policy. The first round of tariffs on Canada and Mexico lasted 1 day before Donald Trump reversed course. The second round of tariffs on Canada and Mexico lasted 2 days before Donald Trump reversed course. Anyone want to make a prediction for how long the third round of tariffs on Canada and Mexico will last before Donald Trump reverses course?

Yesterday's reversal was not a complete one, as with the original reversal. Instead, Trump issued 1-month exemptions on United States-Mexico-Canada Agreement (USMCA)-compliant goods, which means that about half the goods coming into the U.S. from Mexico, and about 40% of the goods coming into the U.S. from Canada, get a temporary (?) reprieve. It is not entirely clear why Trump changed his mind, yet again—some sources say it was an (additional) outgrowth of the squawking from U.S. automakers, which also led to the first round of exemptions (the ones on cars, which took just 24 hours for Trump to announce, instead of 48).

Other sources say the change in plans came because Mexican president Claudia Sheinbaum and Canadian PM Justin Trudeau both got The Donald on the phone (not at the same time!), and told him whatever it is he wanted to hear. For example, Trudeau told Trump that there has been a 97% drop in the amount of fentanyl seized at the Canadian border. That sounds impressive, but for three things. The first is that the only possible source of this friendly-to-the-Canadian-government news is... the Canadian government. We are not sure if readers are aware of this or not, but politicians have been known to lie when they think it's necessary (and some of them even lie when it's not necessary). The second is that, even if the numbers are legit, a decrease in seizures certainly could mean a decrease in smuggling activity, but it could also mean less effective enforcement. The third is that, even if the numbers are legitimate, and even if enforcement is exactly as effective as it's always been, the "progress" made by the Canadians means that the amount of fentanyl crossing that border has gone from about 25 ounces to about 1 ounce. Given that something like 50 tons of fentanyl comes into the U.S. each year, it's not like a 24-ounce reduction at the northern border is going to solve America's fentanyl problem. Or even put a dent in it. Or even a little scratch.

In any event, it remains the case that nobody really understands what Trump is trying to accomplish here. Sure, he says this is about fentanyl, but if that problem is going to be addressed, it's going to be very, very difficult (remember, it's not like Trump made any progress during his first term), and it's not going to be achieved through the willy-nilly levying of tariffs. So, we cannot take the official explanation seriously. That leaves us with our current list of vague theories:

Again, these are just theories. We have no evidence, for example, that he's taking bribes. It's merely one hypothesis that fits the available facts. What would William of Occam say?

Whatever Trump is trying to accomplish, he seems to have created a situation where he's getting none of the benefits of tariffs, and yet a bunch of the downsides. A partial rundown:

At the moment, and very possibly for the foreseeable future, the Republicans who run Congress are not going to use their actual powers to push back against Trump, no matter how crazy his economic "policies" might get. However, some of them ARE using the tried and somewhat true trick of giving him gentle hints through the media. Sen. John Kennedy (R-LA) went on Fox Business and said "I'm worried about the tariffs." He also claimed that the tariffs from Trump v1.0 did not cause inflation, which is a lie, but we guess you have to tread very lightly when you weakly challenge the throne. Meanwhile, Sen. Rand Paul (R-KY), whose home state is suddenly about to sell a lot less bourbon, talked to CNN and said: "Almost every industry in Kentucky has come to me and said, 'It will hurt our industry and push up prices of homes, cars, and so, I'm gonna continue to argue against tariffs." And Sen. Thom Tillis (R-NC), who has to tread more lightly than most, said: "When we start losing, you back off. There's such a thing as strategic retreat."

Whatever the next salvo is going to look like, it's going to come on April 2. That is the day that Trump said he'd start hitting other countries with tariffs, and although the current suspension of the Canada-Mexico tariffs is supposed to be for a month, he implied that April 2 is the real expiration date of his current "amnesty." And then, once he makes his (latest) move in the first week of April, we all get to wait again and see if he gets spooked, or manipulated by someone who knows how to butter him up, or bribed, or whatever else it is that causes him to change positions on a dime. (Z)



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