Schrodinger’s Tariffs
One cannot keep f*cking around and never finding out.
One of the difficult things about Trump and tariffs is he’s serious about them until he isn’t and then is again and then isn’t.
By now, it’s pretty clear that Trump views tariffs less as an economic policy and more as a nondiplomatic cudgel - a sort of crude threat to get what he wants out of other countries. We saw this happen with Columbia earlier in the year - President Gustavo Petro complained about the inhumane manner in which Trump was returning deported migrants, then Trump threatened tariffs on Columbia (a country that the US buys a lot of product like coffee from), then Petro relented rather than risk economic damage to one of his country’s main industries. It was Trump’s way of showing that he could be as cruel in his deportation strategy as he liked, and would just bully other’s with threats of economic hardship unless they just shut up and let him do what he wanted.
But what happens when the other country doesn’t fold, and threatens to escalate with retaliatory tariffs?
We’ve seen Trump walk back tariffs against Mexico and Canada twice already after they threatened/implemented retaliatory tariffs, each time explaining his “pause” by saying these countries have a month to “fix things” before he puts them back on again. But what he wants these countries to do is vague at best - there’s no real, tangible demands to be met for preferred policy outcomes. And the idea that within a one month time period American car manufacturers will be able to build entire factories and train up thousands of workers to replace their parts facilities in Canada/Mexico is ludicrous. So, what is the point? What is he trying to achieve here?
These are questions without a real answer. By this time in April, we’ll have seen a new round of tariff threats issued against our neighboring countries. Will they actually happen this time? Will he find another excuse to “pause” them for a month? Will he start playing these games with other major trading partners like Germany and Japan?
This is an environment that is difficult for businesses to operate in. If you’re ordering, say, lumber from Canada to build housing with, how are you supposed to accurately provide an estimate for a the construction costs, when one of your main materials could cost 25% more than it currently does? If you factor in the tariff cost, and the tariffs don’t happen, your customers will be very made at you overcharging them. If you don’t factor in the extra costs and the tariffs happen, you’re suddenly operating at significantly reduced profit margins. Eventually, businesses have to make a decision about what to do. And if a couple businesses in an industry decide its safer to assume the tariffs are eventually happening, then the rest will follow in raising their prices - after all, they have the cover of “Everyone is raising prices, so you can’t leave us and go to the other guys because they’re also concerned about tariffs too.”
This Ends in One of Three Ways
Trump Stops Threatening Tariffs - Highly unlikely, as it’s such a part of his political personality at this point. But if he does, we’re not going to have gotten much in exchange for all his chaos and bluster.
Be prepared to message on “Trump talked a big game about tariffs, but in the end, he chickened out, and we got a lot of talk and nothing from it.”
Trump Actually Does the Tariffs - This will spark a trade war of retaliatory tariffs. Things that we don’t have the current infrastructure to make in America will get more expensive. Other countries will buy less of our stuff that there isn’t enough of a market for American consumers alone to buy (like corn). People will lose jobs. Farmers will lose the farm. A recession will probably happen.
Blame it on Trump. Blame everything on Trump. Every price increase. Every massive job layoff. Every collapse of an industry. It won’t be hard to connect the dots for people at that point, unless even if they aren’t the brightest folks out there. It’s a little hard to ignore reality when you start defaulting on your bills.
We Keep Up with the Schrodinger’s Tariff Game - At some point, the markets will have a nervous breakdown, which will probably create a less intense version of the consequences of actually doing the tariffs.
It’ll be less catastrophic, but noticeable, and it should still be pretty easy to tell people “Trump broke it” when they complain about the economy.
Alternatively, business just start acting like Trump isn’t serious about tariffs, which will force him into either abandoning the endeavor or actually doing them to show he means it. Refer back to the first two endings to how that plays out.