Stupid Trade War

Bad news: Over the weekend, President Donald Trump signed orders imposing tariffs on goods imported from Canada, Mexico, and China—just our top three trading partners!

Effective tomorrow at 12:01 a.m., a 25 percent import tax will apply on all goods from Canada and Mexico while a 10 percent import tax will apply on all goods from China (in addition to taxes already levied on those goods).

Some goods—such as Canadian crude oil, which will be taxed at a 10 percent rate, not 25 percent—are partially exempt. But setting a lower tariff for such energy products is Trump telling on himself, admitting that tariffs will in fact raise prices:

Canadian press is reporting the 25% tariff on Canada will be on “virtually all goods” starting on Tuesday.

Oil will be tariffs at 10%.

Reports says the tariffs will stay in place until Trump is satisfied Canada is doing enough to stop the flow of fentanyl. pic.twitter.com/0Tsg05N6ij

— Heather Long (@byHeatherLong) February 1, 2025

Team Trump’s stated justification for the tariffs? The influx of fentanyl into America:

Spare me the sob story about how Canada is our “best friend.” I love Canada and have many Canadian friends. But is the government meeting their NATO target for military spending? Are they stopping the flow of drugs into our country?

I’m sick of being taken advantage of.

— JD Vance (@JDVance) February 2, 2025

Trump says Chinese fentanyl is meandering through Canada and Mexico before entering the U.S. at our northern and southern borders. The way to get those countries to enforce their borders more strictly, Trump posits, is to hit them where it hurts. Of course, this will also mean hitting American consumers quite hard.

“We categorically reject the calumny from the White House, that the Mexican government has alliances with criminal organizations,” said Mexican President Claudia Sheinbaum in response. “If such an alliance exists anywhere, it’s with the gun manufacturers of the United States, which sell high-powered weapons to these criminal groups.”

The fentanyl justification makes little sense. Presumably, illegal drug smuggling is something border officials work to prevent; it’s not clear how Trump expects this additional pressure to alter border-enforcement protocols. Other administration officials have latched onto dissatisfaction with NATO as the reason why Canada must be punished, and onto the idea that the two countries are doing too little to work with the U.S. to control illegal immigration. Since the justifications for why the tariffs have been levied are so wide-ranging, it remains unclear what exactly officials in each country ought to do to get them rolled back.

“Drugs may be an excuse since Mr. Trump has made clear he likes tariffs for their own sake,” writes The Wall Street Journal‘s editorial board. “‘We don’t need the products that they have,’ Mr. Trump said on Thursday. ‘We have all the oil you need. We have all the trees you need, meaning the lumber.’ Mr. Trump sometimes sounds as if the U.S. shouldn’t import anything at all, that America can be a perfectly closed economy making everything at home. This is called autarky, and it isn’t the world we live in, or one that we should want to live in, as Mr. Trump may soon find out.”

“Make no mistake, this is a trade war of choice being launched unilaterally by Trump,” writes Reason‘s Eric Boehm. “It is a foolish and self-destructive move, one that (in the case of tariffs on Canada and Mexico, at least) directly violates a trade deal Trump signed during his first term and hailed as ‘the fairest, most balanced, and beneficial trade agreement we have ever signed into law. It’s the best agreement we’ve ever made.’ Tariffs are not a path to peace or prosperity, and igniting a trade war with America’s three largest trade partners is sure to have negative consequences no one can foresee at the moment.”

These tariffs are a really bad idea, one that Trump defenders seem to believe will just…magically work?

It’d be nice to have a bit of consistency from MAGA explainers as to wtf the plan is.

When the US dollar appreciates, it makes it easier for Americans to buy foreign stuff (the imports I thought we were discouraging?) and harder for other countries to buy *our* stuff (the… https://t.co/SKnNZnjhSe

— Derek Thompson (@DKThomp) February 3, 2025

Not every criticism of Trump’s trade barriers is on target. Some people are blaming the high price of eggs on the tariffs (which haven’t gone into effect yet):

Trump’s economy: eggs are now TWENTY THREE DOLLARS pic.twitter.com/Zenkx4XtcP

— Max Dubler ????️‍???? (@maxdubler) January 31, 2025

They’re missing that a) most eggs come from right here at home (we import relatively few eggs), and b) there’s been a bad avian flu outbreak lately, the effects of which will be felt for a long time.

Of course, grocery prices will be majorly affected going forward: Expect prices for avocados, citrus, berries, tomatoes, and lots of other produce categories to rise, since these goods are imported from Mexico. Beef, tequila, and beer imports will likely become more expensive too. Canadian grains, meat, pork, potato, and dairy imports will become costlier for consumers here.

Cars and car parts will become more expensive. Lumber—and thus the cost to build—will also be affected.

Interestingly, some Chinese firms have been bracing for these tariffs, reminiscent of Trump’s first term, and working to set up shop in places like Cambodia, per the BBC’s reporting. (Markets find a way!)

But don’t expect such moves to come close to fully mitigating the tariffs’ effects. This will be bad for many months to come. The Tax Foundation has more on just how bad the first-term tariff impact was, and just how bad things will get this time around.

Scenes from New York: One of the leading New York City hospital systems—NYU Langone Health—has started canceling appointments for two different 12-year-olds who were scheduled to receive implants that would start dispensing puberty blocking medication, per The New York Times. This follows Trump’s executive order taking aim at doctors and hospitals who assist in gender transitions for minors.

• What happens if Donald Trump seals the border? Julia Gelatt came on Just Asking Questions to talk immigration and border enforcement with us. (Subscribe to the main channel here.)

• The history of indoor air quality, and how it went from a huge problem to basically fixed, courtesy of Asimov Press. 
• Department of Government Efficiency leaving chaos in its wake: “Top security officials at USAID were placed on leave Saturday after refusing to allow DOGE staffers access to systems at the foreign assistance agency, saying they lacked the required security clearances,” reports Bloomberg. Elon Musk claims that the president has agreed to shut the U.S. Agency for International Development down. There have also been reports that the administration intends to consolidate USAID with the State Department.
• Effective immediately, Texas Gov. Greg Abbott reports, the Texas National Guard has been “granted the power of immigration officials to make immigration arrests.”
• Good point from former JAQ guest Ethan Mollick:

The Google/OpenAI race for a research tool is going to be very interesting and very consequential.

For Google, it feels like a massive emergency and a huge opportunity. They have a unique position (search, Books, YouTube, etc.) and the models to do something big. We will see.

— Ethan Mollick (@emollick) February 3, 2025

• Also, this:

Been waiting for someone to test this and see if it really works – can multiple AI agents fact-checking each other reduce hallucinations?

The answer appears to be yes – using 3 agents with a structured review process reduced hallucination scores by ~2,800% across 310 test cases. pic.twitter.com/kU1IMNZZhC

— Ethan Mollick (@emollick) February 2, 2025

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