Trump’s Trade War: Biting the Hand That Feeds You

High tariffs on products from Canada and Mexico will increase the cost of living in the U.S. Donald Trump had promised the exact opposite.

Donald Trump’s common sense might reasonably be questioned at this point. Owing to the tariffs that he has now imposed on imports from Mexico, Canada and China*, he certainly is biting the hand that feeds him. And this is happening even without the countermeasures openly announced by the countries in question.

If you’re looking for an economic argument to explain why Trump won the U.S. presidential election last November, it was inflation. The voting public had continued to feel the effects of price shocks in their wallets in recent months and considered themselves “abandoned” by the Democrats. The Republicans promised to lower inflation rates in their election campaign, yet Trump’s tariffs on imports will have exactly the opposite effect.

Import levies of 25% on almost everything that is imported from Canada and Mexico will drive prices up in the U.S. Tariffs on oil and gas will be especially hard to handle, even though they “only” amount to 10% and are not scheduled to go into effect until Feb. 18. Trump can shout “Drill, baby, drill” all he wants. According to estimates, this could increase the price of gas by up to 20 cents per liter (about 0.2 gallons).

The price of a gallon of fuel could quickly rise from $3 to $4 in this car-centric country, a reality that surely won’t be well received by Americans — another of Trump’s problems likely to grow, not shrink. He wants the U.S. Federal Reserve to cut interest rates in order to stimulate economic growth. However, federal bankers are more likely to raise interest rates than lower them if Trump drives inflation back up.

Ultimately, it is irrelevant if the economic performance of Canada and Mexico suffers more from the tariffs than that of the U.S. What really matters is how it affects people in the rural U.S.; a cost shock at the gas station is something they will definitely feel. We can only hope that they wake up and realize what they voted for.

*Editor’s Note: Tariffs on Canada and Mexico were halted for a month on Monday, Feb. 3, hours before they were scheduled to go into effect. A 10% tariff on Chinese goods went into effect Tuesday, Feb. 4.