Donald Trump’s Tariff Plans Only Follow His Own Will and Not Any Strategy

The new threats against Mexico and Canada were made in anger and will not be implemented in this way. But that is precisely what can cause even more damage.

Donald Trump has frequently made clear that he loves tariffs. However, his recent announcement about implementing a 25% tariff on all imports from Mexico and Canada and a 10% tariff on Chinese imports on his first day in office, shows something else: The U.S. president-elect thinks protectionism is a miracle solution and has no interest in strategy.

During the election campaign, Trump promised a general tariff of 10% on all imports, 60% on Chinese goods and 100% on imported vehicles — with the aim of creating jobs and promoting growth in America. Trump and his advisers deliberately ignored warnings from economists that such a policy would only drive up prices and harm the economy.

But now his tariff threats are primarily aimed at neighbors Mexico and Canada, while arch-enemy China gets off lightly. The aim is not, as it was before, to strengthen the U.S. economy, but to curb migration and drug smuggling.

Disruption of Supply Chains

On Monday evening, Trump was apparently angry and reached for his digital quiver to post on his Truth Social platform. It’s unclear, exactly, what the three countries need to do to prevent the tariffs or to ensure that they are quickly lifted. This move would violate the United States-Mexico-Canada free trade agreement with Mexico and Canada, which Trump himself negotiated during his first term in office, and possibly put an end to it. The consequences would be increased inflation, massive disruption to all industrial supply chains, and economic chaos in the U.S., experts state.

One can be fairly sure that these tariffs will not come as they are. Instead, Trump will come up with something else next week. And something else after that. There is no trade policy master plan, and it’s unlikely that there will be one, because the interests of the different supporter groups in the Trump camp are so different.

Flattery Helps

This is good news for all trade partners, including the EU countries. If they accommodate him a little, or flatter him, the damage of Trump’s protectionism can be averted. This was already mostly successful during Trump’s first term in office.

But the volatility and arbitrariness of Trump’s tariff policy opens up another danger. As star economist and columnist Paul Krugman writes in The New York Times, the U.S. government can impose tariffs almost at will but grant exceptions at any time. Trump will use this to reward allies and punish enemies, Krugman warns. He can also do this with other measures — and has proven that he is very prepared to do so. Such “crony capitalism,” in which being close to power is more important for companies than innovative products and good management, would soon make America look like Russia and jeopardize prosperity in the long term. This would not be good news for Europe either.