Welcome To The Stupidest Trade War Ever

When you're waging a trade war against America's biggest trading partners, it's not a bad idea to have a point.

I’m Michael A. Cohen, and this is Truth and Consequences: A no-holds-barred look at the absurdities, hypocrisies, and surreality of American politics. If you were sent this email or are a free subscriber and would like to become a paid subscriber, you can sign up here.

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One of my favorite comedies is Planes, Trains, and Automobiles; one of my favorite scenes is the one below, which contains one of my favorite lines in any movie … “You know when you're telling these little stories? Here's a good idea: have a point.

I’ve been thinking a lot about this line as Donald Trump prepares to impose 25 percent tariffs on Canada and Mexico (and, for good measure, 10 percent tariffs on China).

Because … when you’re starting a trade war, here's a good idea: have a point.

I honestly have no idea why Trump is doing this, how it furthers America’s interests, and what the endgame might be.

For example, here is the fact sheet put out yesterday by the White House on these tariffs.

ADDRESSING AN EMERGENCY SITUATION: The extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl, constitutes a national emergency under the International Emergency Economic Powers Act (IEEPA).

• Until the crisis is alleviated, President Donald J. Trump is implementing a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China. Energy resources from Canada will have a lower 10% tariff.

• President Trump is taking bold action to hold Mexico, Canada, and China accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country.

So, let’s put aside the fact that border crossings from Mexico are at their lowest point since August 2020 … or that the border situation with Canada hardly qualifies as a national emergency, or that about 1 percent of undocumented migrants and 1 percent of fentanyl come to the US from Canada. (Last year, 9,600 kilograms were seized at the US-Mexican border … 19 kilograms were seized at the Canadian border).

How do you square that with the statement below from Trump on Truth Social?

What is Canada supposed to do in response to Trump’s threats? Cut down on border crossings and fentanyl flowing into the country or subsume itself to US sovereignty and become the 51st state?

Indeed, according to reporting in the New York Times today, the metrics for ending the trade war are, how shall we say, fuzzy.

A White House official who briefed reporters about the tariffs said that the U.S. would be prepared to lift them when more of the drug is seized at the border, and Americans “stop dying.”

“The best metric will be Americans stop dying from made-in-China, distributed-by-Mexico-and-Canada fentanyl, and we will track those metrics very carefully,” the official said, speaking on the condition of anonymity to discuss the tariffs announcement. “We’ll be able to see how much is being recovered at the border.”

First, the number of Americans dying from fentanyl is entirely outside the control of Canadian, Chinese, or Mexican officials. Second, if Canada, Mexico, and the US telegraph that they’re focusing on stopping fentanyl from coming into the country over the Canadian or Mexican border, then drug traffickers will simply find new ways to ship the drugs into the country, Seizures won’t go up — and we’ll still be in the midst of a trade war. Lastly, Canada has done much of what Trump is demanding. The Canadian government has dispatched numerous resources to the border since Trump’s election victory in November but to no avail.

Not surprisingly, Canada has announced it will impose retaliatory tariffs totaling more than $100 billion. Mexico is still preparing its response, and the Chinese are, for now, keeping their powder dry. Your guess as to how this ends is as good as mine.

If it was clear where the off-ramp is for America’s trading partners, I could perhaps understand what Trump is doing (granted, it would be a stretch). However, in providing no clarity on that rather important issue, the White House has bumbled into a trade war with no apparent exit strategy.

So why is Trump doing this? I honestly have no idea. One theory is that he needs to raise revenue to pay for extending tax cuts, but that doesn’t hold much water with me. Perhaps he wants to wave his, um, flag around and show the world how strong the US can be. That certainly adds up for a narcissistic bully like Trump, who is obsessed with public displays of strength.

This rant on Turth Social suggests Trump wants companies to relocate to the United States to avoid paying onerous tariffs.

But, as always, the best explanation for any Trump action is that he is the dumbest fucking person on the face of the planet. He is a stone-cold moron, and it’s an absolute miracle that he has the mental acuity to stand upright. Somehow, Trump became convinced that tariffs were an economic panacea and nothing could dissuade him from imposing them. It’s Trump’s Razor; the stupidest explanation is always the right one.

FAFO

Make no mistake, the American people will pay a significant price for Trump’s abject stupidity.

The Budget Lab at Yale University estimates that Trump's tariffs would cost the average American household $1,000 to $1,200 in annual purchasing power.

Gregory Daco, chief economist at the tax and consulting firm EY, calculates that the tariffs would increase inflation, which was running at a 2.9% annual rate in December, by 0.4 percentage points this year. Daco also projects that the U.S. economy, which grew 2.8% last year, would fall by 1.5% this year and 2.1% in 2026 “as higher import costs dampen consumer spending and business investment.’’

What about manufacturers? No industry will take a bigger hit than car makers.

“Nobody can absorb this kind of cost, not the automakers, not the suppliers, not consumers,” said Linda Hasenfratz, the executive chairwoman of Linamar, an Ontario-based company that is one of the 10 largest part-makers based in North America. “Demand will collapse and vehicle production will grind to a halt, putting millions of workers out of work, the vast majority of which are in the U.S.”

She predicted that automobile production could come to a halt within a week of tariffs going into effect.

“You can’t make a car unless you have every part and this industry is so integrated across the three countries,” Ms. Hasenfratz said. I suspect every vehicle will be affected.”

Ms. Hasenfratz’s forecast is shared widely by others in the industry.

“Tariffs on vehicles and parts will reduce North American vehicle production, increase vehicle prices and lead to job losses at manufacturing facilities across the continent,” said Brian Kingston, president of the Canadian Vehicle Manufacturers Association, a group that represents the Canadian subsidiaries of General Motors, Ford and Stellantis.

Some industries that have been stockpiling inventory out of fear that Trump would follow through with his tariff threats can weather the storm (at least initially). But the hit will be immediate when it comes to products like avocados, flowers, or other perishables.

But remember, it’s not as if Trump kept this plan a secret. He said it constantly on the campaign trail, and many Americans either didn’t understand the consequences or didn’t care. Something tells me they’re about to care because these tariffs will immediately hit Americans in the wallet. They will see higher grocery store prices, and some might get laid off. And I don’t care how MAGA-brained people might be; none of this will boost Trump’s approval ratings.

What’s Going On

• In an ideal world where the president of the United States wasn’t a madman, I’d have spent this entire emergency newsletter post talking about the Luka Doncic trade, which might be the dumbest trade in the history of the NBA.

• Putting unaccountable billionaires in charge of federal agencies might be a bad idea.

• Trump voters in Texas are upset that the president is mass deporting undocumented immigrants. If only they’d had a warning of what was coming …

  

Musical Interlude