Is “Tariff Man” Messing Up the Economy?

At one point in his dealings with China (which continue), President Trump called himself “Tariff Man” – apparently because he likes tariffs and thinks they are good things to impose and/or to threaten other countries with.  Which brings me to the tariffs that President Trump threatened to impose on Mexican imports into the United States if Mexico didn’t do more to stop people from entering the U. S. illegally. 

I have commented previously on President Trump’s arguably rogue or unilateralist approach to foreign policy.  I am not a fan of it.¹  I don’t think it’s good in the long run – or the short run – but I also don’t think it does any good for me to complain about it again and again.  And it gets tiring.  Therefore, this post.

But I think President Trump’s threat to impose tariffs on imports from Mexico in this case causes a different kind of problem that I haven’t commented on before, at least with respect to President Trump, so I wanted to do so. 

Most of President Trump’s other threats to impose tariffs were related to trade policy.  I didn’t think most of them were good ideas, but they at least they related to imports and exports and, in that way, were sort of predictable.

But imposing tariffs because of immigration policy has no logic to it, other than we have what we think of as a hammer and we are going to use it.  The problem is the collateral damage this can cause.  During the Obama administration, I commented on the problems to the economy caused by business and economic uncertainty resulting from all of the new rules they were putting in place.  It was hard for businesses to know what was coming next.

It seemed to me that this uncertainty affected business confidence and, thus, the economy.  Businesses couldn’t know what the rules were going to be or what their costs might be because they didn’t know what some part of the bureaucracy might come up with next. 

Now we have President Trump, totally out of the blue, threatening to impose tariffs, starting at 5% and rapidly increasing to 25%, on imports from Mexico – because of immigration.  Talk about uncertainty.  Talk about hitting business confidence.  Just a few months ago, President Trump finalized a new free trade agreement among the U.S., Canada, and Mexico.  And now, with a tweet, he threatens to impose new tariffs on Mexico, regardless of his own agreement.

Are businesses going to hire more people or invest more money, if their supply chains and product costs can be changed almost overnight, with virtually no advance notice?  I argued this kind of uncertainty was a big problem under the Obama administration.  If this keeps up, it will be a problem under the Trump administration, too.
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¹ I didn’t vote for him because I anticipated it.