‘Tariffs aren’t the answer’

Editor’s note: Twenty-five percent tariffs on Canadian and Mexican imports took effect March 4. President Donald Trump also doubled tariffs on Chinese goods from 10% to 20%. China and Canada immediately retaliated with tariffs on American goods. 

It’s 2025, and tariff-related trauma is back again.

Last weekend, President Donald Trump sparked global disruption after declaring that the United States would impose tariffs on imports from Canada, Mexico and China.

The three countries, he said, were responsible for an ongoing flood of illicit drugs and migrants that amounted to a “national emergency.”

Mexico and Canada were later granted a 30-day pause after they agreed to boost border security, but tariffs on China went into effect this week. The president has also promised new import taxes on European goods “soon.”

So where does this high-stakes game of global poker leave the rest of us? Alexandre Padilla, professor and chair of Economics at Metropolitan State University of Denver, looks beyond the tough talk and posturing to provide a few hard facts.

Trump famously said during his first presidency, “Trade wars are good and easy to win.” Is that true?

Basically, trade wars are political tools used to please interest groups that have political power — whether that be domestic industries, unions or voting groups. And tariffs are nothing more than taxes imposed on foreign goods. Countries use them to make foreign products artificially less competitive and thus promote domestic producers. But tariffs inevitably lead to increased costs for consumers, so even when you “win” a trade war, you actually lose.

Canada and Mexico seemed to quite easily repel the latest U.S. tariff threats by making some minor concessions. Might such threats lose their potency if not carried out?

It’s worth noting that Canada and Mexico actually made no real concessions at all. All the border-security actions that the two countries “agreed” to take on last week were already in the pipeline, following a request from the Biden administration late last year. But of course, the average American voter doesn’t know such in-the-weeds details, so President Trump can still sell the episode as a show of strength and a victory. And at heart, I think that is what’s happening here. This is probably more about politics than economics.

Tariffs are a very blunt instrument. What might have been a better course of action for the president to take?

Honestly, the better course would really have been to do nothing. Using tariffs to artificially reduce competition has been tried many times before, and the outcome is always the same: protection (though only temporary) for a relative minority of domestic producers and raised costs for other consumers. Of course, free trade is far from perfect, and all too often, hardworking people lose their jobs to overseas competitors. But the government should help those people through new skills training and by expanding the safety net. Tariffs aren’t the answer.

One industry leader remarked this week that new tariffs would “cause massive havoc” across America. Give an example of how that might unfold.

OK — let’s focus on the housing industry for a moment. Homebuilders in this country rely significantly on lumber from Canada, gypsum from Mexico and electronics from China. Clearly, putting tariffs on these goods will make it more expensive to build houses. That in turn will push up house prices further for millions of already-struggling homebuyers. And that would happen against a backdrop of the Trump administration promising to lower housing costs. Things can get messy quickly.

What might the impact be on the U.S. if this policy triggers a full-blown international trade war?

On an individual basis, Americans will buy less simply because things will cost more and so their money won’t go as far. To paraphrase Adam Smith’s “The Wealth of Nations” in one sentence: The measure of wealth is not how much money you have but how many things you can buy with that money. Basically, tariffs make people less wealthy. That guy who was going to buy an outdoor grill and some garden furniture will now look at the price tags and only buy the grill. It’s that simple.

RELATED: A U.S.-China trade war will hit your pocket

China will likely prove a lot less pliable than Canada and Mexico. Is there a danger that the U.S. is biting off more than it can chew by provoking such a powerful trade partner?

Potentially, yes. China is not going to let itself be bullied by its main rival. After the U.S. government imposed a 10% levy on Chinese goods last week, Beijing immediately slapped a 15% tariff on many American goods, along with a raft of other punitive measures. They do not want to show any sign of weakness.

Empirical studies show that the tariff escalations of Trump’s first presidency, which imposed almost $80 billion worth of new taxes on Americans, ultimately cost China more than the United States. Technically, this country “won” that trade war, but I’m certain that neither consumers nor the stock market at the time were doing victory laps. Also, the Chinese government will exploit the U.S.’s current tariff threats against multiple countries to portray itself as a steadier and more responsible global economic power. They will use this to undermine the U.S.’s moral authority.

The Wall Street Journal just published an editorial titled “The Dumbest Trade War in History.” Should President Trump be concerned?

It depends. Many Americans have built-in political biases — what the economist Bryan Caplan has called rational irrationality — which lead them to systematically reject any information counter to their existing beliefs. And when people’s inherent beliefs supersede what they’re actually seeing in front of them, their chosen political party generally benefits. (In the Midwest, for example, many farmers suffered huge financial losses as a direct result of Trump’s initial 2018 tariffs and yet still voted for Republicans in the midterm elections.)

However, one note of caution: Election voters generally look back over the past six months to a year, judging the state of the economy and their own disposable income. If grocery prices have still not gone down or, worse, have risen sharply by the time we start approaching the 2026 midterm elections — which is feasible, should a tariff war blow up — then Republicans should start worrying.

Political strategist Mark McKinnon said of tariffs: “No one ever wins, and consumers always get screwed.” Given that historical context, how do you see things playing out here?

He pretty much got it right, I’m afraid. It’s possible that a few U.S. producers would gain from tariff action, but it’s difficult to see how those meager benefits would outweigh the costs of millions of consumers losing out. That’s why virtually all economists disagree with these latest policy decisions — we’ve seen them before. When making such major economic decisions, you simply can’t ignore how the markets and other market participants might react to your policies. And as history has repeatedly shown, if a full-blown trade war does break out, nobody will win.