Trump’s tariff plan is bad policy and bad politics

Last month, President-elect Donald Trump announced that on his first day in office, he will impose a 25 percent tariff on all products from Canada and Mexico and an additional 10 percent on China. In his words, the levies will “remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop the Invasion of our Country!”

During the campaign, Trump claimed that tariffs would have wonderfully beneficial effects, restoring factory jobs, reducing government debt and allowing his administration to subsidize childcare.

But Trump’s plan is both bad policy and bad politics. Here’s why.

Despite a significant percentage increase in illegal immigration from Canada into the U.S., the numbers are a tiny fraction of the traffic at the southern border. The problem along the northern border seems manageable, and Canadian authorities are taking steps to address it.

Following more aggressive measures by Mexico and President Biden’s executive order making it more difficult to enter the U.S. without permission to seek asylum, the number of encounters at the southern border dropped to a four-year low in 2024 — even though Trump helped to scuttle a bipartisan bill to enhance border security. Of the more than 1.5 million illegal immigrants taken into custody during this financial year, moreover, only 15,608 had criminal convictions, almost all of them for illegal entry into another country or driving under the influence.

For the first time in years, fentanyl-related deaths in the U.S. have declined. Although the causes are not entirely clear, contributing factors include increased confiscation of the drug at the southern border, crackdowns on Mexican cartels and major disruptions of the supply chains of Chinese distributors of fentanyl precursors.

Trump’s tariff plan may well blow up the USMCA, the update of NAFTA that Trump himself signed to much fanfare in 2018. To justify the tariff, the Trump administration can cite a treaty provision stipulating that any of the three signatory nations can take steps it “considers necessary…to protect its own security interests.” That said, Department of Commerce rules require that tariffs be linked to the impact on a specific industry and not be imposed to coerce another country on matters unrelated to this concern.

Canada, Mexico and China are America’s top trading partners. Canada supplies America with lumber, aluminum, plastics and a high percentage of our country’s crude oil. Automobile parts travel across Mexican, Canadian and U.S. borders multiple times before they appear in cars “made in America.” Many foreign electronics manufacturers use Mexico as a “production partner” before entering the U.S. market. Mexico and Canada grow 32 percent of the fresh fruit and 34 percent of the fresh vegetables sold in the U.S.

The prices of these and many other goods will go up when tariffs are imposed. Estimates vary, but virtually all economists agree that costs to each American household is likely to be thousands of dollars per year.

And some sectors will suffer more than others. During the 2018 and 2019 tariff war, for example, agricultural income in the U.S. dropped by $27 billion, with much of the shortfall made up by a federal government bailout. Nor did tariffs on imported steel result in more jobs at American plants.

China has prepared for a new tariff war by building factories in other countries to assemble components into finished goods for sale in America and elsewhere. China could let its currency fall in value against the dollar to make its exports less costly; purchase products from other countries; restrict supplies of batteries used in electric vehicles and drones; or reduce American companies’ access to metals and critical minerals, essential to making chips, solar panels and other tech products. This week, in fact, China banned exports of gallium, antinomy and germanium to the U.S. because the Biden administration has limited Beijing’s ability to manufacture advanced chips, but also, in all likelihood, as a signal to the incoming Trump administration.

Tariff wars in the 21st century produce no winners. That reality — and polls indicating that 69 percent of Americans (and 59 percent of Republicans) believe tariffs will lead to “much” or “somewhat” higher prices on domestic goods — lead some observers to wonder whether Trump will actually impose draconian tariffs.

Although it is unclear what concessions Trump wants to extract, investors in the U.S. stock market — which continued its upward climb while tariff threats dragged down Asian and European equities — seem to be betting on a relatively benign outcome. They may be right. By landing on a 10 percent tariff for China, not the 60 percent he talked about during his campaign, Trump may get a measured response from President Xi Jinping.

Canadian Prime Minister Justin Trudeau may have helped his cause by flying to Mar-a-Lago, kissing the ring and reporting that Canada will deploy more police, drones and helicopters on the border. And Trump’s false claim that Mexican President Claudia Sheinbaum had “agreed to stop migration through Mexico and into the United States, effectively closing our Southern border” may set the stage for him to declare victory.

If Trump — who once said that “to me the most beautiful word in the dictionary is ‘tariff’” — begins his second term by stepping back from a bad plan, one thing seems certain: Most people, here and abroad, will breathe a sigh of relief.

Glenn C. Altschuler is the Thomas and Dorothy Litwin Emeritus Professor of American Studies at Cornell University.