The Trump administration says it intends to slap a 5% tariff on every medium-sized car, avocado and other Mexican import beginning June 10 – all almost US$1 billion worth that crosses the border into the U.S. each day on average.
The president is using the policy as a cudgel to compel Mexico to do more to stem the flow of migrants into the U.S. and says he’ll increase the tariff if things don’t improve. As a scholar who studies trade policy, I have a hard time agreeing with the president’s strategy that tariffs can be used as a stick to pressure another country to do whatever he wants.
More than that, Americans will pay the price – as they have with Trump’s U.S.-China trade war.
Driving up costs to consumers and businesses
Tariffs, which are a tax imposed on imports paid by consumers in the recipient country, are typically used as a protectionist measure.
That is, governments use them to promote domestic goods in the face of global competition. For instance, if a domestically made item costs less than a foreign made item – due to tariffs increasing the price – trade scholars would expect a consumer to choose the less expensive, domestic item.
This would make sense in an economy where consumers have actual choices about whether to buy a foreign or domestic product. However, due to the evolving global economy, most consumer goods are made abroad or contain foreign parts. All “U.S.-made” cars, for examples, contain foreign parts. And my research has shown that it is not easy to understand how “foreign” a product is.
One good example is avocados. Mexico produces 11 for every 1 grown in California, and demand is unlikely to diminish for avocado toasts and guacamole, so Americans will simply have to pay more.
The long and short of it is that a 5% tariff on all imports from Mexico will drive up costs to American consumers and businesses by almost the entire amount, meaning using them to solve a very different border security issue will be very painful.
Killing the USMCA
It is also quite confusing to place tariffs against Mexico.
Just six months ago, the U.S, Canada and Mexico finished negotiating a massive trade deal to replace the often-reviled North American Free Trade Agreement. Although the deal has been signed by leaders of each country, it has not yet been ratified by the U.S. Congress.
President Donald Trump, who has frequently blasted NAFTA and trumpeted its replacement, now risks seeing his U.S., Mexico, Canada Agreement torpedoed. House Democrats were already on the fence about whether to ratify it and may use his tariff threats against Mexico over immigration as another reason to vote it down – or to get an immigration deal more to their liking.
And Mexico, which also has yet to ratify the USMCA, is also talking about retaliation against any tariffs Trump imposes, including rejecting the negotiated accord. Tearing up the deal could cause economic turmoil for the U.S., particularly as Mexico is the second-largest export market for U.S. goods.
All in all, academic research has shown economic sanctions, including tariffs, aren’t an effective way to conduct foreign policy. Unfortunately, they seem to have become the Trump administration’s go-to strategy when it doesn’t get its way.
No, Ukraine isn’t a ‘game changer’
Why would asking for foreign help for the second time change anything?
Look, I’ll be the first to celebrate once the president is found out to be a traitor. But I’m getting tired of the Kaboom Kabal and other happy campers super-eager to pin the word “game changer” to anything that’s remotely disgraceful for the president.
How Facebook makes money when people are slaughtered
The National Rifle Association nearly doubled its spending on pro-gun Facebook propaganda for three weeks after the mass shootings last month in El Paso, Texas, and Dayton, Ohio, according to analytics provided to The Intercept.The social advertising surge began just one day after the Aug. 3 El Paso massacre, which left 22 people dead, and on the same day as the Dayton killings, which took 10 lives. At one point in this period, the NRA was spending $29,000 on a day’s worth of Facebook ads, nearly four times as much as before the shootings, according to Pathmatics, a company that monitors online advertising spending. The ad spending was conducted through the NRA’s lobbying arm, the Institute for Legislative Action, which, in the four weeks before the shootings, spent on average just over $9,400 a day on Facebook ads.Between Aug. 4 and Aug. 25, the institute spent around $360,000 on Facebook — roughly $16,500 per day — reaching a peak of over $29,000 on Aug. 18, according to Pathmatics, which said that it gathered this data from a panel of hundreds of thousands of Facebook users who opt in to automatically share information about the ads they’re shown. Altogether, the ads bought in this period were viewed tens of millions of times, the analytics firm estimated. “The NRA’s ad spend has spiked significantly, which isn’t surprising for an organization in the midst of a reputation battle and crisis,” Pathmatics CEO Gabe Gottlieb said.
Is a strange Twitter glitch censoring the left?
The Working Families Party, a New York-based progressive political party, has a reputation befitting its name as a left-populist political organization. So when the organization endorsed the center-left Massachusetts Senator Elizabeth Warren — who was once a hardcore Republican and has emphasized her capitalist credentials — over the explicitly democratic socialist candidate Sen. Bernie Sanders, Sanders (I-Vt.) supporters were understandably disappointed. After all, the party overwhelmingly endorsed Sanders in the previous presidential election. What had changed?