Trade wars aren’t just destructive, they’re also confusing.
I placed an order last month for leafcutter bees, which are essential pollinators for my alfalfa seed business in Washington state. I buy them by the gallon from producers in Canada.
Shortly after my latest purchase, however, President Trump announced his intent to slap tariffs of 25 percent on imports from Canada (as well as Mexico).
I’d paid for my bees, but my shipment had yet to arrive.
What I received instead was a message from my Canadian producers. They had a question: Who’s going to pay the tariff?
My first thought was: Not me! We had a deal. It was up to them to fulfill it.
But I also understood their predicament. They need to earn a living, too. A significant new tax represented a new threat. I wondered if they would cancel the order.
Thankfully, President Trump suspended the tariff for 30 days. By the time the suspension expires, I’ll have my bees.
Yet it’s hard to know what will happen next. Will Americans with business partners in Canada and Mexico face steep new tariffs in a month? Or later this year? Or ever?
A lot of my alfalfa seeds are exported. Will I face retaliatory tariffs from nations embroiled in the administration’s next trade war?
It’s hard to know. The uncertainty makes it even harder to plan.
I don’t like tariffs. Having said that, I must admit that I like some of the results that President Trump is achieving with his threats.
Both Canada and Mexico agreed to stiffen border security to lessen the flow of illegal immigrants and deadly drugs into my country. When Colombia’s president refused to accept a planeload of his own citizens that the United States was seeking to repatriate, the president threatened tariffs and Colombia’s president backed down.
President Trump is making good on his promises to secure the border, deport people who have no legal right to be here, and crack down on fentanyl and other lethal drugs.
His approach reminds me of Theodore Roosevelt’s philosophy: “speak softly and carry a big stick.” Nobody will ever accuse the president of speaking softly, but he’s certainly willing to use tariffs as a stick to influence the behavior of other countries.
The challenge is that every time President Trump waves his stick, he risks a trade war. If a nation tries to call his bluff, the administration may have to land a blow—and show that he’s serious about tariffs by imposing them.
This brings to mind President Theodore Roosevelt’s predecessor, William McKinley.
“President McKinley made our country very rich through tariffs,” said President Trump in his inaugural address.
If our current president shares this goal for the United States of the 2020s, he’s bound for disappointment. As Wall Street Journal columnist and McKinley biographer Karl Rove recently showed, federal spending has boomed. In McKinley’s time, it made up 3 percent of GDP. Last year, that figure was 23 percent.
“It would be impossible to rely on tariffs on nearly $3.3 trillion in foreign imports to fund last year’s more than $6.8 trillion federal budget,” wrote Rove.
In fact, it would take a tariff of more than 200 percent on every product that enters the United States from abroad, though of course not even this would work, because few people would agree to pay such a steep tax. They’d just quit exchanging goods and services across borders.
President McKinley could use tariffs as a tool because the government was smaller—and between 1863 and 1913, tariffs brought in almost half of all federal revenue, with most of the rest coming from taxes on tobacco and liquor. Today, as Rove notes, less than 2 percent of federal revenue comes from tariffs. Almost half comes from income taxes and more than a third from Social Security and Medicare taxes.
I’m all for tax reform and reduction—but if we believe tariffs are going to become a major source of revenue for Washington, we’re fooling ourselves with 19th-century thinking.
What we need for the long-term are sensible and predictable policies that allow farmers and other business leaders who rely on international commerce to make plans for growth and prosperity in the 21st century.
I’m cheering for President Trump as he pursues his top goals—but what we need are policies that fully support open trade and the certainty that allows the movement of goods, products and information across borders.
