One of my internet buddies is horrified that Trump followed through with his threats to levy tariffs against Mexico, Canada and China.
"Doesn't he know that tariffs generate tariffs in return and destroy the economies of both countries?"
My parroting of the old bromide that the first rule of training a mule is to get its attention was not appreciated.
Part of me understands where my friend is coming from. The Smoot-Hawley Tariffs act of 1930 is credited with increasing the intensity of the Great Depression, increasing its duration and "exporting" the economic downturn to places like Germany (and indirectly) setting the stage for Hitler and the NAZI party.
Theoretically, Trump's tariffs are almost identical to the Nuclear Weapons policy of Mutually Assured Destruction.
If the way for Mexico and Canada to avoid mutually assured economic destruction is to stop enabling economic immigrants who want to violate US laws from passing through their countries, why is that a problem?
Somebody is profiting from the vast subversion of US law. Otherwise it would have been a minor issue that would have been dealt with before midnight of January 20th.
OK, I can see that some will say that Mexico and Canada are not compelled to follow US laws. But do they really want to go down the road of testing Trump's resolve?
On a different note
One can make a compelling case that if the events of 2020 had happened in 2017, the first year of Trump's first term, then he would have handily won reelection.
Few people remember that Ronald Reagan first term was marred by a brutal recession. I graduated in Engineering from Michigan State in 1981 and only 17% of the people in my major got jobs in Michigan. Fortunately for Reagan, it was very early in his first term and the economy was coming roaring back by 1984. The economy was doing OK and the momentum was in the right direction. The United States electorate cheerfully sent Reagan back for a second term.
From a strategic standpoint, it would not hurt Trump if he had a very sharp recession of short duration NOW. In fact, it would probably help his legacy because it would make MAGA very strong for 2028. I don't see the threat of his tariffs triggering such a recession to be a bug...it is more like a feature from the standpoint of timing the bounce.
You can say lots of negative things about Trump and his MAGA brain-trust but even their critics must admit that their organization is very effective at LEARNING and IMPLIMENTING those lessons.
Side-story about recessions
It is like a young man I know who owned a diesel, 4WD truck. He could not afford to keep it running. It absorbed all of his discretionary money and it was still not reliable transportation. He was trapped by that truck.
His life was on-hold until he confronted the reality of the truck. It was a money-pit that would never offer him a positive return on his dollar invested. Shit happened and he was FORCED to sell his truck.
He dumped the truck and took his loss. He bought a beater, gas-powered car that got 30 mph mpg and never looked back.
Sometimes you just have to let go.
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Gazing into my crystal-ball, the S&P 500 could drop by 40% and it would only unwind the stock market back to October of 2022. That is NOT the end of the world, even if it dents some politicians' stock portfolios.
Canada and Mexico already have tariffs on many, many US goods. I believe that is the point Trump is trying to drive home to them.
ReplyDeleteAs a Canadian… for my part I’d like to apologize for the gong show. Yes, we SHOULD be controlling our borders. Yes, we SHOULD be concerned about trade imbalances. Yes, we SHOULD be concerned about our partners to the south, paying our share of defence, etc.
ReplyDeleteToo many Canadians do not appreciate the value of a dollar, of a good neighbour or a good partner. Justin Turdo and most of his liberal associates couldn’t hold their families together. There’s no way such people can maintain their own countries - never mind an international alliance.
Please stay tooned. Do not change your channel or adjust your set. We are experiencing technical difficulties up here and will have it fixed soon.
Canadian exports to the US are 40% of their GDP. Our exports to them are 2% of our GDP.
ReplyDeleteDunno. I’m retired and I would hate to see my 401 k drop 20% now. Not good. I hope the tariffs work like Trump expects.
ReplyDeleteStocks go up. Stocks go down.
DeleteExpenses go up. Expenses go down. It is good if big expenses happen when the stock market is up but they don't always. That is why it is good to have something like bonds or money-market assets. You can harvest those and rebalance at a later date.
In 1979 when Jimmy Carter was president mortgage interest rates on commercial properties hit 18 to 21% and were refinanced annually. I had three businesses with two properties, three rental houses and was a partner with others in 6 more. And I had a 40 acre farm and a house in town. In 1980 I was busted. Reagen stabilized the economy and I worked my way out of that mess after 6 years and it was hard. I feel for those that might have to face that today. But it seems that we never learn from history and don't listen to those that have gone through it. In 1978 I had some old guys telling me it was coming but I didn't listen. "Things are different now don'tcha know." No it isn't.--- ken
ReplyDeleteThe gas powered beater. 30 mpg perhaps?
ReplyDeleteYou all be safe and God bless.
Good catch. Thanks. Fixed it.
DeleteI am not saying it is quite the same, but it all reminds me of the War on Drugs where Colombia was under pressure to stop the production of cocaine. I seem to remember something about production being demand-driven. So long as people as people want the stuff, somebody is going to produce it and sell it.
ReplyDeleteSame applies to the people coming over the border. If they are being offered employment and a better life, then they will keep coming. If they think they will have a miserable life in the US then they will go elsewhere or stay at home.
>Smoots-Hawley Tariffs act of 1930 .... setting the stage for Hitler and the NAZI party.
ReplyDeleteThis was awesome. I've never heard of Smoots having created nazis.
This is a new twist on the Kevin Bacon game. No matter the subject, Trump is just three steps away from being a nazi.
(I know that's not what you meant, but the best comedy is unintentional.)
I am willing to bet two-bits that at least one article will show up in the next two days that mention the role of Smoots-Hawley and the rise of Hitler. Easy enough to do. At 5:40 AM on Feb 5 I will use those as key-words in Google search (News).
DeleteI read that Mexico was particularly angry about the accusation that their government and the cartels are in cahoots. Although many do not see this as justified, the prior president Obrador adopted a policy of backing off of prosecuting the Mexican drug cartels due to retaliatory violence the cartels employed. Obrador was interested in avoiding the deaths of law enforcement and judges. At the cost of giving the cartels much less to worry about.
ReplyDeleteThe result is predictable - more cartel activities. I can definitely see why some U.S. officials are upset at their government for the backing off.
I think what is also unsaid is that to slow the drug trafficing, the U.S. has to crack down on the suppliers - users on our side of the border. As long as there is a demand, the cartels are willing to feed it.
Criminal convictions are expensive. Drug possession is a slam-dunk from an evidence standpoint. Many cases involved copping-a-plea to the possession in exchange for other, less provable charges being dropped. Hence, there are many violent felons in prison for "simple drug possessions"
DeleteCriminal Justice reformers are advocating for elimination of simple drug possession as a felony. Many jurisdictions stopped prosecuting for it. They lost a valuable tool.
Drug use increased because of the feelz-good activists. More money for the Cartels. More violence everywhere.
Shoot, according to my MX wife (sibs in MX still), the Presidente/a is under the thumb of the cartels. Which are diversifying into protection rackets.
DeleteI remember when the Peruvian government decided that all the armed forces, not just the army, would rotate to the jungle areas for drug interdiction work. My nephew was at the time a navy officer and promptly resigned to avoid being sent.
ReplyDelete“Plata o plomo” is a real thing. You get the choice, but basically only once. There will be no support from your military superiors since they are most probably involved. It is sad, but the drug organisations have more available money than the government, which does have other things to worry about.
I do not believe that the situation in Mexico is that much better and squeezing them with tariffs will mean they are more dependent on the illegal traffic.
There is just too much money involved, and politicians are generally corrupt, or willing to be corrupted. It is how they manage to raise large sums of money for elections, after all.
I stick to what I said before – if you want to disrupt the drug trade and you cannot completely close the borders (which you can’t), then you have to block it further down the supply line.
You will have addicts, who will not react to incentives, but I am sure you have a huge recreational drug trade and decriminalization will do absolutely zero to reduce this. I feel this is where you have to apply pressure, if the drug culture has not become too mainstream for any action to be thinkable.
Ban Narcan use outside the ER, and tattoo a mark after the first use. One rescue per addict, no free rides. Let the addicts die.
DeleteFree trade has been utter disaster, lets try something, anything else.
ReplyDelete