Trump's Very Bad and Destructive Tariff War

Just five years ago, then-President Donald Trump negotiated and entered into a new trade deal: the Unted States-Mexico Canada Agreement (USMCA).

The deal supplanted the 30-year-old North American Free Trade Agreement (NAFTA) and liberalized trade further, giving US dairy farmers greater access to the Canadian market, and strengthened guidelines to have a higher proportion of automobiles manufactured amongst the three nations rather than imported from elsewhere. US intellectual property was better protected, and US pharmaceutical manufacturers got better market access.

It was a very successful agreement, and economists estimate that it increased each nation's wealth through more efficient, more secure and less expensive product sourcing. A win-win-win for all three countries.

Now, back in office for just over a month, President Trump is throwing his own USMCA agreement out the window, and launching a trade war, imposing sweeping 25% tariffs on both Canada and Mexico.  The ostensible reason - to goad Canada and Mexico to tighten border controls to stem the flow of drugs and migrants into the US.

Except that the flow of Migrants - openly encouraged under the Biden administration - has already virtually stopped. And the flow of drugs into the US is a complex matter - drawn as much or more by the lax drug enforcement policies of the US - and active drug smuggling by China - than by the border policies of Mexico.

Last month, Mexico deployed over 10,000 military troops to the border to coordinate drug interdiction with the Trump administration. And Canada - through which only a small fraction of drugs or Migrants are smuggled - has established a new federal drug office and police border deployments to coordinate with the US. In other words, both Canada and Mexico have already stepped-up to coordinate border security with the Trump administration.

A Trade War is an economy-killer. Cars will get more expensive - an estimated $9,000 per vehicle.  Construction materials - lumber - will double in price, making construction jobs 25% to 50% more expensive. Loss of markets in steel and dairy kill thousands of US jobs - and open new markets for Chinese steel and European dairy. Hundreds of thousands of US businesses - especially small businesses - will be crushed.

Canada and Mexico are US military and strategic allies: Canada is a full NATO member, gives the US critical satellite and radar early warning coverage, and supplies vital intelligence to the CIA as a "Five Eyes" partner of the US.  Mexico is a US military partner in NATO and has a series bilateral military and security agreements with the US.

The whole purpose of the North American trade bloc was to reinforce the strategic power of a militarily united North America with a free trade agreement that ties together our three economies. The economic unity is part of the strategic and military unity that makes each county more secure and safe.

Let us hope that President Trump sees the wisdom of sticking to his own excellent USMCA agreement, and the strategic necessity of not starting a war - trade or otherwise - with our closest allies.