Copy of AFF Sentinel V22 #08-Latest Tariff Intelligence
- Steve Dittmer
- Jul 22
- 5 min read
Things Known and Unknown - the Way Trump Likes It
Steve Dittmer | AFF Sentinel
Colorado Springs, CO
Originally sent to subscribers 01/27/25
No one should think that using tariffs as a negotiating tactic is going to be a smooth process. A lot will depend on how other countries react.
An example of it working quickly played out over the weekend. Colombia approved landing permission for two military flights with 80 illegals each. They then rescinded approval, while the flight was airborne. Trump promptly promised a 25 percent tariff with quick escalation to 50 percent, plus visa cutoffs, etc. Colombia reversed itself in a few hours.
Both Colombia and Brazil complained about illegals being handcuffed on the flights. Some 80 criminals on a plane and they expected to roam the plane freely?
The episode quickly showed Trump is not afraid to use America’s economic clout decisively when it is justified.
What about Canada and Mexico, our important North American trading partners? Mexico has received multiple flights of deported illegals but not publicly mentioned tariff negotiations. There has been mention publicly and privately that Canada has been sending people to negotiate with the Trump Administration.
But Trump Administration officials are just settling in to new positions and Canada’s ability to negotiate is questionable under Prime Minister Trudeau’s impending resignation. Things can be promised but evidently funds can’t be appropriated with Parliament out until well into March.
While Trump has mentioned Feb. 1 as a deadline for Mexico and Canada, there has been no indication as to whether that will be an announcement date, whether there will be a phase-in period or if Canada’s unusual political position will garner them some extra time.
While it is well known that Trump considers the flow of illegal aliens and of fentanyl two issues that must be resolved to his satisfaction right away, there are other considerations for Mexico and Canada. How serious the factors and how urgent Trump’s desire to re-open negotiations to modify the USMCA is not known.
Less discussed has been any contribution to government revenue totals from levying tariffs on incoming goods.
The president has said he is not ready to impose universal tariffs yet. But former Trump official Larry Kudlow points out that even a ten percent tariff on $5 trillion in imports would contribute $500 billion in revenue to finance tax cuts. He believes half of any tariff cost would be borne by the exporting country, and only a “slight” increase in prices would get passed on to consumers.
But Kudlow pointed out that Trump likes bilateral negotiations, on reciprocal bases, rather than blanket moves. If one side cuts tariffs or trade barriers, then the other side can do so.
The President is basically a free trader. He likes the idea of low tariffs, lower non-tariff trade barriers, no subsidies and free trade worldwide. But it won’t happened unless he pushes for it.
Wall Street is panicked about a trade war but Kudlow points out that the world’s trading system has been broken for a long time. Trump has talked about ten percent tariffs on Chinese goods but he has said he is going to talk to President Xi first. China’s tariffs are twice our levels, the EU’s are fifty percent higher, and Brazil’s are five times as high as ours.
The WTO has done nothing to fix those imbalances, Kudlow said.
So rebalancing those things are rightly part of the American First agenda. But having worked for Trump, Kudlow said no one should be surprised that Trump is not tipping his hand.
But no one should doubt he knows how to use the tariff weapon.
Kevin Hassett, has been named as the new director of the National Economic Council. He reiterated the weekend demonstrated that Trump would use tariffs if he had to. Any new tariffs would be on top of any universal tariff.
Hassett talked about that other consideration: that any tariff could also be part of the supply-side approach in order to lower some of the taxpayer burden. In rough terms, another $500 billion to apply towards tax relief would definitely offset tax cuts.
Hassett reminded everyone that Trump is looking at the big picture, which includes producing more energy and lowering its cost, deregulation cost savings, tax cuts and reduced spending as part of a supply-side overhaul creating a Golden Age for America.
What about claims of tariffs causing inflation?
Hassett said the $1.5 trillion/year of increased spending under Biden caused inflation. Cutting off future energy production increases were a key element of the situation.
Reducing inflation will take an all-of-the-above approach. Tariffs are a small part of the big picture.
Kudlow mentioned a story that said Trump advisors claimed he was close to imposing 25 percent tariffs on Mexico and Canada.
Hassett said Trump is one hundred percent committed to getting fentanyl imports under control but that’s all he could say right now.
The story Kudlow referred to was a story in Monday’s Wall Street Journal that indicated that both Trump and his aides were serious about those 25 percent tariffs on Canadian and Mexican goods on Feb. 1. Of course, he could announce tariffs and then offer a time period for negotiations before an imposition. Or, following the episode with Colombia last weekend, he could act quickly and negotiate later if he feels the two countries are not cooperating like he feels they should. At least two key advisers, Commerce Secretary Howard Lutnick and Deputy Chief of Staff Stephen Miller are in the tariff-first, talk-later camp (“Levies on Mexico, Canada Put on Fast Track,” 01/27/25).
We think the key word there is “cooperation.” Mexico has accepted multiple incoming flights of illegals, re-instated Remain-in-Mexico policies and called out its national guard. But Administration officials have indicated Mexico has not done enough and neither has Canada, although they have tightened their border, too. We’ve been told Canadian officials have been in touch with the Administration but they are also preparing a list of retaliatory tariffs. But Canadian officials are claiming still to be in the dark about what else they could do.
Part of the problem has been both Canada and the U.S. are in political flux, as some key American officials have not been confirmed by the Senate yet.
All of Trump’s economic advisers agree he is not looking to impose long-term tariffs on everything. He still sees them as a tool to eventual free trade. Some of that timing will depend on how other nations respond, on whether they are interested in free trade or not
But we have the biggest, richest market and Trump is not going to timidly avoid using that hole card.
Our address: Agribusiness Freedom Foundation, P.O. Box 88179, Colorado Springs, CO. 80908.
To support the work of AFF, you can contribute with any major credit cards here:
Or,
If you wish to use your Paypal acct. click below: