Copy of AFF Sentinel V22 #17-Let the Cake Bake*
- Steve Dittmer
- Jul 22
- 3 min read
Instant Panic Is Not Required
Steve Dittmer | AFF Sentinel
Colorado Springs, CO
Originally sent to subscribers 03/04/25
Trump’s efforts to battle illegals and fentanyl started Tuesday, with 25 percent tariffs on some Canadian and Mexican goods and an additional 10 percent on Chinese goods. Only energy from Canada will be tariffed at a 10 percent rate.
While Mexico and Canada both have been instituting actions and processes they felt would placate President Trump, it hasn’t been enough, at least not yet. We thought perhaps he was waiting for actual evidence of the success of those measures, perhaps he is letting them take effect to show he will impose them if he has to. No one is saying how long tariffs could stay in place.
But the damage to Americans from fentanyl, from crime from illegals and the economic burden of supporting the influx of illegals is not something Trump takes lightly.
Howard Lutnick, Commerce Secretary explained clearly to Larry Kudlow (“Kudlow: on Fox Business) Tuesday that a key metric has not responded -- autopsies of Americans dying from fentanyl.
“They did a nice job on the border to start but the fentanyl deaths have not been declining in the way we expected,” Lutnick said.
Both Canadian and Mexican officials have been on the phone telling Lutnick that they will do better and the President is listening and he is very fair, very reasonable, he said. He will work something out with them. There will not be a pause. He is expecting them to do more and he will meet them in the middle. He expected those conversations to occur Wednesday.
Lutnick also said the provisions of the USMCA will be involved. If the two nations have been living up to those provisions, Trump will use that as a reason to meet them in the middle on these tariffs, if the fentanyl issue is sufficiently addressed.
As for China, who had issued a statement that if Trump wanted a tariff war or a trade war, they were ready.
“It’s a drug war,” Lutnick said forcefully. “It’s not a trade war, it’s not a tariff war. They still are giving maximum subsidies to producing the ingredients for opioids that are killing Americans.
“They are thumbing their nose at the President,” Lutnick said. That is not going to get them very far, he suggested.
Kudlow recalled the G20 Summit in Buenos Aires, where “without batting an eye,” Xi Jinping agreed to Trump’s suggestion of capital punishment for fentanyl or opioid involvement. He never did it, Kudlow said.
On April 2, the reciprocal tax policy kicks in and adjustments could happen then, if not before.
Lutnick pointed out that Canada has a five percent sales tax and a 200 percent tariff on milk and milk products.
He charged that there was a lot of “cheating on the side” of USMCA. He also referred to a digital tax Canada imposes on tech companies.
That covers the motivation behind the tariffs. What about the effects?
John Carney of Breitbart Business Digest has said for some time that the 2018 Trump tariffs provided evidence that contradicts claims that tariffs today get passed through to consumers intact.
A study published in the American Economic Association AER: Insights by four economists analyzed the effects of tariffs. The study showed import prices increased almost in direct proportion to the tariffs but consumer prices did not. U.S. retailers absorbed much of the cost burden.
For example, while tariffs increased certain Chinese imports by 20 percent, retail prices on those goods increased by 0.7 percent on average. They used BLS data, retail price tracking and data from two large U.S. retailers for the study. Retailers opted to sacrifice some profit margin rather than risk losing market share.
Carney also pointed out that corporate tax rate cuts and deregulation created the room for companies to make some adjustments in pricing strategies. There also can be adjustments in supply chains and pricing changes by exporters to moderate the effects of tariffs.
Competitive pressures affect how everything shakes out.
Also, recall that inflation ranged from 1.4 to 1.9 percent during Trump’s first term, even with his tariffs. Are tariffs inflationary or is government spending inflationary?
*Expression from U.S. member of Congress, whose notation we can’t find. Later.
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