Make No Mistake, Trump Knows How To Wield the Tariff Weapon

Make no mistake, President Trump knows how to use the tariff weapon.The president of Colombia, Gustavo Petro, thought he was going to prevent President Trump from deporting what Mr. Trump called a “large number of Illegal Criminals” back to their home country.And Mr. Petro actually turned back two American military deportation flights — mid-air.Then, Mr. Trump told him to pound sand, and threatened to destroy Colombia’s economy with a 25 percent tariff, that would’ve rapidly gone to 50 percent.Guess what?Mr. Petro changed his mind and offered to send his own government’s plane to pick up the Colombian illegals and bring them back home himself.President Sheinbaum of Mexico at first refused to cooperate with Mr. Trump’s deportation plan and his “Remain in Mexico” executive order — but now, after a 25 percent tariff threat, suddenly Mexico has welcomed a total of four plane loads — with presumably plenty more coming.This is Mr. Trump’s tariff diplomacy.It may be used to deal with unfair trading practices, or closing the border, restoring national security, and may even be used to end the Russia Ukraine war.The Colombian tiff has now prompted headline stories about how many countries will feel Mr. Trump’s tariffs and how quickly.A Wall Street Journal news article claims that momentum is growing among Mr. Trump’s advisers to place 25 percent tariffs on Mexico and Canada as soon as Saturday, February 1.The WSJ story cites anonymous advisers — it does not cite the President himself — but Mr. Trump has said he’s thinking about February 1.Without question, Mr. Trump is using tariffs as an effective negotiating tool. And he has plenty of executive authority to back that up. Now, the question is what exactly will the President’s tariff strategy be.It looks to me like Mexico is cooperating on the border, though unfortunately Canada, at the moment, is leaderless.Yet I don’t think Mr. Trump will break up the United States – Mexico –Canada trade deal that was so hard to come by in his first term in just the next couple of days.Changes in that deal may well be possible. But the administration players are not yet in place, and the time is very short to make that kind of decision.Similarly, Mr. Trump has said he is not ready for a universal tariff quite yet.For my part, I rather like the universal tariff.I especially like the numbers: $5 trillion in imports at 10 percent could yield roughly $500 billion in revenues to finance tax cuts. At least 50 percent if not more of the cost of those tariffs will be borne by exporting countries.Hence there will be no more than a slight possible one-off price impact, at worst.Mr. Trump’s past custom has tended to be bilateral negotiations where he applies the principle of reciprocity.That is if you tax us, we’ll tax you. But if you cut your tax on us, we’ll cut our tax on you.In this theoretical sense Mr. Trump is very much a free-trader who would like to see significantly lower tariffs, non tariff barriers, and less government subsidies worldwide.Many on Wall Street are crazed about the idea of tariffs, but they shouldn’t be.The world’s trading system has been broken for a long time.Certainly Mr. Trump is aiming tariffs at Communist China, but he has said he is going to talk to Xi Jinping first.China’s tariffs are more than twice as high as America’s. European Union tariffs are 50 percent higher. Brazil and India are nearly 5 times as high and the world trading organization does nothing about all of that.That is why Mr. Trump is right to play an “America First” strategy.Knowing him as I do, though, no one should be surprised if he keeps us guessing until he strikes.And make no mistake, president Trump knows how to use this tariff weapon.From Mr. Kudlow’s broadcast on Fox Business Network.

Make No Mistake, Trump Knows How To Wield the Tariff Weapon

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