ST.PAUL, Minn. — The tariff war that President Trump started Saturday against Canada will push gasoline prices up at least 40 per gallon in the Upper Midwest and perhaps70 cents, say economists. John Spry at the University of St. Thomas noted that Minnesota refineries rely lean heavily on crude oil by pipeline from Alberta, Manitoba and Saskatchewan. Whether Trump was aware of this was unclear. Said Spry, a finance professor: “If you’re a Minnesotan, you’re not really using crude oil from the Middle East — why ship it that far? You’re using crude oil from North Dakota or Canada.” Trump slapped 25% tariffs on imports from Canada, which is the largest U.S. trading partner, and on Mexico, the second largest.
Conflicted Trump messaging
Pressed about his executive order on taruffs , Trum said he wanted to push Mexico to stop immigration across the southern border. How would weaponizing tariffs accomplish this? Pressed by reporters, Trump shifted his rationale to Canada: “Mexico and Canada have never been good to us on trade,” he said. “They’ve treated us very unfairly on trade, and we will be able to make that up very quickly because we don’t need the products that they have.” At another point Trump told reporters that tariffs would reduce illegal importation of the drug fentanyl. How? By definition, pirates and traffickers avoid customs agents and sneak their goods into the country. Trump’s messaging, in effect, was mixed and confusing.
What’s next
It’s possible that Trump’s bully-posturing could backfire. Canada’s prime minister, JustinTrudeau immediately announced retaliatory new tariffs against U.S. products into Canada. Experts in geopolitics and international finance agree that tariff wars have disastrous consequences as they escalate. It is possible, too, that Trump could be forced to back down under U.S. domestic pressure and exclude specific products, for example Canadian crude oil. Last week Trump retreated under pressure from Congress, governors and lobbyists to back off a poorly and hastily conceived scheme for massive job cuts at federal agencies, which would have decimated public services.
Spry. Global finance professor.
Trump panacea
Inside Trump’s mind on tariff hikes: “Number One is the people that have poured into our country so horribly and so much. Number Two are the drugs, fentanyl and everything else, that have come into the country. And Number Three are the massive subsidies that we’re giving to Canada and to Mexico in the form of deficits.”
Domestic downsides
Textbook explanation Economics 101: Higher tariffs push prices higher on imported goods because import companies cannot absorb what’s, in effect are surcharges. The surcharges are passed on to consumers. The new Trump tariffs are up 25% on goods from Canada and Mexico and 10% on China. Gary Hufbauer, of the Peterson Institute for International Economics: “There’ll be price spikes in particular, goods, like the autos, also fruits and vegetables.” U.S. farmers could lose foreign outlets in a tariff war as did Trump’s trsde war in his first presidency. To alleviate the resulting farm crisis, Trump cannibalized other federal programs to finance farm aid packages.