The Tariff War is getting hotter. Here are some bullets and a reading list.
1. First, some history — in our new book, The Fed and the Flu: Parsing Pandemic Economic Shocks (https://www.thefedandtheflu.com/), my co-authors and I discuss the plague in Athens and the aftermath of the Peloponnesian War. See Chapter 4. Note that one of the early tariffs in recorded antiquity was levied on exports and imports in the port of Piraeus in the period following the Peloponnesian War. Athens used tariffs for revenue when exacting tribute from its allies was no longer an option. Port users paid because they didn’t have competitive options elsewhere in the region — 2% in and 2% out. Also note that Athens had restored monetary stability following the war, and the drachma was accepted throughout the Mediterranean as a functioning reserve currency. Vast trade networks converged in the markets of Athens, and leaders further developed the city as an optimal center for profitable trade in the decades that followed the war. For these reasons, the tariffs, which were not a lot higher than today’s fees for credit card transactions, were not prohibitive or punitive but a ticket to opportunity. All this detail is in the book. We hope you enjoy the chapter.
2. The Tax Foundation says this about the history of tariffs (“History of Taxes,” https://taxfoundation.org/taxedu/primers/primer-history-of-taxes/ – :~:text=heir at death.-,Tariffs,butter, cheese, and more):
Tariffs have been dated to the 3000s BCE on trade of metal and wool between the ancient city of Kanesh in Anatolia (modern-day Turkey) and Assyria (in modern-day Iraq). The Roman Empire also levied tariffs, both on goods traded within the empire and imported from outside. Foreign goods were taxed at five to 25 times the rate of internal trades. Throughout history, tariffs have been levied to control the trade of certain goods like wool, leather, butter, cheese, and more.
Now let’s turn to the present.
3. George Robertson’s Substack piece discusses the tariffs against Canada and how DT 2.0 is likely to lose in US courts when his use of the NEA is adjudicated. Kotok’s view is that Trump’s legal team already knows that there is no immigration emergency with Canada, and the fentanyl claim against Canada is a real stretch. They are prepared to fight and expect to eventually lose if it gets to the “Supremes”. Please note that Mexico is in a different category; and Trump’s legal team expects to win at SCOTUS on the Mexico Fentanyl threat. Here’s Robertson.
In the foreign area Trump can make Executive Orders “stick” but only if there is either a national security emergency that gives Trump sole power to resolve as per the National Emergencies Act (NEA) or in trade the International Emergency Economics Act (IEEA). Otherwise the Senate must decide all executive acts in security and trade. Trump has declared power under the NEA given the cartels smuggling fentanyl, unfettered continued illegal immigration. Of late the illegal flow of migrants has ceased but of course fentanyl is a national security risk of the first order. This is not to judge Trump’s actions but to understand if they will hold up under judicial review. With the Southern border, Trump’s use of the NEA will likely not end in court regarding Mexico.
Extending the NEA to empower his actions regarding Canada will end in court given the realities of the Northern border national security, it will end up under judicial review and likely struck down. Any home builder facing a 25% tariff on soft wood framing lumber or any auto parts maker forced to deal with the 25% tariff will seek judicial actions to stay the inclusion of Canada under the NEA will receive remedy.
(“Last week, February 3rd to February 9th,” https://themonetaryfrontier.substack.com/p/last-week-february-3rd-to-february .
4. Here’s a detailed history of American tariffs: “Chapter 3: The Creation of the U.S. Tariff Commission,”https://www.usitc.gov/publications/other/centennial_book/chapter3.pdf. I recommend taking the six minutes to read it so that you better understand the entirety of American tariff policy. Note that DT 2.0 uses historical references selectively and cherry picks the outcomes. An example is with President McKinley, where Trump cites the early policy but ignores McKinley’s policy reversal: “Why Trump’s Tariff Idol, McKinley, Abandoned His Own Tariff Policy,” https://www.wsj.com/video/series/news-explainers/why-trumps-tariff-idol-mckinley-abandoned-his-own-tariff-policy/38A9364C-142B-4656-AFE3-B6F7F4F504E2.
5. In one of the finest pieces of writing I’ve seen, Lyric Hughes Hale penned this discussion of DT 2.0, including tariffs. Her title is“Inundation,” and the subtitle is “The Trump Tsunami” (https://plus.econvue.com/p/inundation). This essay is extraordinary and is well worth the paywall for an entire year, IMO. Lyric is a great writer and researcher. I rate this analytic piece 5 STARS. Here’s the overview:
The four stages of Trump’s political tsunami are 1) Revelation 2) Follow the Money 3) Legal Issues, and 4) The Court of Public Opinion. We detail these as well as six key economic issues we are watching.
6. Are tariffs impacting the price of gold? I don’t know. but here’s one explanation to consider: “Is the London Gold Shortage Just a Tariff Scare… or Something More?,” https://www.moneymetals.com/news/2025/01/31/is-the-london-gold-shortage-just-a-tariff-scare-or-something-more-003799.
7. Bruce Mellman’s exceptional Sunday missive on tariffs belongs on the research reading list: “ Six-Chart Sunday (#55) – Trade Wars,” https://brucemehlman.substack.com/p/six-chart-sunday-55-trade-wars.
8. And here’s a primer on tariffs from PBS NewsHour: “A look at how tariffs work and the impact they have on the economy,” https://www.youtube.com/watch?v=quk2evrZHAM.
We’ll stop the reading list there. DT 2.0 won’t stop tariffs.
The Tariff War outcomes are unpredictable. As Lyric Hughes Hale wrote, we are facing a tsunami.
