We have now watched a 10% vindictive tariff placed on a country (Canada), which has been one of our most enduring and lasting allies for nearly a century. A regional politician in Canada sponsored an ad that quoted Ronald Reagan, a former Republican party leader and two-term president of the United States. President Trump showed his personality in response by suspending tariff negotiations with the Canadians and adding a 10% tariff to an already painful and damaging economic structure between the US and Canada. Personal Trumpian pique? Yes. Logical or sensible policy application? No. This is madness, IMO.
There is absolutely no national security issue here. Zero, zip, nada, none. Canada and the US have a peaceful 3000-mile border. I have crossed it many times. There is no law passed by the Congress authorizing this type of behavior by a US president. And that is where things stand unless the Republican congressional leadership takes a stand as they did with Richard Nixon when the behaviors became too extreme to tolerate any more.
Tariffs have a cost. Unlike with sales taxes in states, with tariffs the buyer has no way to tell how much of the price of a thing represents the cost of the tariff to the consumer. But paid tariffs are, whether you see them itemized or not. To understand their impact, we need a comparison. So, we selected gasoline because it is easy to understand, and it is a widely consumed item. We can also draw a parallel between gasoline and Trump tariffs because we have the data on the monthly amounts the US Treasury is receiving in new and additional tariff money in 2025. We can compare those numbers with the same month the prior year. That is how we get to estimate that tariffs are essentially acting in a similar fashion as a $2 per gallon hike in the gasoline tax over the course of a single year.
Here’s what we wrote about this a few months ago:
“Market Discussion Series Part 7: Tariffs Vs Gasoline Price Shocks — Similar?” | Kotok Report, https://kotokreport.com/mds-part-7-tariffs-vs-gas-price-shocks/
