Updated February 03, 2025 at 13:16 PM ET
President Trump's tariffs on Mexico, Canada and China have an official rationale: the failure to stop fentanyl smuggling into the United States.
In his public statements, though, the president keeps neglecting this reason, giving others instead. He posted on Truth Social Sunday that "We pay hundreds of Billions of Dollars to SUBSIDIZE Canada. Why? There is no reason. We don't need anything they have…Therefore, Canada should become our Cherished 51st State."
The "subsidy" apparently refers to an annual trade deficit of about $60 billion. Clearly the United States needs something from Canada, especially the energy purchases that are responsible for the deficit.
In any case, the president's Truth Social post made no mention of drug traffic. What to make of this?
On Morning Edition, we put the question to two economists with different politics — Peter Morici, who writes for the Washington Times, and Ernie Tedeschi, who served in the Biden administration.
Steve Inskeep: The president officially has said 'I'm doing this because of fentanyl trafficking.' We have noted on NPR, there seems to be very little fentanyl coming across the U.S.-Canadian border. There does seem to be a problem at the Mexican border. But some of the president's other statements, his own statements, suggest that's not really his motivation here. He's talked about a trade deficit the U.S. runs with Canada. He says these countries are ripping us off. He doesn't like the economic terms of the deal, and he's using whatever reason he can to impose tariffs… Is there some way that Canada is ripping off the United States?
Peter Morici: No. This is ridiculous. Canada is not a real source of fentanyl, it's not a real source of immigrants, it's certainly not ripping us off. The trade is based on comparative advantages, based on economic efficiency, and it makes us and them live better. [There are more complaints with Mexico, but] It isn't clear what Trump really wants.
Ernie Tedeschi: There seems to be this sense in the White House that trade surpluses are good, and trade deficits are bad. There are cases where that may be the case. But look, we have a trade deficit because the United States is a rich country. And we are using our high income to buy goods and services from other countries… That's not a bad thing, because we choose to use our productive capacity for other things… Germany produces trade surpluses from year to year, and Germany has seen economic stagnation."
Now, we could certainly find people who favor tariffs in certain situations. Morici, for example, strongly favors the tariffs on China, because he says they are "trading unfairly." Some manufacturers favor tariffs for their specific industries. And it's also true that the U.S. once used tariffs as a tool to protect and encourage domestic industry.
The tariffs on allies are baffling to the economists, however.
It should be no surprise that Trump has imposed tariffs now, because he spoke of them so much during the campaign. Yet it's clear that some voters were surprised because the president spoke so vaguely about them and sometimes in different ways. He was going to raise so many tariffs, and produce so much money, that Americans would hardly need an income tax. But he was also going to negotiate great deals in exchange for not imposing tariffs, which implied they would not bring in any revenue at all. (Some in the business community plainly have been hoping for that latter outcome.)
Americans were also not going to pay anything extra, even though tariffs are taxes on the products they buy, and tend even to raise the price of domestic alternatives. That's why tariffs are "protectionist." They allow everyone including domestic producers to charge more.
This is what the president said. Now we see how it worked in practice. The president has started acknowledging that "maybe" there will be "some pain" for Americans. He appeared to impose tariffs on Mexico and Canada with no real negotiation at all, nor any clear demand for what must be done to bring about their removal.
On Monday the president abruptly reversed course, pausing the tariffs on Mexico, for now, in exchange for a Mexican promise to send 10,000 additional troops to the U.S.-Mexico border. That Mexican action, at least, would appear to have something to do with drug traffic.
For Canada, which has already added security at its border, the clearest demand is the one Trump put in writing on Truth Social: that Canada should give up its independence.
During our inauguration coverage, NPR's Mara Liasson observed faith in tariffs is among the president's core beliefs. He just wants to do them. Trump has spoken of further taxes on imports from the European Union and even the UK.
The larger goal he brings up is empire building: the United States adding to its territory. Canada as the 51st state. Greenland as a U.S. territory. The Panama Canal Zone back under U.S. control.
It's worth noting that the American empire did not feature at all in the presidential campaign. It has emerged just since his election, and while some first took Trump's words as a joke, he put them in his inaugural address and keeps repeating them.
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