Trump's Tariff Tumult

With the attention span of a fruit fly Donald Trump flits from one vindictive act to another.  Today it is "Liberation Day", but on brand, we have only a vague idea of what he is supposedly liberating.

There will be tariffs on Canadian products, despite the advice of experts (which he ignores) and just because he said so - and his minions are scrambling to make it happen. We will not be alone. Other nations, who have been "ripping off America" according to Trump, will be targeted - but the products to be targeted and tariff level to which they will be subjected is unknown at this moment. As usual, the narrative around the reason for these tariffs is manufactured and without factual basis, but in Trump's dangerously simple mind, it will make America Great Again.

It will not make American great again.

The story he continues to repeat is that companies will be coming back to America in droves, creating jobs for American workers. This is a pipe dream and has no connection to reality in the world in which we, the more grounded and realistic, live.

First, manufacturing has changed over the past 100 years. Modern manufacturing does not create thousands of jobs - it may create hundreds. In addition, those jobs are not the kind of jobs that his hopeful red hat wearing base expect. The jobs of manufacturing now are mostly highly skilled, often requiring education beyond high-school along side of the necessary automation that rarely breaks down, is faster, more efficient and does not go on strike.

According to the Bureau of Labour Statistics (which may be wiped out for clarifying this matter) roughly 14.2 million people or 8% of the US working population were employed in manufacturing in 2023. The decline over the past 40 years from approximately 36% of the workforce has been accelerated by American companies moving to lower cost jurisdictions and investing in automation. As of the same year the service sector has grown to 79.9% Will McDonalds be moving more outlets to the US to pick up the slack?

Second, as has been noted in previous posts, the American companies and foreign enterprises that currently operate outside, but trade into the US, and do plan to return to the country will take 3-4 years to devote the time, effort and capital to such a impactful move on their bottom line. Some companies with an existing footprint may expand capacity to serve the American market. However, if capacity exists in the automotive sector for example, it will take a year to retool or change a platform for a different model of vehicle. Moreover, will the jobs that come with them be high paying, and low skilled? Very few will fit that criterion.

This may be one of the reasons the fruit fly wants to extend his term as President.

Third, Trump's ego will not sustain the hits to his popularity that are currently playing out at the moment.  According to an Associated Press-NORC survey conducted between March 20 and 24 revealed that 56% of respondents disapproved of Trump's job as President and 42% approved. The differences, not surprisingly, were divided along party lines. In addition:

"The findings from the AP-NORC poll also reveal that 58 percent of respondents disapproved of Trump's handling of the economy, while 40 percent approved. Meanwhile, 60 percent disapproved of his handling of trade negotiations, while just 38 percent approved."  Donald Trump's Approval Rating Falls To New Low, Newsweek, April 1, 2025.

Inflation is not abating and will only increase in some segments of the economy because of his tariffs. The stock market, one of his key barometers is in a funk. In conjunction with the economic circumstances, the volatility will not put Trump's policies in favourable light.

As the mid-term elections approach he will become more desperate and the slash, axe and burn approach to his detractors will accelerate and take more of his limited attention. And then there is always golf.

Consequently, what does this portend for the "Liberation"?

In my view, when I consider all of the above, the tariff strategy is same approach he takes to all his deal-making. Once he has his adversary weakened by his bullying and threats he sits down to "negotiate"- and that is where we are heading when the dust settles. How long the tariffs remain in place is anyone's guess, but they will be in force until he gets some minor "wins" for his trade agenda.

And what will ultimately be won, even if his enterprises can operate behind the protectionist policies of his administration? Every country I have studied that bases their economy on an insular set of barriers to trade and competition suffers from the lack of competition. If we think back to the mid-seventies and early 80s when the US automotive industry dominated their home market, the quality of their product suffered greatly. Chrysler teetered on bankruptcy. Asian automakers made better more reliable products that the market wanted. The enterprises that operated behind the restrictive access of the communist block were inefficient, without the incentive to innovate.

While I doubt this will be the overarching outcome for all of American industry, the policies of protectionism universally yield this kind of result.

A final point demands reiteration: whatever happens, Canada needs to make the substantial changes to how we do business domestically and globally, with whom we do business and how we deploy our resources to protect our way of life, our sovereignty and remain true to our values.