Delaware economist says Trump's tariffs on Canada and Mexico could lead to a recession in United States
President Trump hit on a wide array of topics during his lengthy address to Congress on Tuesday night. But few may have garnered more scrutiny than the president's doubling down on his use of tariffs.
"Other countries have used tariffs against us for decades, and now it's our turn to start using them against those other countries," Mr. Trump said.
Mr. Trump announced 25% tariffs on Canada and Mexico, and an additional 10% tariff on China on Tuesday morning. The nations are three of America's largest trading partners.
The news sent the stock market plunging early this week, though Wednesday did see rebounds by the three major indexes. Still, as grocery prices and inflation remain elevated, Democrats criticized the president's move as bad for the economy, while Republicans are taking a wait-and-see approach.
"Trump promised again last night to make America affordable again. But this isn't going to help make it more affordable," Delaware Sen. Chris Coons during a Wednesday interview with CNN.
"Maybe a different approach than I would've taken, being more specific and nuanced in tackling it," said Republican Rep. Ryan Mackenzie, who represents the Lehigh Valley and Carbon County. "Ultimately, what I'm hoping for to see with these tariffs is that they'll be negotiated and come to a resolution where we can see that peace and security we're looking for."
But Mr. Trump on Tuesday night signed much broader, global plans for tariffs. He said starting on April 2, he will institute reciprocal tariffs with all U.S. trading partners.
"Whatever they tariff us, other countries, we will tariff them," Mr. Trump said.
The president claimed during his speech that the tariffs would bring in "trillions" of dollars to the U.S. and create job growth. Mr. Trump believes companies will move to the United States in an effort to avoid paying tariffs for bringing their products into American markets.
But Robert Fry, an economist based in Delaware, had a far different outlook on the plan.
"It's not going to spur the economy, and it's not going to help the sector of the economy it's intended to help," said Fry, who is the chief economist at Robert Fry Economics LLC. "It's intended to help manufacturing, and it doesn't."
Fry said while the U.S. did have higher tariffs in the late 19th and early 20th centuries, the nation has generally shied away from the practice since the end of World War II. But it has been a long time since America imposed tariffs like the ones the president is planning for next month.
"Intuitively, reciprocal tariffs make sense. We think, 'Well, if they're going to put tariffs on our exports, we should put tariffs on their exports,'" Fry said. "But the economic case for free trade going back to Adam Smith in 1776 is a case for unilateral free trade, that even if they tariff our goods, Americans are better off if we don't tariff their goods."
It isn't the broad tariffs that bring Fry the most concern, though. He said he can see the case for instituting tariffs on China. But he had a stark warning if the levies on Canada and Mexico were to linger.
"I think if the tariffs on Canada and Mexico stay in effect for more than a few weeks, I think we have a recession," Fry said.
America's neighbors are also two of its largest trading partners with the U.S. importing many goods from produce to car parts and more. Canadian leaders quickly announced plans for retaliatory tariffs in the wake of Trump's move, while Mexico's president is set to announce its plans to strike back on Sunday.
Mr. Trump has said he was instituting the tariffs as a means to get America's neighbor nations to crack down at the border on fentanyl entering the U.S.
Mr. Trump and Canadian Prime Minister Justin Trudeau did speak by phone on Wednesday, and the White House announced a one-month pause on auto-tariffs on Canada and Mexico. For now, though, the rest of the tariffs remain in place. And even Mr. Trump himself, on Tuesday night, hinted that Americans may feel the impact.
"There will be a little disturbance, but we're OK with that," he said.
"If the tariffs go into effect and stay in effect, prices are going to go up, auto production is going to go down. It's going to hurt," Fry said.
