Tariffs And The Damage Coming?

On Trump's Threats

(Nathaniel Arfin came on the Scrimshaw Show yesterday to talk Tariffs and Mainstreet. Subscribe, like, and become a paid subscriber to this site to support the work I’ve done and will continue to do. 2025 will feature Ontario and Federal elections, and your support makes it easier for me to cover them with the seriousness they require - and keep me from losing my mind.)

Monday night’s tariff announcement/promise/bluster from Donald Trump has been the political story of this week in Canada, for understandable reasons. A lot of the overly credulous assessments of the chances of this tariff regime coming into play seem absurd at the extreme, but it’s worth being clear that while the government should plan for worst cases, we are not actually obligated to.

The chances these tariffs come into play seem fairly low to me - I’m not an expert in almost anything, but I’ve been addicted to Twitter since far before Trump rode down the golden elevator and I have a good memory. Trump has made threats before, and they don’t end up happening. And they don’t for a simple reason: it would be self destructive for Trump.

How the Canadians should response is up for debate, but this isn’t about actually imposing tariffs on Canadian oil and steel. This is about Donald Trump setting a tone for how his four years will go by getting two world leaders to bend the knee to him. And at the end of the day, the knee will have to bend, because the US is a superpower, and we’re not.

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Let’s start with why I’m so confident that these tariffs will not go into (serious) impact. Let’s sketch a path here to the tariffs coming online on January 21st - the Liberals, and their Mexican counterparts, just refuse to negotiate and refuse to deal. Trump signs the order at 5PM on the 20th, conveniently after market close. And let’s say for the sake of it that the Dow Jones is 45k on the 20th (essentially where it is now). In this hypothetical, the Dow is at 40k by February. The idea that the market wouldn’t crash at a significant reduction in real wages for most Americans (and therefore huge drops in disposable income) is ludicrous.

Tariffs would raise prices on everything from softwood lumber and steel to oil and eggs. You would see delayed price hikes in some areas - the increases in housing costs wouldn’t show up on the 21st - but you’d see the higher costs of gas in much of America right away, and you’d certainly see immediate higher prices in Walmart and at the pumps. For a country that voted for Trump to lower prices, an instant price hike would be a political disaster.

It’d also be a financial one, with the way car manufacturing in North America is so integrated. Since the Auto Pacts of the 60s, cars have been completely interdependent, with parts being made in Oshawa and Windsor being sent to Detroit and parts made in Detroit finished or refined in Canada. It’s a system that is far too interconnected and interdependent to unwind. It’s a joke. There’s no universe in which the automakers would ever accept tariffs in the long run. The American auto industry is good at lobbying in DC, and it’s also the case that JD Vance is going to want to win Michigan again.

If it costs more to eat, and to fill up the gas tank, then you’re less likely to upgrade that TV that’s pretty old or get that vacation you were thinking about or any number of non-essential purchases that fund the US economy. Even without tariffs directly raising prices at somewhere like Best Buy, or raising hotel prices, or the prices at a Disney Park, it’s gonna be a bad year for these blue chip companies if their customer base just got significantly poorer. And spoiler, all of these companies will push back.

Might the tariffs go into effect for a day or 3? Maybe. But I don’t think there’s much of a chance they’re still in place by Valentine’s Day, if they even do. Trump threatened escalating tariffs against Mexico in his first term, before backing off that idea. There’s every chance he would do the same thing when it’s explained to him that all of his rich friends are about to get bent over and fucked. But more than this, this is an effort to extract a win, not advance an agenda.

Like, let’s be real - this is a fake problem, at least on the Canadian side. The idea that Fentanyl and illegal migration to America from Canada are serious problems is nonsensical. But that’s how we know it’s not a serious proposition. Donald Trump doesn’t want to solve real problems because this is not a serious problem on our end. This is a virility test, picking a fight so you can declare victory. And that’s what the Liberals need to understand.

Smart people have pointed out that the Americans are going to keep doing this unless we stand strong now, but the honest answer is we don’t have the leverage outside of the fact that the US economy will tank to stop this. If Donald Trump wants to tank our economy and his at the same time he has the power and the ability to do so. He does! We can hope he doesn’t, we can reason with him, but at the end of the day if he’s predisposed to doing it we are collateral damage. It’s an extremely high stakes version of marrying someone entirely out of your league in both looks and finances - you get the benefits of their lifestyle, but at the end of the day, you’re lucky to be there and everybody knows it. If someone has to bend the knee, it’s gonna be us.

The path here seems fairly straight forward - Trump wants a win, in whatever nebulous way he can claim one. The good thing about attempting to solve fake problems is you can do minimal work and declare victory, because there won’t be a problem after your “solutions”. We don’t know what those “solutions” might be, but it seems plausible that some combination of committing to hiring more border agents, increasing the percentage of cars randomly selected for spot checks, and some nonsensical joint border security commission to recommend further action items could make sense. It’s hard to come up with actual solutions - again, given the whole fake problem thing - but I think these could be a good start that don’t actually give anything away.

Are the threats going to keep coming? Sure, but that became true the moment America elected this fucking idiot President. There is little we can do about the fact that the American people are morons, and sometimes there are no good solutions. This is a situation where there’s only varieties of bad.

I’d love for Trudeau to do what Claudia Sheinbaum did and put out a statement of strength pushing back at Trump. It’s, unfortunately, idiotic pandering to domestic considerations at the expense of their people. It is much better to handle this quietly and diplomatically, as much as it would make us all feel better to have Trudeau breathe fire about the terribleness of Trump. The risk of tariffs is both real, and still distant. I don’t think these tariffs will survive first contact with his actual swearing in. And the lack of outward Federal panic shows they think the same.