Tariffs 101

Many people still aren’t getting it! Some of this post is excerpts I copied from previous posts, and I added some details. I’m trying to make this subject as simple as possible.

The reason we’ve been an economic powerhouse is because of our global trade. People laugh when I say that because we have inflation and economic woes, but those people think the USA is the center of the world and don’t understand the global economy and what’s going on in other countries.

In the last century or so, as transportation technology has gotten increasingly more sophisticated and efficient, most of the world has enjoyed an unprecedented year around bounty of food. When we have an abundant harvest of a crop, we’re able to ship the surplus to a country that had a poor harvest. When we have a bad crop, we are able to import from a country that has a surplus. If we have to suddenly pay a high tariff on those food imports, grocery prices would go up.

When Trump imposed tariffs against China in his first term, many farms here went bankrupt. China had been buying most of our surplus corn and soybeans, and lots more agricultural products. The tariffs made them mad. They made deals with several countries in South America to get the same products from them. Farmers here lost that market. Some people couldn’t recover and lost their farms. The ones who managed to hang on took years to recover. Now it’s happening again. Farmers have huge stockpiles of grain that was ready to ship, and our global customers are saying they don’t want it. How many more farms will go under?

When I calculated the following a few weeks ago, the December stats hadn’t been released yet, and I’m not going to redo it to include that month. But for the eleven months covering January – November 2024, Canada imported a little over $322B in goods from the US, and the US imported a little over $377B in goods from Canada. That’s a $55B deficit for the US (not the 100s of billions that Trump claims).

To get a proper understanding, look at it from this angle:

The US has 335 million people and imported $377B in goods from Canada. That works out to $1127 per person. Canada has 40 million people and imported $322B in goods from the US. That works out to $8,056 per person. That’s more than seven times per capita for Canada.

Why so much for a Canadian citizen? Because Canada’s top three imports from the US is cars, oil and natural gas. Cars are expensive and most Canadian families have at least one. Canada is very cold much of the year, and it takes a tremendous amount of natural gas to keep their homes warm. All that adds up to a lot of moolah.

So what about the $55B deficit over an eleven month period? You may as well erase that for two reasons:

1. Canadians who live close to the border come into the United States to do a very great deal of their grocery and household shopping because our prices are cheaper. They also do their Christmas shopping here.
2. Canadians come to the US for their vacations, and spend many billions a year doing so.

Except now Canadians are mad at us. They are refusing to shop here and canceling their vacation plans. So we will be losing that revenue.

I have a hundred more points to make about why these tariffs are a really bad idea, and about all the misinformation that’s going around. But I said I’m keeping it simple. I’m sure I’ll be posting more about the subject soon enough for anyone who’s interested in learning more.