The Trump administration just imposed 25% tariffs on Canada and Mexico, triggering massive retaliation from those countries that will wipe out tens of thousands of American jobs. For example, Canada retaliated “against $155 billion of U.S. exports,” in retaliation for the 25% tariffs the Trump administration imposed on Canada. Thousands of Americans who work on farms or in factories producing those exports will lose their jobs.
As Republican Senator Rand Paul of Kentucky notes, such retaliation typically occurs when Trump imposes tariffs on Canada and Mexico. And it means higher prices for American consumers and fewer American jobs: “US tariffs inevitably bring Canadian, Mexican, and Chinese tariffs which means higher prices for lumber, steel, aluminum and more expensive homes and cars.” Moreover, “Retaliatory tariffs lead to lowered US farm exports, lowered bourbon exports, and less international shipping. Tariffs are taxes and if you tax trade you’ll get less trade and less prosperity,” observes Senator Paul.
As an economist at JP Morgan Chase Bank explains, “The trouble with tariffs” is “that they raise prices, slow economic growth, cut profits, increase unemployment, worsen inequality, diminish productivity and increase global tensions.”
Trump justified the tariffs against Canada and Mexico by citing fentanyl that comes in from Canada and Mexico. But America doesn’t get its fentanyl from Canada, it sends fentanyl to Canada! So Trump’s rationale for imposing tariffs on Canada is bogus. Economists across the political spectrum think Trump is dumb to get into a trade war with Canada and Mexico.
As the economic historian Phil Magness — a leading critic of academic leftists — explains, “The claim of a fentanyl crisis at the northern border is basically a complete fabrication. Trump is using it though because it allows him to invoke unilateral ’emergency’ tariff measures on his own, instead of going through a multi-month regulatory review.” Moreover, “The total amount of fentanyl seized in connection with the northern border last year was just 43lbs – a negligible amount compared to Mexico. But even these stats are misleading exaggerations, because CBP measures seizures as being in any state that touches the border,” even if the seizure was in a part of that state far from the border (like in New York City, or Seattle — New York State has a northern border with Canada, but fentanyl seized in New York City doesn’t come from Canada, but rather other countries like China). So even fentanyl that comes into states that border Canada almost never comes from Canada, but rather from other countries, such as through American ports in those border states that are nowhere near the border. Canada makes up at most 0.2% of all U.S. border fentanyl seizures.
Fentanyl flows from places where it is cheaper and more abundant to places where it is scarcer and commands a higher price. That includes flowing from America, where fentanyl is relatively abundant and cheap, to Canada, where it is scarcer and more expensive. As Magness notes, “the ‘street price’ for fentanyl is much higher on the Canada side of the border. It sells for $15-40 per pill in Vancouver, compared to $1 per pill in Washington state. Basic economics indicates the traffic is likely going the other way from US into Canada.” In short, “The claim of a fentanyl crisis at the northern border is basically a complete fabrication. Trump is using it though because it allows him to invoke unilateral ’emergency’ tariff measures on his own, instead of going through a multi-month regulatory review,” says Phil Magness. Magness is the anti-woke scholar who forced the resignation of Harvard’s left-wing president Claudine Gay, by exposing her history of rampant plagiarism.
As the Globe and Mail notes, the 43 pound figure cited by Trump includes fentanyl that actually has nothing to do with Canada:
U.S. border agents confirmed to The Globe that the agency’s methodology for attributing seizures to the northern border doesn’t hinge on whether the fentanyl was intercepted at the border or whether it came from Canada. It could have been seized hundreds of kilometres inland, and it may have no ties to Canada whatsoever.
Regardless, border agency spokesperson Jason Givens said seizures made by its agents in what it considers the north, including as part of joint law-enforcement operations, are recorded as northern-border seizures.
One of the northern-border regions, known as the Spokane sector, was responsible for nearly 24 pounds of the 2024 total cited by the White House, so The Globe travelled there. Law-enforcement officials across the sector, which covers eastern Washington, Idaho and western Montana, said they could not think of a single case of Canadian fentanyl flowing into their jurisdiction. All five of the current and former high-ranking officers said the problem – even where they are, in the northernmost parts of the western United States – is fentanyl from Mexican cartels.
“What I can tell you is that the majority of our sourcing of fentanyl comes from the southern border,” Commander Alan Brooks, of the Northwest Montana Drug Task Force, said in an interview.
A lot of fentanyl does come from Mexico, but it is mostly smuggled in by U.S. citizens, not illegal aliens. Indeed, 86% of those caught smuggling fentanyl into the U.S. are U.S. citizens. So fentanyl isn’t a great excuse for imposing tariffs on Mexico, either.
The Wall Street Journal says Trump’s tariffs on Canada and Mexico are shrinking the economy by reducing investment and factory orders and causing economic uncertainty:
Uncertainty is already affecting the economy by slowing business orders and making it harder for companies to plan. This comes as the economy is hit by other forces, including mass layoffs of federal workers, cutbacks to government-funded programs and restrictions on immigration. U.S. stocks tumbled Monday after Trump confirmed tariffs were coming, led by a 2.6% decline in the technology-heavy Nasdaq Composite…. “Customers are pausing on new orders as a result of uncertainty regarding tariffs. There is no clear direction from the administration on how they will be implemented, so it’s harder to project how they will affect business.” The Institute’s purchasing managers index fell slightly in February, indicating a slowdown in manufacturing growth.
Tariffs harm U.S. industries, even before they trigger retaliation. That’s because U.S. industries rely on imported components and raw materials from Canada and Mexico to manufacture things like cars. So tariffs can harm American manufacturers and wipe out U.S. manufacturing jobs, notes The Journal:
Take the U.S. auto industry, which is really a North American industry because supply chains in the three countries are highly integrated. In 2024 Canada supplied almost 13% of U.S. imports of auto parts and Mexico nearly 42%. Industry experts say a vehicle made on the continent goes back and forth across borders a half dozen times or more, as companies source components and add value in the most cost-effective ways.
And everyone benefits. The office of the U.S. Trade Representative says that in 2023 the industry added more than $809 billion to the U.S. economy, or about 11.2% of total U.S. manufacturing output, supporting “9.7 million direct and indirect U.S. jobs.” In 2022 the U.S. exported $75.4 billion in vehicles and parts to Canada and Mexico. That number jumped 14% in 2023 to $86.2 billion, according to the American Automotive Policy Council.
American car makers would be much less competitive without this trade. Regional integration is now an industry-wide manufacturing strategy—also employed in Japan, Korea and Europe—aimed at using a variety of high-skilled and low-cost labor markets to source components, software and assembly.
The result has been that U.S. industrial capacity in autos has grown alongside an increase in imported motor vehicles, engines and parts. From 1995-2019, imports of autos, engines and parts rose 169% while U.S. industrial capacity in autos, engines and parts rose 71%….Thousands of good-paying auto jobs in Texas, Ohio, Illinois and Michigan owe their competitiveness to this ecosystem, relying heavily on suppliers in Mexico and Canada….
Then there’s the prospect of retaliation, which Canada and Mexico have shown they know how to do for maximum political impact. In 2009 the Obama Administration and Congressional Democrats ended a pilot program that allowed Mexican long-haul truckers into the U.S. as stipulated in Nafta. Mexico responded with targeted retaliation on 90 U.S. goods to pressure industries in key Congressional districts.
These included California grapes and wine, Oregon Christmas trees and cherries, jams and jellies from Ohio and North Dakota soy. When Mr. Trump imposed steel and aluminum tariffs in 2018, Mexico got results using the same tactic, putting tariffs on steel, pork products, fresh cheese and bourbon…
None of this is supposed to happen under the U.S.-Mexico-Canada trade agreement that Mr. Trump negotiated and signed in his first term. The U.S. willingness to ignore its treaty obligations, even with friends, won’t make other countries eager to do deals. Maybe Mr. Trump will claim victory and pull back if he wins some token concessions. But if a North American trade war persists, it will qualify as one of the dumbest in history.
Retaliation doesn’t just take the form of tariffs. It also includes boycotts and refusals to buy American goods. The Canadian province of Ontario — which contains 40% of Canada’s population — is removing U.S. alcohol from its liquor stores in response to Donald Trump’s tariffs. The city of Bellingham, Washington, which is near the Canadian border, has seen a 25% drop in tourism from Canada after Trump’s threats to impose tariffs.
