If you wanted to grow an orange in the Antarctic it would require a great deal of infrastructure and energy. Naturally, that would be more expensive than simply planting an orchard in Florida, but that’s where tariffs come in. The idea behind making goods that are otherwise cheaper to produce more expensive started in 1789 when George Washington first introduced 5% duties on all imports.
From an economic standpoint tariffs rarely have an outcome that benefits the consumer. After all, no one wants to pay $1000 for an orange. Things also don’t work in a vacuum and the country that faces an attack on their competitive advantage tends to strike back and before you know it, we are also paying $1000 for a bag of ice. So why start a trade war history suggests you cannot win?
For someone who is obsessed with the stock market, President Trump will not seek to destroy that which he has worked so hard to build. Then there are also the interests of the many billionaires that make up his cabinet. The plan is seemingly that Mexico, Canada, and China will go the way Columbia did and give in to whatever demands that are placed upon them.
Of course, without pain there will be no gain and today’s reaction in the financial markets tell the story of what is to come. It reminds me of the time I tried to order a chicken burger at my favourite fast-food outlet. I asked for light mayonnaise to offset the calories of the fries I wanted with my meal. Not only was I firmly rebuked by the mean looking lady behind the counter, but she also sternly said: “and you’ll like it”.
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