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Today's read: 15 minutes.
Editor's note.
One of the biggest stories in the United States right now is the plane and helicopter crash in Washington, D.C., on Wednesday night. We had planned to cover the incident in today’s edition but felt that the story touched on several important issues that we could not cover adequately in our standard newsletter format. Accordingly, we’re dedicating this week’s Friday edition to an in-depth assessment of the crash — what led up to it, what safety systems failed, and how we can avoid future accidents like this. As part of our coverage, we’ll be sharing interviews with a former Federal Aviation Administration safety inspector, veteran airline pilots, and a former Black Hawk helicopter pilot.
Quick hits.
- Treasury Secretary Scott Bessent reportedly granted access to members of the Department of Government Efficiency (DOGE), led by Elon Musk, to the federal government payment system. The system contains the personal information of Americans who receive Social Security payments, tax refunds, and other payments from the government. (The access) Separately, Musk said he was working to shut down the United States Agency for International Development (USAID) as part of his efforts to cut federal spending. (The comments)
- Venezuela released six American citizens from detention following a visit from a top Trump administration official to discuss a deal on deporting unauthorized Venezuelan immigrants in the U.S. (The release) Separately, the U.S. ended Temporary Protected Status for roughly 300,000 Venezuelans, making them susceptible for deportation. (The decision)
- Acting Deputy Attorney General Emil Bove directed acting FBI Director Brian Driscoll to fire eight employees and identify all current and former FBI personnel assigned to Jan. 6 and Hamas cases for an internal review, citing concerns over the employees’ commitment to enacting President Trump’s agenda. (The directive)
- Seven people died and at least 22 were injured after a medical jet crashed in northeast Philadelphia on Friday. The flight crashed shortly after takeoff, and investigators are still working to determine the cause. (The crash)
- Fire crews in Los Angeles announced that the Palisades and Eaton fires had reached 100% containment. The fires burned 23,448 acres and 14,021 acres, respectively, after igniting on January 7. (The announcement)
Today's topic.
Tariffs on Canada, Mexico, and China. On Saturday, the White House announced that the United States will be imposing a 10% tariff on all imports from China and 25% tariff on imports from Mexico and Canada, with energy imports from Canada taxed at 10%. President Donald Trump used emergency powers under the International Emergency Economic Powers Act of 1977 (IEEPA) to authorize the taxes, citing the “extraordinary threat posed by illegal aliens and drugs” and saying they would remain in place until the crisis is alleviated. The tariffs were scheduled to effect at 12:01am ET on Tuesday; however, on Monday, President Trump said he would pause the tariffs on Mexico for one month after Mexican President Claudia Sheinbaum said she would send 10,000 soldiers to the U.S.-Mexico border to target drug trafficking.
Back up: Tariffs (or duties) are levies placed on foreign goods paid by domestic importers to Customs and Border Patrol at ports of entry. Tariffs are usually intended to boost domestic industries by making it more expensive to purchase goods from foreign competitors, but they can also result in higher consumer prices. In his first term, President Trump issued tariffs on select goods from China, such as solar panels and washing machines, as well as steel and aluminum imports from most countries. President Joe Biden left the tariffs on China in place, then added more duties on electric vehicles, semiconductors, and other materials.
The newest levies affect all goods, have a condition allowing the president to increase them, and are known as “ad valorem” — meaning they are taxed on a percentage of the item’s value. Notably, the tariffs provide no exception for de minimis items, or single shipments that are valued at $800 or less.
Canada, China, and Mexico all announced they would issue retaliatory tariffs in response. Canadian Prime Minister Justin Trudeau told Canadians they could “face difficult times in the coming weeks,” Mexican President Claudia Sheinbaum said Trump’s claim that the Mexican government works with drug cartels was “slanderous,” while China called the tariffs a “serious violation” of World Trade Organization regulations.
Mexico is the United States’ largest trading partner. China is the United States’s second-largest net importer of goods, behind Mexico. Canada is the largest exporter to 36 U.S. states. Imports from those three countries account for about 40% of all U.S. imports and amount to roughly $1.1 trillion annually.
Encounters with migrants at the southern border have recently fallen to pre-pandemic levels just below 60,000 per month, after peaking at nearly 250,000 in December 2023. 89,740 people died from overdoses in the U.S. from August 2023–August 2024, a nearly 22% decrease from the previous year, according to the latest data from the Centers for Disease Control and Prevention.
“We need to protect Americans, and it is my duty as President to ensure the safety of all. I made a promise on my Campaign to stop the flood of illegal aliens and drugs from pouring across our Borders, and Americans overwhelmingly voted in favor of it,” Trump said in a post on Truth Social. On Sunday, Trump acknowledged that the tariffs may cause "some pain” for the U.S., while suggesting that he may impose tariffs on the European Union and United Kingdom.
Below, we’ll get into what the right and left are saying about the tariffs. Then, Editor Will Kaback gives his take while Executive Editor Isaac Saul is on paternity leave.
What the right is saying.
- The right is mixed on the tariffs, but mostly supports them and says Trump should go further.
- Some say the tariffs are likely to hurt U.S. consumers more than anyone else.
- Others suggest that opposition to the tariffs is motivated by reflexive opposition to Trump.
In The American Conservative, Alan Tonelson said “Trump should go big on tariffs.”
“Mr. Trump should go right ahead with his proposal for a universal tariff of up to 20 percent. A duty this sweeping can of course raise major revenue and help control the federal budget deficit. But it’s also needed to prevent China from evading tariffs on its own products by shipping them through third countries through various subterfuges,” Tonelson wrote. “Most other countries use exactly the same system. And it could help offset not only foreign tariffs, but the wide variety of other, often hard-to-identify ploys used by other countries’ opaque bureaucracies to block U.S. exports.”
“Although fits of pique may prompt some near-term foreign retaliation against U.S.-owned companies, full-blown trade wars are unlikely in the extreme. America’s very status as the world’s importer of last resort alone demonstrates how most major foreign economies depend much more on selling to the U.S. market for their own prosperity than vice versa,” Tonelson said. “President Trump has seen domestic and foreign leaders rush to accommodate his disruptive positions and bold pronouncements on a wide range of issues. If he uses the powerful tools that authorize him to act unilaterally and swiftly, he’ll find that going big on tariffs will ultimately produce similar results.”
The Wall Street Journal editorial board called Trump’s action “the dumbest trade war in history.”
“Leaving China aside, Mr. Trump’s justification for this economic assault on the neighbors makes no sense. White House press secretary Karoline Leavitt says they’ve ‘enabled illegal drugs to pour into America.’ But drugs have flowed into the U.S. for decades, and will continue to do so as long as Americans keep using them,” the board wrote. “Mr. Trump sometimes sounds as if the U.S. shouldn’t import anything at all, that America can be a perfectly closed economy making everything at home. This is called autarky, and it isn’t the world we live in, or one that we should want to live in, as Mr. Trump may soon find out.”
“Tariffs will also cause mayhem in the cross-border trade in farm goods. In fiscal 2024, Mexican food exports made up about 23% of total U.S. agricultural imports while Canada supplied some 20%,” the board said. “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.”
In The Federalist, J.T. Young argued “Trump’s critics only oppose his tariffs because they oppose him.”
“Except for the Civil War income tax’s life, tariffs were America’s primary revenue source until well into the 20th century. They didn’t just disappear once overtaken by taxes — they have been a constant revenue source since,” Young wrote. “Tariffs already exist on many goods coming into the U.S., including anything that doesn’t come from the 20 countries we have trade treaties with. America has a trade-weighted average import tariff rate of 2.0 percent on industrial goods. With half of all America’s imported industrial goods entering duty-free, many goods face tariff rates above 2 percent. The Biden administration didn’t revoke Trump’s China tariffs; they let these stand untouched for four years.”
“Yes, free trade is optimal… However, free trade does not exist. Not here and certainly not abroad, where U.S. exports often face higher tariff rates than these countries’ imports face from the U.S. Free trade is great in theory, but it is time the U.S. sought lower trade barriers for its exports in practice,” Young said. “Much criticism of Trump’s tariffs — both imposed and proposed — is based on politics and the establishment media’s opposition to him. As Democrats and the establishment media’s silence at the Biden administration’s somnambulant trade policy of the last four years demonstrates, Democrats are hardly in a position to call out Trump on trade.”
What the left is saying.
- The left mostly opposes the tariffs, arguing they are likely to increase prices for U.S. consumers.
- Some say the tariffs are poorly designed to fix the problems Trump wants to solve.
- Others suggest the levies could be a catalyst for a trade deal with China.
In MSNBC, Jared Bernstein asked “what the heck are Trump and his team thinking?”
“Who eats the tariff: the importer, the exporter, or…you (the consumer)? I’m sorry to report that the research suggests it’s you. Most of the tariff gets passed through into higher consumer prices. Perhaps the clearest example of this was when Trump imposed one of his first tariffs back in 2018 on imported washing machines. The price of both imported and domestic washing machines subsequently increased, by about $86 per unit according to one estimate,” Bernstein said. “The whole point of Trump’s tariffs is to rebuild domestic manufacturing by making imports more expensive. But if the exporter eats the cost, then the U.S. price doesn’t change.”
“One conclusion is that this is all theatre: threats to extract other goals from trading partners. We saw a microcosm of this last weekend in a dustup with Colombia. But in the cases of Canada and Mexico, this explanation is confusing, because it’s not clear what he’d wants from them,” Bernstein wrote. “I strongly suspect that what’s probably going on here has a lot more to do with politics than economics… As is characteristic of this moment, we’re left with a lot of uncertainty about a presidential fixation that even he may know is a bad idea right now.”
In Jacobin, Dominik A. Leusder wrote “tariffs are a costly nonsolution to the US’s social crisis.”
“Trump rose to his second term on a wave of economic distress, which, when not sublimated into cultural resentment, found inchoate expression in a support for trade barriers. The decline of industrial employment is viewed as the root of the country’s malaise, and trade, specifically the US trade relationship with China, as the main driver of that decline,” Leusder said. “This theory of crisis is largely bipartisan. The consensus is evidenced by the Biden administration’s Trumpian marriage of national security politics and industrial policy in concert with trade restrictions imposed with the explicit aim of stunting China’s further technological development.”
“Tariffs will not and cannot redress America’s trade imbalance. But is trade even the cause of American decline? Not really. Attempts to arrest global economic integration by curtailing trade flows are as futile socio-economically as they are hazardous geopolitically, because they misidentify the primary causes of the problems they purport to address,” Leusder wrote. “Most advanced open economies are as, if not more, exposed to the dynamics of global trade as the United States is — and not a small number of them are both wealthier and more politically stable while boasting higher levels of human development and lower levels of inequality.”
In The New York Times, Wendy S. Cutler wrote “Trump wants a trade deal, not a trade war. He may get one.”
“By all measures, China seems like the perfect target for Donald Trump’s tariff hikes… Still, Mr. Trump hasn’t imposed new tariffs on China. The 10 percent tariff hike he threatened to impose for its lax fentanyl policies is significantly less than what he promised on the campaign trail,” Cutler said. “To be clear, this does not mean that tariffs on Chinese products are off the table… In the meantime, he seems to be directing his retribution toward America’s neighbors, with whom he has more leverage, making an early victory on trade more feasible.”
“If Mr. Trump does travel to Beijing soon, there will be strong pressure for a big announcement during his stay. But sacrificing substance in order to reach a quick trade deal with China would be a mistake. A wiser approach would be to announce the start of negotiations and lock down a few early ‘down payments,’ including a ‘catch up’ purchasing deal to meet the targets set out in the Phase One agreement,” Cutler wrote. “Trying to improve the U.S.-China economic relationship is a laudable goal — but only if Mr. Trump approaches those negotiations with the discipline equal to what Beijing will surely bring to the table.”
My take.
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- Trump has always been interested in trade policy, and he’s always seen tariffs as a useful tool.
- These actions already seem to be producing positive outcomes with Mexico.
- Chinese tariffs will be a long game, and I have a hard time discerning the goal of Trump’s Canadian tariffs.
In Wednesday’s edition on Trump’s immigration executive orders, I suggested that immigration was the issue that propelled Trump to victory more than any other. However, I think the issue he personally cares about most is trade.
Trump has been bemoaning U.S. trade policy for decades. As a private citizen in the 1980s, he focused his ire on Japan, whom he said was “ripping off” America by flooding the country with imports while restricting access to their own markets. Just as trade has been Trump’s animating issue since his political infancy, tariffs have been his preferred solution; in 1989, Trump called for a 15–20% tax on imports from Japan, saying, “We’re a debtor nation, and we have to tax, we have to tariff, we have to protect this country.” Over time, China has become the primary villain in Trump’s view on trade, but his overall solution remained the same.
The president’s affinity for tariffs also underscores another aspect of his political persona: a disregard for “consensus” views. Most economists and lawmakers believe tariffs do more harm than good — a position that unites people of all political stripes, from writers at Jacobin, to Tea Party conservatives like Sen. Rand Paul (R-KY), to The Wall Street Journal editorial board, to Trump’s own Treasury secretary (once upon a time). Another widely held view is that it’s generally in the U.S.’ interest to avoid antagonizing its allies. President Trump clearly holds little regard for this consensus — something that frustrates his opponents and is also one of his biggest appeals among his voters.
The commentary about Trump’s tariff announcement has primarily varied from how the president is weakening America’s international standing, introducing more fairness to global trade, leading the country into an inflationary crisis, or taking the first step toward boosting U.S. industries. Others have argued that tariffs are an effective tool to protect vital U.S. industries and increase revenues, while also preventing U.S. jobs from being shipped overseas. Before diving into those arguments, I think it would be helpful to contextualize the debate with a few examples of the impact tariffs have had in the past.
The Smoot-Hawley Tariff Act is a perfect historical example of tariffs backfiring. Signed by President Herbert Hoover in 1930, the law increased already elevated tariff rates in an effort to protect U.S. industries during the Great Depression. However, it exacerbated the ongoing global economic downturn and prompted harsh retaliatory tariffs from other countries. Smoot-Hawley was, in other words, the worst-case scenario of tariffs come to life — a negative-sum game on the world stage.
For a more modern example, we can look to President Ronald Reagan’s decision to impose a 100% tariff on Japanese computers, televisions, and power tools. In this case, Japan had been violating a trade agreement on semiconductors, selling them below market price in the U.S. while blocking American producers from exporting to Japan (prompting then-citizen Trump’s comment about the U.S. getting ripped off). Reagan’s tariff caused an increase in semiconductor prices in the U.S., but it halted steep job losses in the semiconductor industry and forced Japan to open its markets to U.S. companies.
Trump’s tariffs in his first term were couched in a similar rationale to Reagan’s — that unfair trade practices by other countries were hurting the U.S. economy and causing job losses — but their scope was much broader. In 2018, he levied tariffs on solar panels and washing machines, then enacted tariffs on steel and aluminum imports from most countries; he extended those tariffs to the previously exempt European Union, Canada, and Mexico a few months later. Trump’s tariffs on China prompted retaliatory action, and each country had levied billions of dollars in tariffs on the other by 2019.
Most economists and analysts hold that Trump’s trade war with China failed to deliver what he said it would. Their arguments are compelling: between 2018 and 2019, the U.S. trade deficit with China increased, China’s exports increased, growth in manufacturing jobs and production failed to materialize, and Trump’s “phase one” deal to get China to buy more U.S. goods and services fell short of its intended impact.
We’ve already seen one major development with Trump tariffs 2.0: Mexico committing to deploy an additional 10,000 troops to the border to target drug trafficking is a win for Trump right off the bat (and a nearly identical outcome to Trump tariffs 1.0).
Trump is right to see poor border security as a major contributor to overdose deaths. In fiscal year 2024, Customs and Border Patrol (CBP) seized over 21,900 pounds of fentanyl at the southwest border, slightly down from 26,700 pounds in 2023 and up from 14,700 pounds in 2022. Apart from the blanket tariffs, one of the best specific actions of these orders is closing the de minimis loophole. That carveout has allowed shipments below $800 to enter the U.S. duty-free and with minimal inspection, which has enabled Chinese companies to undercut the U.S. market and has very likely been a gateway for fentanyl to enter the country. It’s a loophole Biden should have closed, and Trump’s action here will undoubtedly save lives.
With Mexico, we appear headed for a best-case scenario: better enforcement on their side of the border, leading to declines in drug trafficking and migration before either country feels an enormous economic impact. A similar agreement may be possible with Canada, but Trump’s goals for the tariffs are harder to determine. The White House claims that fentanyl production is rising in Canada, but CBP data from the past three fiscal years shows that the amount of fentanyl captured coming from Canada makes up less than 1% of all fentanyl seized nationwide. Canada has already begun taking action on Trump’s concerns about drug trafficking at the border (and made some huge seizures), so I suspect Trump is primarily using the tariffs as a tool to address America’s trade deficit with our northern neighbor. If that’s the case, lifting the tariffs won’t be as simple as cracking down on drug trafficking.
While Monday’s agreement with Mexico is a positive development, the worst-case scenario of these tariffs still looms large. On Friday, the Yale Budget Lab released its outlook on the tariffs’ impact, estimating that U.S. households will lose $1,250 in purchasing power on average, driving up both prices on imports and domestic products. As a result, the lab expects higher inflation and commodity prices, including computers and electronics (+5.7%), motor vehicles and parts (+3.9%), and fresh produce (1.8%). Economist Noah Smith summed up the risks of these tariffs nicely, saying they could hurt U.S. manufacturers by increasing their input costs without imposing a similar penalty on manufacturers abroad.
If Trump follows through on levying tariffs on the European Union, the negative effects could compound — leading to retaliation, a global economic downturn, and unintended geopolitical consequences.
There are a lot of possible outcomes somewhere between those extremes. For example, it’s very possible that a few weeks of economic turbulence and an anemic stock market (one of Trump’s preferred measures of presidential success) bring Trump to the negotiating table, where Canada and Mexico give him symbolic concessions that he can use to claim success. With China, the fight over the relatively low 10% tariffs is likely to play out over a longer period of time, making it harder to predict.
Of course, all these predictions could be wrong, and anyone telling you they know exactly how these tariffs will play out should be regarded with skepticism. But we are still headed into an uncertain future with risks to both our economy and long-term security should we do lasting damage to our relationships with allies.
When Isaac wrote about Trump’s economic plan in September, he noted that Trump’s arguments about tariffs rested on some faulty assumptions — namely, that tariffs are a tax on a foreign country (they’re actually paid by U.S. companies importing foreign goods). This economic rationale worries me, and it leads me to believe that Trump has a deeper motivation for the tariffs: to address perceived injustices. Trump has highlighted many valid issues with our trade practices, and his impulse to balance the scales is understandable. But his view of tariffs as a catch-all solution — or worse, as a show of force — risks attacking a problem with a worse solution.
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Under the radar.
Last week, the United States transferred approximately 90 Patriot air defense interceptors from storage in Israel to Poland in anticipation of delivering them to Ukraine. The weapons systems had been given to Israel by the U.S. during the first Gulf War, and the Israeli Air Force officially decommissioned them last April; at that time, Ukrainian officials reportedly approached Israel and the U.S. about transferring the systems to Ukraine. The Patriot system acts as a critical line of defense against Russian attacks on Ukrainian infrastructure, and the transfer of the 90 interceptors is the most significant delivery of weapons from Israel to Ukraine since the start of the war. Axios has the story.
Numbers.
- 59%. The percentage of Americans who say the United States has lost more than it has gained as a result of increased trade with other nations, according to a Pew Research survey conducted in April 2024.
- $3.12 trillion. The total value of U.S. imports in 2022.
- $1.95 trillion. The total value of U.S. exports in 2022.
- 17.7%, 14%, and 13.5%. China, Canada, and Mexico as a percentage of U.S. imports, respectively, in 2022.
- 7.71%, 15.8%, and 15.1%. China, Canada, and Mexico as a percentage of U.S. exports, respectively, in 2022.
- 2.86%. The estimated percentage increase in real gross domestic product (GDP) over a six-year period if the United States were to impose a 10% tariff on all imports, according to a July 2024 study by The Coalition for a Prosperous America.
- $4,252. The estimated increase in inflation-adjusted household incomes if the United States imposed a 10% tariff on all imports.
- $1.1 trillion. The estimated increase in taxes between 2025 and 2034 if Trump’s tariffs on China, Canada and Mexico are imposed long-term.
The extras.
- One year ago today we had just covered the deaths of U.S. troops in Jordan.
- The most clicked link in Thursday’s newsletter was a link to language in the Office of Management and Budget’s “Fork in the Road” announcement.
- Nothing to do with politics: A headline from a Pennsylvania newspaper: “Winter storm in the forecast for York County after local groundhogs offer prognostications.”
- Thursday’s survey: 3,227 readers responded to our survey on federal government spending and staffing with 39% saying the government should not significantly reduce either. Additionally, 56% only supported acts of Congress to reduce government spending. “While hopeful for cuts in bloated federal spending, I am not willing to pay the prices of institutional chaos and serious breaches of the separation of powers between the Executive and Legislative branches to see them done,” one respondent said.
Have a nice day.
Alzheimer’s disease is the most common neurodegenerative disease in humans, yet scientists have had difficulty designing medications that can pass the blood-brain barrier to treat the disease. However, a recent Harvard study found that Xenon — an odorless noble gas used as a general anesthetic — “stimulated the brain’s resident immune system, which can protect against Alzheimer’s, leading to reduced neuroinflammation, minimized brain atrophy, and promoted protective neuronal states.” Phase 1 clinical trials of this drug are set to begin early this year. Good News Network has the story.
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