Capital Economy, Business and Finance
Unless President Trump changes his mind, the US will impose 25 per cent tariffs on imports from Canada and Mexico at 12.01am tomorrow morning.
One potentially positive result would be a real-world test of the argument that such tariffs are self-defeating, inflationary and likely to trigger what the WSJ has called “the dumbest trade war in history”.
The journal, which gives Trump the benefit of the doubt if there is any, noted in an editorial that the US car industry contributes more than $800 billion a year to the US economy but depends heavily on Canada and Mexico for parts which as things stand will all be 25 per cent more expensive from tomorrow.
The tariffs would pull a rug from under the US-Mexico-Canada Agreement which Trump himself signed in 2020 and which takes full advantage of American innovation, Canadian raw materials and Mexican labour.
Trump's collision with mainstream economics recalls that of Turkey's Erdogan, who stuck rigidly to the view that interest rates should stay low when inflation is rising, until reality proved him wrong.
