“Trump has called “tariff” the fourth most beautiful word in the dictionary behind “God”, “love” and “religion.” CNN
On Saturday, President Trump, just 11 days into his second term, said he will impose a 25 percent tariff on Canadian and Mexican imports, and 10 percent on Chinese imports.
He has said it will raise revenue to correct the large trade imbalances with those countries, as well as induce Mexico and Canada to halt the flow of fentanyl into the U.S., and the flow of illegal immigration.
But immigration flows are already down to levels before even the Obama administration, while Mexico and Canada have already said they will work with Trump to stem the flow of illegal drugs.
So why is he doing what will badly harm the U.S. economy and that of our two best neighbors and trading partners? His real motivation is pure greed. He and his oligarch friends must decrease the massive budget deficit that has mushroomed to 121 percent of Gross Domestic Product (see graph), so that he can prolong the tax cuts that have transferred so much wealth from working adults to the wealthiest supporters and that has added $5 trillion to the national debt.
He must cut the huge budget deficit that has resulted because it is alarming bond investors and budget hawks.
Hedge fund manager Ray Dalio, founder of Bridgewater Associates, once the world’s largest hedge fund, has been sounding the alarm mostly recently in a Barron’s Magazine interview, in which he said our current budget deficit could give the world a “financial heart attack.”
“Think of the credit flow like the blood flow that carries nutrients through the system to the body. Credit creates debt that builds up like plaque in those arteries, and like plaque, it grows and crowds out the nutrients because debt service crowds out other spending,” , said Dalio
“When does the heart attack come? When the constriction is enough that it squeezes out other spending, which in increasingly happening, or when investors see that happening, which leads them to sell bonds,” said Dalio.
Tariffs had become Trump’s way of paying down the deficit by taxing imports. He has said collecting what he believes will be “billions” in taxes from the tariffs on imports will help pay down the huge budget deficit that he helped to generate from the 2017 tax cut bill (Tax Cuts and Jobs Act) in his first term.
But that tax cut was just the latest by Republican administrations that have caused the massive national debt, which is expressed as a ratio of debt-to-gdp in the above FRED graph dating from 1980, when Republicans first began increasing the budget deficit.
It has been Republicans’ huge tax cuts since President Reagan in 1980 that have created the largest national debt since World War Two, and the trickle-down economy ever since. And renewing Trump’s 2007 Tax Cuts and Jobs Act when it expires this year could add another $5 trillion to the budget deficit, according to non-partisan analysts.
So who will be hurt most by the tariffs? Workers in all countries at a time when inflation is still too high, and preventing the Fed from making fewer rate cuts this year due to higher inflation.
The NAFTA trade agree between Mexico and Canada has made North America the largest trade-free zone outside of the Eurozone, enabling each country to produce what it does best, such as autos where many auto parts are manufactured more cheaply and shipped into the U.S. where they are assembled.
Trump has repeatedly (and incorrectly) said that “the tariff sheriff” former President William McKinley, ushered in an era of American prosperity at the end of the 19th century by going all-in in tariffs, said CNN.
No, it was the result of the industries created in the first Gilded Age by the Robber Barons of that era—the oil, railroad, and banking magnates of that era. And Trump, a convicted felon, believes he can be another robber baron in this Gilded Age.
Harlan Green © 2025
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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