On April 27, U.S. Commerce Secretary Wilbur Ross announced the agency would be imposing a tariff on Canadian softwood lumber imports.
Trump has also withdrawn from the Trans-Pacific Partnership (TPP) and has continually reaffirmed stance on the North American Free-Trade Agreement (NAFTA). This latest action,has shown that President Donald Trump intends to carry out the protectionist economic policies that he campaigned on.
This tariff could be the start of severed trade relations with Canada and Mexico, and potentially other countries.
“Clearly this is causing shockwaves in the markets,” said Delta Political Science Professor Cirian Villavicencio. “If you pick on one economic sector, lumber, then there’s going to be another country that’s going to be affected by it, because they are fearing the uncertainty that they’re going to be next.”
If Trump continues this trend of economic policy making, it could lead to the end of NAFTA.
“I would think that a 23 year old trade agreement need to be renegotiated, given that there’s been advancement and our economy has changed,” said Villavicencio. “If you re-negotiate NAFTA, it’s not going to be done multilaterally. I think what you will see is bi-lateral agreements with Canada and Mexico separately, which I foresee as the end of NAFTA”
Tariffs come with some potential benefits as well as many risks and the estimated outcomes of Trump’s trade policies vary wildly.
While the fact sheet published by the Trump campaign estimates that 25 million new jobs will be created in the next decade as a result of Trump’s economic plan, other sources such as the Peterson Institute for International Economics and the Economic Policy Institute suggest Trump’s plan could actually cost U.S. jobs and lead to a recession.
A tax on foreign goods could force manufacturing companies into building plants here in the United States, leading to an increase in jobs domestically.
The risk is the cost of the negative outcomes that will likely arise from the tariffs.
Trump has suggested targeted tariffs around 45 percent and blanket tariffs around five percent to 20 percent in the past.
If implemented, these costs would likely be passed on to the consumer.
While some jobs may be created as a result of the import taxes, the majority of Americans will suffer from a lower quality of life from the increased prices of many consumer goods such as food, electronics and clothing. These price increases will have the largest impact on lower-income Americans as goods consume a larger portion of annual income.
The lack of competition from international companies could also hurt consumers as well.
“Tariffs restrict competition” said Villavicencio. “The auto industry is a good example of this because yes, you provide cover for the american auto industry, but this won’t force innovation because of competition.”
This lack of competition could lead to higher priced and lower quality goods for consumers.
The increase in prices wouldn’t only be hurting individuals, however, as the tariffs would also likely apply to materials shipped the the U.S. to be used in manufacturing.
This could mean increased production costs or delays for products produced domestically, causing price spikes on U.S. made items as well.
Import taxes like these would particularly hurt the tech industry as companies import metals and components from all around the world to build the gadgets Americans use on a daily basis.
Tariffs could lead to retaliation, potentially starting trade wars and reducing the value of US made goods around the world. A trade war with China could be disastrous, but is somewhat unlikely.
“I don’t see him re-negotiating with China because if you do that it will start a trade war, and I don’t think China’s going to want to do that as well…but they have no interest in seeing the U.S. Dollar collapse either,” said Villavicencio.
