The trade war between the United States and Canada—more exactly between the American government and the Canadian government(s)—helps illustrate the opposition between two regimes: free trade between individuals or private organizations, which creates mutual gains and favors peaceful relations; trade between governments or directed by them, that is, mercantilism, which generates conflicts and hatred.
After US President Donald Trump had announced 10% tariffs on imports of Canadian “energy products” and 25% import tariffs on all other goods, the federal government of Canada announced retaliatory tariffs on American exports. The premier of the province of Ontario, Doug Ford, just announced a provincial tax of 25% on Ontarian exports of electricity to New York, Michigan, and Minnesota. He declared (“Ontario Hits Power Exports to US With 25% Surcharge as Trade War Accelerates,” Financial Times, March 10, 2020):
If necessary, if the United States escalates, I will not hesitate to shut the electricity off completely.”
He had previously said (“Canada to Cut Off Electricity to US States: ‘Need to Feel the Pain,’” Newsweek, March 4, 2025):
If they want to try to annihilate Ontario, I will do everything—including cut off their energy with a smile on my face, and I’m encouraging every other province to do the same.
They rely on our energy. They need to feel the pain.
Individuals and their private parties trade together with a smile on their faces. Governments intervene in trade and impose pain with a smile on their collective face, if we may use that analogy. The fact that the Ontario Government owns or directly controls a large part of the production and distribution of electricity in Ontario (“our energy”), as do to a lesser extent the governments of the importing US states, does not help depoliticize the market. Subject to weak constitutional constraints, governments can anyway impose tariffs, taxes, and prohibitions on whom they decide, and the consequence is not universal love.
That Mr. Ford is himself a conservative with a populist streak, who once expressed his support for Mr. Trump, should remind us to beware of the “will of the people.”
In a recent post, I quoted Henry Adams, who wrote that
politics, as a practice, whatever its professions, has always been the systematic organisation of hatreds.
From a moral viewpoint as opposed to a narrow economic viewpoint, which ruler starts the conflict is not irrelevant.
******************************
Two mercantilist kings
READER COMMENTS
Craig
Mar 11 2025 at 10:37am
In hismost recent speech Trump noted how in some cases, the case he noted was South Korea, that would impose tariffs on US companies while the US shouldered major defense responsibilities, I mean, he’s right. Canada of course spends far less than the US per capita on defense though obviously Canada is not across the DMZ from North Korea. He noted a date of 4/2 (because he noted he didn’t want to choose April Fool’s Day) to impose reciprocal tariffs and if he simply said, “Our tariff is your highest tariff” to me that would make some sense, but this trade war seems to be wily nily, he’s all over the place and he throws in foreign policy objectives like fentanyl and immigration. So I’m not sure what his goal even is here to be honest. Is it to make Canada beg to become the 51st state? Because perhaps instead of Art of the Deal perhaps he should read, “How to Win Friends and Influence People” and what he’s doing isn’t it.
Even from a protectionist viewpoint, even if one subscribes to that viewpoint, the latest trade war isn’t such that businesses would actually feel protected. So it doesn’t even make sense from that viewpoint.
Pierre Lemieux
Mar 11 2025 at 10:51am
Craig: You wrote:
With due respect, you cannot will the principle and not its logical implications or its institutional consequences.
Mactoul
Mar 11 2025 at 11:04am
As for principles, please name a single country that has forsworn tariffs. Indeed, in the so-called heyday of 19c classical liberalism, tariffs were freely used, particularly in America.
Pierre Lemieux
Mar 11 2025 at 11:37am
Mactoul: Hong Kong (see my post “Hong Kong and John Cowperthwaite“) and the UK for a few decades after the mid-19th century. I am not sure there were any tariffs in 16th- or 17th-century Holland, nor for that matter in the Italian city-states or in many cities of Medieval Europe.
What would you have answered if, in the 16th or 17th century, somebody had asked you: “Please name a single country that has forsworn controlling what people publicly advocate and what religion they practice.”
Craig
Mar 11 2025 at 11:13am
Pax Americana costs money. I’d pull back and leave them to their fate, but short of that the question is what tax should the US impose to pay for that? An income tax? I should pay an income tax to help subsidize the defense of a country that will discriminate against my commercial pursuits? Meanwhile I-40 isn’t open and the life expectancy in TN is 71. Really? No, sorry, if they do that, its chutzpah, it really is. Trump does come from somewhere. Honestly, at that point, then tax the Americans trading with South Korea, I owned two Kias, let them pay for it and yes that would include me. Yes, the tariff will hurt, but those income taxes pile up, year after year after year after year. If I extrapolate how much less I could pay in income taxes based on the relative difference in per capita defense expenditures applied to my federal income tax burden, it adds up to alot of money nominally and whatever the opportunity cost of that capital is? I dunno see the S&P 500?
Warren Platts
Mar 11 2025 at 5:29pm
It would take a 20% tariff on EVERYTHING just to pay for the Department of the U.S. Navy that keeps all those sea lanes open…
Warren Platts
Mar 11 2025 at 5:47pm
So why shouldn’t there be a 20% tariff on everything earmarked for the U.S. Navy?
Pierre Lemieux
Mar 13 2025 at 3:36pm
Warren: A 20% tariff on everything would be EXACTLY the same as a sales tax of 20% of everything (both domestically-produced and imported goods and services). It’s a good test of one’s economic knowledge to explain that.
Warren Platts
Mar 13 2025 at 7:28pm
Yes of course. A tariff is merely a glorified sales tax on imports. As such it has it’s deadweight costs, just like all taxes. But what’s the difference between a tariff and a value-added-tax (VAT)? If we imposed a VAT, would that change the equation? That actually takes some economic knowledge to explain that. Especially: the terms of trade effects that show that VATs are a better beggar-thy-neighbor policy than tariffs…
Pierre Lemieux
Mar 13 2025 at 10:48pm
No, Warren, if I read you correctly. A VAT is exactly a sales tax (levied differently). A universal tariff of 20% would be exactly like a VAT of 20% imposed on all goods, domestically produced or imported. Exactly? Nearly exactly: the difference is that the consumers who buy domestic products would pay the 20% to producers (in higher prices) instead of to the Treasury.
Warren Platts
Mar 14 2025 at 3:20pm
I guess what I’m saying is that one of the little discoveries in my economic tutelage that you have helped me out is that if one’s goal is mercantilist, beggar-thy-neighbor, terms-of-trade gains, then VATs actually work better than tariffs. This is easy to see if you draw it out on partial equilibrium supply & demand chart. So politically, probably Trump would be better off announcing VATs (you can put in all the domestic exemptions you want).
Pierre Lemieux
Mar 14 2025 at 4:52pm
Sorry, Warren, but I don’t see this, although you have helped me formulate better my (conventional-economic) thinking. A VAT is exactly the same as a sales tax (as the latter is usually understood and neglecting the fact that tax avoidance is more difficult in case of a VAT), and are both charged to the final consumer. A tariff of the same percentage has the added consequences that (1) it is not shared by domestic producers (assuming, as is usual, that world supply is perfectly elastic), and (2) the removal of some foreign competition further increases domestic prices; that’s why domestic producers love it.
Jon Murphy
Mar 12 2025 at 7:09am
Even if one grants that foreign countries should chip in for US naval patrols, tariffs won’t accomplish that goal. Tariffs are imposed on Americans, not foreigners. Americans who already pay taxes for the largest military budget (by far). So, tariffs just add to the tax burden of the already burdened.
Rather, I reject this globalist justification for tariffs. If the goal is to have other countries contribute, it’d be best to do so via treaties.
Mactoul
Mar 11 2025 at 10:56am
Is it so objectionable to be a part of American union? Most of the world would appreciate the honor.
And the tariff war merely shows that these so-called liberals are in fact as illiberal and collectivist as any populist nationalist authoritarian. These Canadian liberals think that they own the Canadian people.
Pierre Lemieux
Mar 11 2025 at 11:42am
Mactoul: With due respect, your second paragraph is nonsense. Don’t you know the difference between progressives (who now call themselves “liberals,” especially in North America) and classical liberals?
Jose Pablo
Mar 11 2025 at 2:49pm
Most of the world would appreciate the honor.
Would they appreciate the honor, or would they be forced to appreciate it? (like the Czechs & Slovaks “appreciated” the “honor” of being part of the Third Reich)
The Canadians, Greenlanders, and Panamanians don’t seem to “appreciate the honor”. These ungrateful morons!
Nor do Californians, 60% of whom were in favor of secession from the Union in a 2021 poll (and the numbers are likely higher now)
Mactoul
Mar 12 2025 at 12:31am
The two cases are not remotely analogous. Trump has proposed union on an equal footing. Making Canada a state means equal voting right to Canadians and two senators.
Most of the world would jump in joy for such privilege.
Mactoul
Mar 12 2025 at 12:55am
When you say The Canadians, Greenlanders, and Panamanians, you are conflating the people (who have not spoken) with the leaders (who are outspoken). Why shouldn’t these territories have referendum to decide the matter?
Student
Mar 12 2025 at 10:56am
I can think only if Puerto Rico… and we don’t admit them because they are a “shit hole” country. More likely, it’s we would be admitting 2 more left leaning senators… ditto for Canada (if they wanted to… doesn’t seem they do). Recall the free soil/non free soil problem. Conservatives are bluffing about Canada. It’s just meant to be an insult. There nearly a 0% chance that would ever happen. Ditto for Greenland, ditto for Puerto Rico. Are conservatives really interested in 6 more Hawaiian senators? I think not.
Jose Pablo
Mar 13 2025 at 11:44am
Why shouldn’t these territories have referendum to decide the matter?
Why shouldn’t the US hold a referendum to decide if they want to invite Canada to join the Union?
This issue is so absurd that the only reason to entertain it is to highlight the sheer level of insanity in American politics today.
Meanwhile, this distraction is costing another $1 trillion in American companies’ market capitalization, likely outweighing total DOGE savings by an order of magnitude.
Making America Great Again 1 trillion in losses at a time …
Jon Murphy
Mar 11 2025 at 11:11am
In a bitter irony, previous protectionist policies opened up American citizens to this harm. Specifically, the Jones Act. By making it prohibitively expensive to ship energy (oil and natural gas) from the Gulf of
MexicoNew Spain, many Northern states import energy from Canada, Europe, Russia, and other places.Pierre Lemieux
Mar 11 2025 at 11:46am
Jon: Good point. I also mentioned the despicable Jones Act in my post “Repeating a Historical Experience of Autarky.”
Craig
Mar 11 2025 at 12:06pm
https://www.reuters.com/markets/commodities/oil-companies-work-around-jones-act-supply-us-fuel-markets-2022-08-18/
Counterintuitively protecting Bahamian gasoline mixers?
“Traders are increasingly sending unfinished gasoline components from the Gulf Coast to Buckeye Partners LP’s terminal in the Bahamas, also known as Borco, where they are blended into finished gasoline to be sent to the U.S. East Coast. The uncommon trade is a sign of heavy demand for products up and down the coast, home of some of the nation’s largest consumer markets.”
So instead of Houston to Fort Lauderdale, it goes Houston–>Bahamas–>Fort Lauderdale.
I think Hovensa’s facility in USVI has a waiver? Hovensa is Hess and I think Venezuela and I am now thinking, “Hmmm may be that is why there is a Citgo sign at Fenway” — not sure.
Pierre Lemieux
Mar 13 2025 at 3:51pm
Very interesting story! Thanks, Craig. The consequences of the Jones Act are similar to the effects of the chicken tax on the importation of minivans. A customs tariff is like any discriminatory tax: it creates incentives for avoidance and arbitrage that waste real resources.
Warren Platts
Mar 13 2025 at 7:53pm
That people in Boston have to import LNG from Russia is a myth. A hoax. You can look on the EIA.gov website to see that I’m right. There were two shipments from England because there was a political uproar about Russian natural gas. There were never any direct imports from Russia.
As for New England, they have messed their own nests, now they can live in it.
David Seltzer
Mar 11 2025 at 11:44am
Pierre: I suspect you know much of Canada’s electricity generation and transmission are government-owned public utilities. So Premier Ford’s threats carry some weight. The total costs to others affected by this hatred is hardly considered by these petulant clowns. My sentimental recollection of trading with other traders on the CBOE and CME…people traded with one another not because they liked or even disliked the other. They traded because both parties benefitted financially. Mundane morality or “mere justice” seemed best.
Jose Pablo
Mar 11 2025 at 12:27pm
So Premier Ford’s threats carry some weight.
No, they don’t.
U.S. tariffs primarily hurt American consumers, and Premier Ford’s retaliatory measures only add to the pain for Canadians (without reducing the damage caused by U.S. tariffs in any way).
The rationale behind the threats is that by inflicting additional economic pain on Canadians, the U.S. will be pressured to lift its tariffs, thereby limiting the damage to Canadian exporters. This might happen, but it is by no means the only possible outcome. If Premier Ford’s measures fail to influence U.S. policy, Canadians will have inflicted additional pain on themselves for no reason.
So, the relevant question is: What will be the U.S. response to Premier Ford’s actions? Will it be: a) “Sorry, I’ll immediately lift my tariffs,” or b) to impose additional tariffs on Canadian products?
If the most likely answer is b, then Premier Ford’s measures are counterproductive.
It would be much better, for example, to mandate that only women can manage trade issues. Their rational thoughts are less prone to the egotistic chest-banging responses of the “alpha males” who, according to Elon Musk, should run countries.
David Seltzer
Mar 11 2025 at 12:44pm
Jose Pablo wrote;” So Premier Ford’s threats carry some weight.
No, they don’t. U.S. tariffs primarily hurt American consumers, and Premier Ford’s retaliatory measures only add to the pain for Canadians (without reducing the damage caused by U.S. tariffs in any way).” If Ford’s threats cause pain for Canadiens and tariffs cause pain for American consumers, both DJT’s and Premier Ford’s threats most certainly carry weight in the form of negative externalities. Yes they do!
Jose Pablo
Mar 11 2025 at 1:02pm
In that meaning yes, David.
I was reading you meaning that “Premier Ford’s threats” can help Canadians to reduce the negative consequences of US tariffs.
My argument was that these threats will increase, not reduce, the negative consequences on the Canadian economy. It is from this perspective that they are not important (= they don’t carry any weight) as an, even partial, solution to the problem.
David Seltzer
Mar 11 2025 at 1:35pm
Jose, I should have been more clear. I agree with you.
steve
Mar 11 2025 at 12:24pm
Trump just said he is increasing Canada tariffs to 50%. In the past he said trade wars would be easy to win and I think he is out to prove that. It also burnishes his tough guy image with some people, although he wont really be hurt as its people further down the income ladder who will actually feel the pain.
Query- From the POV of a libertarian economist (assume you are now president of Freedonia) , setting aside the moral and political issues for a minute, what would be the ideal economic policy response when Trump imposes a tariff on your country?
Steve
Jose Pablo
Mar 11 2025 at 12:44pm
its people further down the income ladder who will actually feel the pain.
Indeed!
It seems that we are transitioning from this:
https://www.economist.com/special-report/2024/10/14/the-american-economy-has-left-other-rich-countries-in-the-dust
to this:
https://www.economist.com/finance-and-economics/2025/03/10/how-trump-provoked-a-stockmarket-sell-off
There is significant risk in a flagrant misdiagnosis (such as believing America needed to be made “great again”).
However, at least half of the people feeling the pain down the income ladder have, in some ways, brought it upon themselves. When you voluntarily drink snake oil, the culprit is not solely the charlatan who sold it to you.
Jose Pablo
Mar 11 2025 at 12:56pm
what would be the ideal economic policy response when Trump imposes a tariff on your country?
The ideal economic “policy” is the same as the ideal industrial “policy“: do nothing “politically”.
Let individual private producers adapt to the new situation. They will sell less to their current major clients, but more to previously underserved or marginal clients. They will adjust their volume, and resources will naturally be redirected to other industries.
Any government intervention will only make things worse, particularly retaliatory measures, which will directly hurt Canadians and, on top of that, are more likely to escalate the trade war, hitting them twice.
Sh** happens. You adapt and move forward.
Pierre Lemieux
Mar 11 2025 at 9:27pm
Steve: That is the question or a big part of it. I hope to do more posts on this. I take your question to mean, what should the government of Freedonia do if the government of Tyrannia has imposed a tariff (a tax) on its own citizens’ imports, which will also indirectly affect the production and sales of firms in your beloved Freedonia. Note that any public policy (or its absence) results in a particular distribution of income (and utility) and thus requires a normative (moral) judgment. Cutting corners, the government of Freedonia “should” do like the government of Hong Kong did (and a few others in history), that is, not harm its consumers because some of its producers have been harmed; my short post on “Hong Kong and John Cowperthwaite” may help your reflection. Letting individuals and private firms adapt while exploiting their comparative advantages is the key; my post on “Taking Comparative Advantage Seriously” gives further elements of reflection.
The missing element is that your point of view will likely be different if you live in Tyrannia (whose government has started the trade war). You may very well hope that the government of Freedonia will forget its principles, violate its constitution, and retaliate in order to force your government in Tyrannia to back off from its tariffs–in order to constrain your own government. It may work, if it does not lead to an all-out trade war or real war.
Jose Pablo
Mar 12 2025 at 11:20am
If an earthquake devastates the US (but not Canada) reducing the American demand for Canadian products by X%, it doesn’t make any sense to respond by forcing a reduction of your imports from the US. Why respond differently to the same external shock? The reason behind the shock makes no difference to its effects and the optimal “economic policy” response to them.
Responding to tariffs with retaliatory tariffs only makes sense if you calculate that imposing “your” tariffs will help lift the original ones. This is unlikely on the initial heat. And that one-time shot works almost as well (if not better) as a threat.
Retaliatory tariffs are imposed by politicians because of “public choice theory reasons”. They favor politicians’ popularity by increasing the pain among individuals.
steve
Mar 12 2025 at 12:07pm
Thanks for confirming what I thought. Now you need to throw in the moral and political concerns. Watched part of an interview with Buffett yesterday. He claimed that tariffs should be seen as an act of war which is indeed his I think lots of people see it the same way. It will also be seen as an act of betrayal as the terms of trade were negotiated by Trump 5 years ago and now Trump is unilaterally reneging. Integrated production chains were set up based upon those agreements and now they blow up. People in Canada wont see people in US paying higher prices. They will see that they might lose their jobs because their product suddenly costs too much in the US.
In the ideal, Canada seeks new trade partners as the US has proven itself unreliable, may be China which AFAICT has never done something like this. However, I bet this will look like weakness and means losing the next election ie the politician will be punished because people really wanted them to act tough in response.
Steve
Pierre Lemieux
Mar 12 2025 at 4:47pm
Steve: Please read my reply to Jose, which should help you understand the last paragraph of my previous reply to you.
On the other issue you raise in your reply to Jose, I don’t agree that tariffs imposed by the government of the US on imports from Canadian producers should be considered an act of war against “Canada.” If it is an act of war, it is an act of war from the government of the US against US residents. That the government of North Korea forbids (for all practical purposes) North Koreans to marry Americans, is an act of war against the former not against the latter (or, at least, not against all Americans).
Mactoul
Mar 13 2025 at 12:42am
Buffet is being hysteric. Tariffs are and have been perfectly normal. All countries retain full freedom to impose tariff howsoever they deem fit.
New York Times had an op-ed by a Democrat politician advising against falling into a anti-tariff absolutism.
Pierre Lemieux
Mar 13 2025 at 3:55pm
Mactoul: You write:
Of course, they are, like Republicans, very careful not to compromise the primacy of collective choices. I have had a number of posts on this recently.
Pierre Lemieux
Mar 12 2025 at 4:40pm
Jose: I don’t think you understood my last paragraph, and I understand why because it was not well-written. I have just changed a few words in it and it should be clearer now. (Sorry to Steve too.)
To take the example of Canada (Freedonia in this case) and America (Tyrannia in this case), my point was the following. If you live in America and you are hit by Trump tariffs (as a consumer or a manufacturer), you may very well hope that the government(s) of Canada (and Europe) will retaliate if it leads your own government in America to back off. Kapitch?
Jose Pablo
Mar 12 2025 at 10:23pm
if it leads your own government in America to back off.
Yes, but this is very unlikely to be the case. It is much more likely (as we have witnessed with Doug Ford’s response) that retaliation will induce an increase in the tariffs damaging Tyrannia consumers.
Why not, instead, actively help Canadian producers to reduce trading frictions (which are a lot in international trade) with other nations?
Or, even better, why not start the process of joining the EU? You can argue that Canada has always been closer to Europe than to the US (Canadian food is enjoyable, weapons are illegal, single-payer healthcare system …)
https://www.economist.com/europe/2025/01/02/why-canada-should-join-the-eu
Pierre Lemieux
Mar 13 2025 at 3:59pm
Jose: I don’t disagree. This is why I wrote
Actually, the Canadian would simply have to declare unilateral free trade, if there were more than a couple of people there who really believed in the primacy of individual choices, that is, in individual liberty.
Jose Pablo
Mar 13 2025 at 5:23pm
Yes!, Brilliant! In fact, non-government-sponsored voluntarily individual boycotts on American products would be a beauty!
They can be pretty effective (ask Elon Musk) and it would be much more difficult for Trump the First to retaliate against it.
Kind of “free trade guerrilla warfare”.
Warren Platts
Mar 11 2025 at 5:35pm
Free trade isn’t free. When the Houthis disrupt trade through the Suez, who are you going to call? The Canadian Navy? Nope. You will call the US of A././.
Pierre Lemieux
Mar 11 2025 at 7:59pm
Warren: Have you ever tried to call the US of A? You probably mean the government of the United States. Foreign governments have done this, and they now regret it as it turns out to be a very unreliable cop. They even wonder if the weapons they bought from the American military-industrial complex would be serviced or would even work in case of war. Many of these fears are now voiced in the international press (and even in the Wall Street Journal). The government of Germany is toying with the idea of acquiring nuclear weapons. Don’t you realize the lasting damage that the King of America is causing?
Pierre Lemieux
Mar 11 2025 at 8:05pm
Including, of course, the lasting damage he will have caused not only to American institutions but also to a lot of Americans who are not billionaires.
Craig
Mar 11 2025 at 8:57pm
“The government of Germany is toying with the idea of acquiring nuclear weapons. ”
Kind’ve an aside here, Pierre, but post-WW2 Germany had its militarism chopped off and Germany acquiring nuclear weapons wasn’t something they’d think they’d be able to get away with. Nominally West Germany was under the nuclear umbrella of the US and of course the UK and France. However, many Germans feared that any nuclear strike on German soil wouldn’t necessarily trigger a counterstrike from the UK, France or the US.
One Soviet plan envisioned deploying 50 tactical nukes on German soil in the ‘seven days to the Rhine’ plan. The thought of course is that US, UK and France wouldn’t trade New York, London and Paris because the Soviets had hit Frankfurt am Main. (Now probably Berlin of course).
MAD produces some funky logic. Maybe its true, maybe its not, but make no mistake about it any ambition on the part of Germany to acquire nukes isn’t just about whether they feel they can rely on being under the US nuclear umbrella but whether they can rely being under the nuclear deterrence offered by UK and France.
Warren Platts
Mar 13 2025 at 4:02am
If the North Koreans and the Iranians and Pakistanis are allowed to have nukes, then why shouldn’t the Germans and the Japanese and Taiwanese have nukes? It should be a free market right?
Mactoul
Mar 12 2025 at 12:47am
In a world where likes of Pakistan and North Korea have nukes, why should a nuclearized Germany or Japan be any problem? Don’t you trust liberal democracies?
Warren Platts
Mar 13 2025 at 4:03am
Good point yes…
Warren Platts
Mar 13 2025 at 3:57am
They work. I’ve seen them work…
Pierre Lemieux
Mar 13 2025 at 4:25pm
Warren: As long as the US government allows their vendors to provide service and software updates (even assuming that they cannot remotely the weaponry)! European governments have just woken up to the unreliability of all that given the general unreliability of the US government as an ally). Read https://www.ft.com/content/1503a69e-13e4-4ee8-9d05-b9ce1f7cc89e
Jon Murphy
Mar 11 2025 at 8:12pm
I thought tariffs were meant to goose wages? Or was it manage the trade deficit? It’s just so hard to keep up with the ever-changing justifications.
Although it’s hard to see how one of the largest tax increases in American history on Americans is going to make Canada pay for patrolling the Suez Canal.
Warren Platts
Mar 13 2025 at 4:13am
OK Genius Congressman: you tell me how we should fund the U.S. Navy…
Jon Murphy
Mar 13 2025 at 7:42am
It’s amazing how the justifications for tariffs change day to day, and sometimes hour to hour. It’s almost as if they’re just a policy in search of a justification rather than a reasoned policy response to a legitimate problem.
Craig
Mar 11 2025 at 8:57pm
Oh, right our new mortal enemies, the Houthis……
Warren Platts
Mar 13 2025 at 4:08am
Personally, I have no dog in this fight. Why should the Americans be the ones keeping the Suez sea lanes open?
Thomas L Hutcheson
Mar 11 2025 at 10:25pm
I don’t know if it was the first trade war in world history, but it’s a charming story just he same.
Charlemagne and King Ofa of Mercia were negotiating a deal whereby a son of Charlemagne would marry one of Ofa’s daughters but in return Ofa wanted one of Charlemagne’s daughters as a bride for his son. Charlemagne was incensed at this pretention of equality — Ofa wasn’t even a Christian and a mere king whereas Charlemagne was a Pope-certified Holy Roman Emperor — and the result was mutual prohibitions of traders from the Carolingian Empire to enter Mercia and vice versa.
Pierre Lemieux
Mar 12 2025 at 4:51pm
Thomas: Yes, it is a fun story. It is quite probably not less true than the story about Haitians eating Americans’ beloved pets.
Mactoul
Mar 12 2025 at 12:43am
Why there were no such lamentations when Biden and other local administrations imposed ruinous and utterly unrealistic Green Energy Climate Change mandates?
When they were diverting billions to favored businesses and NGOs? Only last week a NGO sued Federal Govt to release 7B $ it was promised by Biden.
They were driving the energy sector to collapse. Such hysteria, such scientific ignorance is all fine and dandy. All this of tariff, of Canada of Greenland etc etc is rounding error compared to what has been averted by the change in regime.
Mactoul
Mar 12 2025 at 2:31am
I see no hatred from American side but plenty of hysteria from the Ontario Premier– annihilate Ontario indeed.
The point I wish to make is tariffs are respectable. All governments seem to be able to impose a tariff at any moment. Now, if the economists are united in their belief that tariffs are invariably harmful, then the economists as a profession have been highly remiss in its duty to inform the governments the positive harm tariffs inflict on themselves.
It is not merely that Trump doesn’t listen to the experts. It is that all countries possess this suicidal weapon and can deploy it immediately.
Monte
Mar 13 2025 at 10:39am
Economists aren’t, in fact, united in this belief. Notable among those who do support tariffs under certain circumstances are Krugman, Stiglitz, Solow, Chang, and Rodrik.
Jon Murphy
Mar 13 2025 at 11:10am
We have to be careful here and distinguish between theoritical and practical cases for tariffs. All of those you list understand the theoritical cases where tariffs may be net beneficial. But, with the exception of Rodrik, who is something of a heterodox, they all reject tariffs as a practical policy (to quote Krugman: “[the optimal tariff model] is intellecually impeccable but of doubtful usefulness”).
Economists are quite united that tarriffs are awful.
Monte
Mar 13 2025 at 10:58am
You can add to this list Jagdish Bhagwati. And while these economists d0 recognize that tariffs can be justified under certain conditions, they all believe that the overall benefits of free trade outweigh any short-term protective measures.
Jose Pablo
Mar 13 2025 at 11:59am
The point I wish to make is tariffs are respectable. All governments seem to be able to impose a tariff at any moment.
The point I wish to make is war is respectable. All governments seem to be able to start a war at any moment.
The point I wish to make is that beating and killing women is respectable. It seems to happen, to some extent, it happens in every country of the world.
The point I wish to make is that killing people because of their religious or political beliefs is respectable. It seems to happen in an awful lot of countries.
The point I wish to make is that pursuing Jews is respectable. It has happened throughout history and happens today in far too many countries.
I often tell my children that the worst reason to do something wrong is simply because everyone else is doing it.
I used to think that was just “kid-level” advice. Turns out it is not.
Pierre Simard
Mar 12 2025 at 8:36am
Laissez-faire Trump!
What would happen if we stopped opposing Trump and allowed him to implement his tariffs without retaliation? Of course, the Canadian economy would suffer the consequences, but at least Canadians would not have to bear the cost of the ineffective counter-tariffs imposed by their own government. Meanwhile, American citizens, facing higher prices, and American businesses, struggling to convince consumers to buy their products, would see their sales decline in the Canadian market due to economic nationalism.
Trump prospers on a rhetoric of confrontation, where every criticism of his administration fuels his image among his electoral base. By polarizing the debate, he manages to stay at the center of the news cycle and strengthen his influence. The imposition of tariffs and the withdrawal from multilateral agreements are merely tools to assert American supremacy. For him, being challenged by other powers is proof that he is defending American interests.
But what would happen if this opposition faded away? Without adversity, Trump would no longer be able to feed his confrontational discourse and would have to face a different kind of pressure—the expectations of his own people.
It is important to remember that the biggest loser in trade wars is the American citizen. So far, Trump has leveraged opposition from other countries to maintain his image and mobilize his supporters. If this opposition were to disappear, he would have to prove his worth in another way: by addressing the real needs of the people he claims to defend.
N.B. Traduction par ChatGPT
Pierre Lemieux
Mar 12 2025 at 12:03pm
Pierre: Good point. Advice for the government of a free society: ignore foreign tyrants harming their own subjects and don’t prevent your own citizens from practicing unilateral free trade! (PS: Your English is perfect!)