Let us begin with a simple reality: This ain’t your 50’s era economy. Back then—the halcyon days of America’s 20th century boom—less than five percent of Americans were invested in the stock market. Today that number is estimated at 62 percent. That means, there are far more eyes on the market than ever before, and they don’t like what they see.
On January 20th, America’s recovering economy was written about as ‘the envy of the world.’ While there was certainly room for improvement, it had essentially weathered the pain of the pandemic. But since day one of Donald Trump’s presidency things have changed.
Today’s stock market, analysts say, is ‘going through a correction.’ Put another way, the market is wary and down, especially with all the talk about tariffs, Trump’s economic fix-all elixir. And it is showing it.
Early returns see a rapid cooling. And it may be a continuing trend, analysts say, if Trump’s new favorite weapon, tariffs, keep the world guessing.
Earlier this month, Trump ordered 25 percent tariffs on imports from Canada and Mexico and 20 percent on China. He later included similar tariffs on the European Union countries before backpedaling and announcing delays in implementation.
“He wants these countries to respect him,” Commerce Secretary Howard Lutnick said in defending Trump’s questionable economic policies on the country’s biggest trading partners, including Canada and Mexico. “If you make him unhappy, he responds.”
Economists say tariffs are, very simply, a tax imposed by one country on imported goods from another country. Tariffs are used to influence trade, raise revenue or for competitive gains. But, unlike what Trump says about them, that they will ‘bring us wealth,’ it is Americans who’ll be paying the freight on anticipated price increases that invariably come with them.
Of course, tariffs have their place, said University of Denver economist Jack Buffington. The Program Director and professor in supply chain management at DU said, “They’re not all the same.”
Canada, as an example, “imposes tariffs on food” imported from the U.S. “If they did not, we would flood their market.” The same applies to China. “Without tariffs, they would flood the markets,” he said. But countries also counter tariffs by shopping elsewhere.
China, once America’s top market for soybeans, now buys its soybeans from Brazil. It’s also perfected a new high-protein corn that is slowly complementing soybeans in the nation’s diet.
But Trump believes, without evidence, that his tariff ploy is a winner. Of course, it’s a guess, said Buffington. “If the strategy works, it will enable American productivity to be more competitive.” That, of course, is the theory. “But in the short term, the biggest impact, is disruption in the supply chain.”
Trump’s unorthodox approach cheered mostly by his own economic advisors, has been met with unequivocal derision by countries targeted for tariffs, most immediately from our closest neighbors.
Mexican President Claudia Sheinbaum has promised her country’s response would equal Trump’s 25 percent trade tax. To date, Mexico has postponed retaliatory tariffs pending U.S. action. Mexico exports cars, car parts, electronics, appliances and much of America’s fruits and vegetables, especially in winter.
Canada, reacting to the tariffs as well as Trump’s declaration that he would like Canada to submit to him and join as America’s 51st state, has taken an equally bold stance against the tariff threat.
Newly elected Canadien Prime Minister Mark Carney spoke directly to the tariff consequences. “Americans should make no mistake,” he said. “In trade, as in hockey, Canada will win.”Canada is a leading exporter to America of energy, machinery and auto parts, aluminum and lumber. Higher priced lumber will be painfully felt in suburban Los Angeles, where recent wildfires destroyed thousands of homes. Canadian lumber, which will be essential in the rebuild, makes up more than 80 percent of all imported lumber into the United States.
Trump has been both energetically hot and inversely cool on his tariff threats. Some days they seem imminent, only to get postponed, often within hours. Giving them a date certain for execution has been a mystery.
But if and when Trump gives the green light for their imposition, Metropolitan State University-Denver economist Chandler Reilly says Americans won’t have to wait long to feel their impact. “There will be economic costs,” he said. “When you put tariffs on steel and aluminum, that pushes everything up.”
Right now, the specter of steel and aluminum price hikes has the U.S. auto industry—and consumers—in a very uncomfortable position, especially when new car prices are routinely in the $40,000-plus category.
But the stress over Trump’s tariffs goes well beyond the four-wheel variety, said Reilly. “If you’re a construction company,” he said, and looking to build a big apartment complex , “and you have to pay 25 percent more” for materials, you might just hold off.
The goodwill traditionally accorded a new U.S. president has proved to be ephemeral in light of Trump’s tough talk on tariffs. And it’s not just the threat of tariffs on hard goods that has engendered anger.
The EU recently imposed a 50 percent tariff on American whiskey. Not to be outdone, Trump immediately posted on “X,” formerly Twitter, that the EU could expect a “200 percent tariff” on all champagne and wines crossing the Atlantic unless the whiskey tax was removed.
The coming weeks and ultimate reaction to the tariff war begun by Trump could derail not only America’s recovering economy, but the world’s. Until the picture becomes clearer, the champagne will remain on ice.
