"Why tariffs are different-Plus, immigration and podcasts."
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Russ Roberts (https://trendsingeopolitics.blogspot.com).
 January 24, 2025 |
Good morning. We’re covering Trump’s slow tariff rollout — as well as immigration, abortion pills and podcasts.
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| President Trump after signing executive orders in the Oval Office. Doug Mills/The New York Times |
Fast and slow
Donald Trump’s second presidency is obviously off to a fast start. In almost every area that’s a priority for him and his advisers — immigration, energy, climate, race, gender and more — he has begun making major policy changes.
But there is one notable exception: tariffs.
Even though Trump has said that “the most beautiful word in the dictionary is ‘tariff,’” he has been cautious in his first week back in office. He has not imposed the universal 10 percent or 20 percent charge on all imports that he promised during the campaign. He has instead threatened to enact targeted tariffs on Canada, Mexico and China that wouldn’t take effect until Feb. 1. Trump’s aides have signaled that the threat is partly a negotiating tool to win other concessions from those countries.
Trump has also directed government agencies to assess the feasibility of broader tariffs and report back on the findings, which is itself a sign of his caution. Feasibility assessments are not normally the modus operandi of Trumpism.
Wall Street, which tends to oppose tariffs, has noticed the caution. The S&P 500 rose again yesterday, and market analysts said the slow movement on tariffs was one reason. “The worst fears have not been realized,” said David Kelly, chief global strategist at J.P. Morgan Asset Management.
Why is Trump proceeding more tentatively on tariffs? That’s the subject of today’s newsletter.
Internal worries
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| The New York Stock Exchange yesterday. Timothy A. Clary/Agence France-Presse — Getty Images |
Trump’s second administration is largely unified on most big issues, at least for now. His White House advisers and cabinet secretaries agree on the importance of expanding oil and gas production. They are dismissive of the risks and costs of climate change (despite the evidence). They oppose many diversity programs.
Any disagreements tend to be about secondary questions. On immigration, for example, Trump and his team favor much tougher border rules and an acceleration of deportations. The main area of internal disagreement involves a more niche subject: how many highly skilled immigrants to admit through the H-1B visa program.
On tariffs, the internal tensions run deeper. Nobody publicly opposes tariffs. But some senior officials were skeptical of tariffs before they entered Trump’s orbit. The corporate executives close to Trump are also wary, as is Wall Street.
The stock market is one of the few traditional restraints that matter to Trump, as my colleagues Jonathan Swan and Maggie Haberman have noted. Trump sees stock prices as a report card on his presidency. And he knows that much of Wall Street worries that tariffs could hurt economic growth by raising prices in the U.S. and by sparking retaliatory tariffs elsewhere.
Some new tariffs are still likely because of Trump’s passion for them. Trade policy is a rare issue on which he has expressed consistent views for decades. (Immigration is another.) The uncertainty involves the form that the tariffs will take.
Three tariff goals
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| A steel plant in Huaian, China. Agence France-Presse — Getty Images |
Ana Swanson, who covers trade for The Times, has a helpful way of framing the issue. She points out that during the confirmation hearing for Scott Bessent, the nominee for Treasury secretary, he encouraged people to think about the Trump tariffs as having three main goals:
1. Bring production home. Bessent said tariffs could play a role in “remedying unfair trade practices” by other countries and cited China as an example. If other countries are heavily subsidizing their own companies or keeping out foreign rivals, the U.S. can respond in kind to level the playing field.
The broader goal is to rework the supply chain, Ana notes. The U.S. can use tariffs to encourage more production in this country, especially in industries that are growing or militarily sensitive, by increasing the cost of foreign goods.
2. Raise revenue: Bessent’s second category was “a more generalized tariff as a revenue raiser.” Trump has proposed a huge tax cut, and tariffs could replace the lost revenue to keep the deficit from soaring. The Republican majorities in Congress are so narrow that a tax cut without offsetting deficit reduction may not be able to pass. House Republicans have floated cuts to Medicaid for the same reason.
3. Gain leverage: Bessent’s third category was leverage with other countries: “Tariffs can be used for negotiations,” he said. Trump this week threatened Russia with tariffs unless it agreed to a reasonable cease-fire in Ukraine. His planned tariffs on Canada and Mexico are partly an attempt to force concessions on border policy and a trade deal.
Speaking to political and business leaders in Davos yesterday, Trump vaguely threatened new tariffs on European countries. He has long criticized Europe for not buying more American products and not spending more on their militaries. They might be willing to make some changes if the alternative is economically damaging tariffs.
What’s next
The people in the administration who are wary of tariffs — you can think of them as the doves — seem to hope that this third category ends up being the dominant one. As Ana told me, “The dovish advisers want tariffs to be used as a negotiating tool that doesn’t actually go into effect, or even as a negotiating tool that could lead to more market opening.”
The hawks are more focused on the first two categories and the actual enactment of tariffs. Trump himself is enough of a hawk that at least some tariffs probably will go into effect.
Their scope may depend on what happens after that. If tariffs start to have the negative effects that their critics predict — higher inflation, lower profits and a trade war — Trump will likely pull back. If they seem to be working, or at least not failing, Trump may end up being a lot bolder than he has been in the past few days.
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| Outside the U.S. Immigration and Customs Enforcement building in Chicago. Vincent Alban/Reuters |
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| Near Castaic, Calif. Mark Abramson for The New York Times |
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Opinions
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MORNING READS |
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| Javier Jaén |
Blood filter: A start-up claimed its device could cure cancer. Then patients began dying.
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SPORTS |
Tennis: Novak Djokovic exited after just one set of his Australian Open semifinal match against Alexander Zverev. Djokovic had suffered a leg injury in his quarterfinal win.
M.L.B.: The Athletic obtained audio of Ippei Mizuhara, the former translator for Dodgers superstar Shohei Ohtani, impersonating the baseball player while requesting a $200,000 wire transfer. Listen to it here.
N.F.L.: Buccaneers offensive coordinator Liam Coen is expected to accept the Jaguars head-coaching job — just hours after the franchise parted ways with its general manager.
ARTS AND IDEAS |
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| Jason Kelce at a taping for his new show. Hannah Yoon for The New York Times |
The former N.F.L. player Jason Kelce has been busy since retiring. He has built a career as an analyst and podcaster and appeared in commercials for Campbell’s soup, Marriott hotels, General Mills foods, YouTube TV, Buffalo Wild Wings and Tide. This month he will begin yet another job: ESPN late-night host.
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| Zoe Saldaña in a scene from “Emilia Pérez.” Page 114 – Why Not Productions – Pathé Films – France 2 Cinéma/Netflix, via Associated Press |
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Welcome to my geopolitics blog site. This is a Hawaii Island news site focusing on geopolitical news, analysis, information, and commentary. I will cite a variety of sources, ranging from all sides of the political spectrum.