Trump's Blockade of America

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What was once unthinkable is now reality. At 12:01 AM this morning, Donald Trump imposed the largest tariffs in modern US history—a 25% tariff on all Mexican imports, a 10% tariff on Canadian energy products, a 25% tariff on all other Canadian goods, and a doubling of the 10% tariffs on China imposed 30 days ago. The costs of these actions are enormous, covering $1.3T in US imports or roughly 42% of all goods brought into the United States. If households and companies tried simply to import the same goods from the same countries as last year, they would now be forced to pay an 11.5% effective tariff or more than $370B in total. Sustained, any one of these actions would exceed the total impact of Trump’s entire first-term trade wars, but combined they represent the single-largest tariff hike since the infamous Smoot-Hawley Act of nearly a century ago.

For as long as they last, these tariffs will drive up US prices for key raw materials like gasoline, fertilizers, steel, aluminum, wood, plastic, and more. Groceries, especially fresh fruits and vegetables from Mexico, will become harder to find. Manufacturing industries reliant on complex integrated North American supply chains—vehicles, computers, chemicals, airplanes, and more—could grind to a halt if those links are forcibly severed. Costs could spike for phones, laptops, and appliances where production is particularly concentrated in China and Mexico.

Exporters will be hurt by increased costs for raw materials, currency appreciation, and upcoming retaliatory tariffs—all of which will cut into US economic activity. In fact, the Canadian government has already retaliated, immediately hitting $21B in US exports, and the Chinese government has scheduled tariffs on $22B in US exports for early next week. Even more retaliation is coming—Mexico is prepping to unveil its response package, Canada is threatening another $86B in tariffs, and provincial Canadian leaders are promising their own reprisals. American export-oriented farmers, energy producers, and automakers are already in the crosshairs.

Fear of these tariffs was already having profound effects on consumer sentiment and business behavior, mostly by inducing panic-buying and hoarding throughout the previous few months. Preliminary data for January shows the trade deficit jumping by more than 25% as Americans rushed to buy foreign-made goods before Trump took office. That trend likely