Please explain the positive value of tariffs to the U.S.

[Toonces]

Let's keep it strictly to math and economic theory.

The U.S. is facing inflation - grocery prices are way up seems to be a theme.   Our administration ran on a policy of bringing inflation down (can't remember, but probably on "day one").

This is a serious question - how does imposing 25% tariffs on Canada and Mexico benefit the U.S.?  My understanding is that the tariffs are on the importer, not the exporter, which means the cost is borne by the importer in the U.S., who passes along that increase to the U.S. consumer.

I'm willing to believe this is a good idea if someone can explain it to me, because it seems counter-intuitive.

[Jarhead0331]

This really shouldn't be a thing here, but so long as everyone keeps it civil, I'm willing to role with it.

While I'm hardly an expert, there are three key reasons why the administration has imposed tariffs. First to influence or shape foreign policies and compel certain trading partners to take action to combat illegal immigration and the influx of drugs, including deadly fentanyl. Second, indirectly protect domestic industries by making foreign products less competitive and to counteract unfair trade practices, theft of IP and other trade imbalances.  Third, as a source of revenue to drive down the federal deficit.

Yes, we can expect some prices to rise because some portion of the additional cost imposed by a tariff is typically passed on to consumers. Also, many companies rely on imported components and raw materials as inputs for their products, so tariffs on these inputs can raise production costs too, which may then be passed on to consumers.

I think the primary goal is to bring these trade partners to the table to negotiate better trade deals. It could work, but if it does not, and if the tariffs remain in place, in the long run it could certainly have negative impacts on the US economy overall.

Not sure if any of this answers your question or not.

[Pete Dero]

The importer pays the tariff but that money goes to the US treasury.
In the best case for the US the importer doesn't raise the price for the consumer and the money from the tariff is used to lower the debt or is given back to the population.
But the importers profit will decline and after a while he will be forced to ask a higher price from the consumer, causing inflation.

In most cases the other country will also impose tariffs causing higher prices around major parts of the world (in this case China, Europe, Canada and Mexico).

This ends most of the time in a lose-lose situation.
You'll quickly see this reflected in stock market losses.

[Uberhaus]

Well, the hope is that the government of the importing country will pay the tariffs, enriching the US.  Canadians will not do this and we are retaliating with our own tariffs.  Also, it is hoped that all manufacturing in the automotive, pharmaceutical industries, etc will come home to the states.  In the meantime, expect to see the cost of cars jump by approximately $10000 as Ontario is a significant manufacturer of not only cars but parts and systems like engines go back and forth across the border as they are built. 
The US won't be able to source Aluminum from outside of Canada for some time, lumber same.  Steel won't be a problem.  The Ontario premier will add a tariff to export of electricity and if the trade war continues into April, he will stop it completely.  The $100 million (only Canadian) Starlink contract is cancelled, US alcohol has been pulled from sale in Ontario and people are choosing to buy Canadian goods throughout the country.  It is very doubtful that the Alberta premier will stop the flow of crude from the oilsands, but she will feel pressure from the rest of the country.  If Saskatchewan was to stop the flow of potash, the US will have very, very poor corn harvests and really only two options, but Canadians aren't that kind of a people.

[Pete Dero]

I think the primary goal is to bring these trade partners to the table to negotiate better trade deals.

In 2020 the United States-Mexico-Canada Agreement (USMCA) replaced Nafta.
This was a deal made by the Trump administration, so I find it difficult to believe better trade deals are the primary goal in those cases.

U.S. exports of services to USMCA were an estimated $109.0 billion in 2022, 23.6 percent ($21 billion) more than 2021, and 17 percent greater than 2012 levels. U.S. imports of services from USMCA were an estimated $83.0 billion in 2022, 27.0 percent ($17.6 billion) more than 2021, and 66 percent greater than 2012 levels. Leading services exports from the U.S. to USMCA were in the travel, professional and management services, and financial services sectors. The United States has a services trade surplus of an estimated $26.0 billion with USMCA in 2022, up 14.0 percent from 2021.

https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement

[Jarhead0331]

I think the primary goal is to bring these trade partners to the table to negotiate better trade deals.

In 2020 the United States-Mexico-Canada Agreement (USMCA) replaced Nafta.
This was a deal made by the Trump administration, so I find it difficult to believe better trade deals are the primary goal in those cases.

U.S. exports of services to USMCA were an estimated $109.0 billion in 2022, 23.6 percent ($21 billion) more than 2021, and 17 percent greater than 2012 levels. U.S. imports of services from USMCA were an estimated $83.0 billion in 2022, 27.0 percent ($17.6 billion) more than 2021, and 66 percent greater than 2012 levels. Leading services exports from the U.S. to USMCA were in the travel, professional and management services, and financial services sectors. The United States has a services trade surplus of an estimated $26.0 billion with USMCA in 2022, up 14.0 percent from 2021.

https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement

In that regard, I was referring mostly to China.

[Pete Dero]

In that regard, I was referring mostly to China.

If I'm not mistaken China gets an increase of 10% while Mexico and Canada have 25% imposed.

Also numbers show that illegal immigration and drug trafficking from Canada is almost non-existent.
Nearly all of the 21,900 pounds that U.S. law enforcement seized in 2024 was at the southern border while only 43 pounds of fentanyl was seized at the Canadian border.

[Jarhead0331]

In that regard, I was referring mostly to China.

If I'm not mistaken China gets an increase of 10% while Mexico and Canada have 25% imposed.

Also numbers show that illegal immigration and drug trafficking from Canada is almost non-existent.
Nearly all of the 21,900 pounds that U.S. law enforcement seized in 2024 was at the southern border while only 43 pounds of fentanyl was seized at the Canadian border.

I didn't say it was a sound policy, Pete. I'm only explaining the logic of how tariffs are typically used and what benefits they may have. There is no reason for an argument. I'm not interested.

[Pete Dero]

There is no reason for an argument. I'm not interested.

Sorry.  I'm pretty on edge these days and I don't know why  .

[Con]

I can speak for the pharma part for China in that tariffs wont be beneficial for the following reasons
1. Pharma manufacturing takes about 18 months to go from brownfield to working cleanroom space
2. Additional re validation of any manufacturing and certification of equipment and drug templates takes about an additional 2 years
3. Pharma mfg single use assemblies raw materials come from China or Asia so the core mfg process will require larger purchases from these sources.
4 China is rapidly expanding its pharma mfg capabilities to take advantage of the cost pricing that will hit the US consumer - expect many workarounds (eg buying prescriptions in Canada/US etc).

There are many other nuances but in summary the tariffs on Pharma will only build China capabilities
Of course we can cut a year  off this timeline if we dont certify or validate using todays regulations - however I wouldn't want to take those drugs- I've seen some real horror shows on bio contamination and reducing companies barriers to entry on this level will see many contaminated drug batches. - and its a real bitch to manufacture in a biological environment.
Con

[nelmsm]

And it's not like Canada didn't already have tariffs on American products.  I do believe they had some hefty ones on American dairy products for starters.

[Toonces]

I have to say, this actually helped a great deal. 

[FarAway Sooner]

While I'm hardly an expert, there are three key reasons why the administration has imposed tariffs. First to influence or shape foreign policies and compel certain trading partners to take action to combat illegal immigration and the influx of drugs, including deadly fentanyl. Second, indirectly protect domestic industries by making foreign products less competitive and to counteract unfair trade practices, theft of IP and other trade imbalances.  Third, as a source of revenue to drive down the federal deficit.

JH, this is a very articulate explanation for why a country might impose tariffs on another country.  I appreciate you taking the time to articulate them here for everybody's benefit.  I'm not arguing with you about the effectiveness of the policies; just evaluating the first two as relates to different countries facing increasing American sanctions:

An evaluation of whether the recently announced tariffs might be effective seems to be outside the scope of this conversation.  But you've done a good job of outlining the theory.

[Redwolf]

Good thread.

As you I am puzzled about what Canada did to us to need a coercion tool. Not something we can clear up here.

[Jarhead0331]

While I'm hardly an expert, there are three key reasons why the administration has imposed tariffs. First to influence or shape foreign policies and compel certain trading partners to take action to combat illegal immigration and the influx of drugs, including deadly fentanyl. Second, indirectly protect domestic industries by making foreign products less competitive and to counteract unfair trade practices, theft of IP and other trade imbalances.  Third, as a source of revenue to drive down the federal deficit.

JH, this is a very articulate explanation for why a country might impose tariffs on another country.  I appreciate you taking the time to articulate them here for everybody's benefit.  I'm not arguing with you about the effectiveness of the policies; just evaluating the first two as relates to different countries facing increasing American sanctions:

An evaluation of whether the recently announced tariffs might be effective seems to be outside the scope of this conversation.  But you've done a good job of outlining the theory.

Thanks. And again, I'm not taking the position that tariffs will ultimately be effective. There are a lot of variables at play. If I was forced to guess, I'd say in the end it will be a mixed bag. There will be benefits gained by some of the tariffs. However, some of the benefits may be countered by the consequences, of which there will most certainly be some. It's too early to tell where the chips will fall.