Food Prices are about to skyrocket!
Tariffs end up tanking economies - that is a basic fact that any economist will tell you. Never, in the history of the world, has a tariff-fueled trade war ended up being advantageous for anyone. Tariffs merely increase prices overall, which reduces demand, shrinking economies. As prices rise, inflation takes off - the sort of "stagflation" we saw back in the late 1970s. I lived through that and it wasn't pretty.
Already the CEOs of Walmart and Dollar General are sounding the alarm. Their low-income customers are cutting back - cutting off - non-essential spending. The poor had little in the way of disposable income, now they have none.
While we are the breadbasket of the world, our crops consist mostly of corn, soybeans, and wheat. Yes, California grows a lot of produce in the Central Valley, but that is a seasonal crop. You can say goodbye to buying fresh fruit from South America when it is out-of-season in the North. And for things like bananas and other tropical fruits, well, they will be hit with tariffs, as they don't grow in the United States.
Even though we grow a lot of produce in America, a large portion of our produce comes from Mexico and Central America. So expect prices to rise considerably. And for things like Coffee and Tea, well, they simply don't grow in the US.
Yes, this may be a windfall for some farmers. Their US-grown tomatoes will be worth far more, now that tomatoes from Mexico are tariffed. But the net result is higher prices for consumers. US farmers won't simply sell at the lower prices we have today, once the competition is selling at higher prices.
Other farmers are going to be hit and hit hard. The vast farms in the Midwest growing thousands of acres of wheat, soybeans, and corn, are going to see their export markets shrink and thus demand for these bulk crops shrink. There is a carry-on effect as well - fewer hopper cars filled with corn for CSX to ship to the coast to send overseas. Struggling farmers will buy fewer new tractors and harvesters, meaning John Deere will have to lay off workers. And with tariffs making US-made tractors less attractive, sales will slump further. Traffic at the Ro-Ro terminal here in Brunswick (where we export American-made agricultural and construction equipment) will decrease and layoffs will ensue.
This is not "chicken little" thinking, but the logical outcome of a trade war. It is what happened in 1829 and 1930 when this idiotic thinking previously took hold.
Tariffs can be enacted in such a way to limit collateral damage. Small tariffs or tariffs limited to specific products may only affect a narrow market or cause prices to adjust slightly. The so-called "chicken tax" of the 1960s was enacted to tax commercial vans from Europe, in response to Germany tariffing American chicken. The net result was that VW stopped selling it windowless cargo van in the US, but still sold their passenger version. Today, Ford imports "passenger" vans with cardboard seats and cheap plastic windows, which are converted to cargo vans at the port, to avoid the tariff (a process known as "tariff engineering").
The chicken tax illustrates another thing, though. Once enacted, tariffs are damn hard to get rid of. Each trading nation has a gun pointed at the others' head, with each saying, "Let's put our guns down - you go first!" The Smoot-Hawley tariffs of 1930 took a decade or more to alleviate, as new trade agreements had to be painfully negotiated with each trading partner. Tariffs are easy to enact, difficult to eliminate.
Tariffs of ridiculous amounts shut down trade entirely. Trump is tossing around double-digit numbers and blanket tariffs without much consideration as to how they affect markets. And the net effect of most tariffs is higher prices and reduced trade.
Consider the "anti-dumping" tariff levied by the International Trade Commission during the Obama years. The ITC used to be down at 4th and D street and one of my jobs as law clerk was to go down there and make copies of "section 337" complaints. You see, you can ask the ITC to levy tariffs or actually exclude products from import, based on a number of factors. Naturally, we were interested in Patent and Trademark complaints - section 337. If someone overseas infringes your Patent, and they import the infringing goods, you can file a complaint with the ITC and get an exclusion order commanding Customs to stop the products at the port of entry. The importer either has to pay to have the products shipped back or have them shredded. We saw a lot of knock-off sneakers get shredded.
Anti-dumping complaints are a different beast and go back to the Smoot-Hawley tariff act of 1930. They became very popular in the 1970s when Japanese car manufacturers were accused of "dumping" cars in America for below cost, in order to get market share and a foothold in the market. It worked. Honda, Toyota, Nissan, et al. sold cars for cheap at first, but people quickly realized how much of a bargain they were and how reliable they are. Not long thereafter, people were paying more for Japanese cars than they would for a US-made car, And the "Japanese" car was likely assembled in America, negating much of the anti-dumping tariffs.
In the case of an anti-dumping complaint, counter-tariffs may be levied if the ITC finds the products are sold for below cost. One of the funniest complaints was filed by Mercury Marine against Yamaha, claiming "certain power heads" were being dumped on the market for below cost. The case was dismissed when it turned out that the number one customer for these power heads was..... Mercury Marine, which used them in their "American-made" outboard motors. Truth is stranger than fiction.
Anyway, once an anti-dumping complaint is validated by the ITC, the tariff order has to be signed by the President, which in this case, was President Obama. Unlike Trump's tariffs, the amount and reasoning behind the tariffs wasn't just pulled out of a hat, but was judiciously deliberated by the Administrative Law Judges of the ITC, after hearing arguments and pleadings from both parties. There was due process involved.
Even so, "Obama's" tire tariffs accomplished nothing, other than to screw consumers. Tire prices - imported and domestic - skyrocketed for a brief period of time - and "American" tire companies simply pocketed windfall profits. Once the tariffs ended, well, we went back to the way things were, and today, Chinese and Korean tires dominate the market. Even "American" brands like Firestone are owned by Bridgestone, a Japanese conglomerate and the second-largest tire company in the world. Plants were closed, no jobs were saved, and today, of the five largest tire companies in the world, only Goodyear represents the United States. Tariffs did bubkis.
Harley-Davidson went a similar route. I worked for a fellow whose wife was a Trademark attorney in-house at H-D during the transition from the AMF years (boo! hiss!) to the reorganization under new management. The company was pretty broke, but they started licensing their marks and that provided enough income to fund development of their next generation "Evolution" motors. They also filed an anti-dumping complaint with the ITC for motorcycles above 750cc. They could not keep all Japanese bikes out the market (which were, indeed, killing off domestic bike production in the US, UK, and Europe) as H-D didn't make smaller motorcycles.
But they prevailed in the big-bike segment and the ITC levied a tariff on big bikes. The Japanese responded by making bikes of 749cc or less, and still managed to do well. Of course, the traditional Harley buyer wouldn't touch a "Jap Bike" but it did give H-D some breathing room for a few years.
But, once again, the relief was short-lived. The Indian brand was revived in America and Polaris started selling big "Hogs" as well (the two merged later on). There is no secret sauce in building motorcycles and with domestic competition, well, the tariffs didn't do much to protect H-D's market share. Not only that, but their target audience started aging out. I commented on this before - how the younger generation isn't interested in big, loud, "hogs" and the image that goes along with them. Motorcycling in general is on the decline, and the first part of 2025 has seen a 20% drop in sales, due to the recession. Boomers are aging out, and the next generation doesn't have the disposable income to buy what is a fair-weather friend and a very expensive recreational toy - one that is frustrating to ride in our ever-crowded roads.
So H-D is in trouble today, aided and abetted by some mis-steps in trying to reach out to the younger market as well as a ill-fated foray into electric bikes. Tariffs didn't save the company, or if they did, it was only a short-term bump, not a long-term benefit.
So, in addition to tariffs causing a lot of financial pain for consumers, they don't end up helping the industries that they are supposed to help. And a lot of other industries and business segments - particularly agriculture - end up being hurt by reciprocal tariffs. And Trump thinks he can "warn" foreign countries not to enact such reciprocal tariffs. That hasn't worked.
So why do people support tariffs? For some, it is ignorance, for others it is greed. I've heard people say things like, "Well, the foreign company will just have to take the cost of tariffs out of their profit margin!" But in many industries, profit margins are measured in the single digits. You can't simply cut your profits by 35% to match Trump's tariffs, when your own profit margin is less than 10%. These ridiculous tariff numbers amount to an exclusion order, eliminating an import altogether. VW simply stopped selling its cargo van (shown above) after the chicken tax was enacted. They can't afford to "eat" a 20% tariff, and padding the price accordingly would make the van unaffordable to consumers. They simply left the market at a time GM, Ford, and Dodge started producing their own vans.
So a win for the big-3? Maybe. VW is still around, and cargo vans, as I noted, are now imported with disposable seats and windows to avoid the tariff. Mercedes assembles knock-down "kits" in South Carolina and avoids the chicken tax as well. Dodge (Ram) builds its "Promaster" vans (based on Fiat designs) in either Mexico or Turkey. I'm getting so tired of winning!
The other argument made by the pro-tariff set is that tariffs on imported goods will raise their prices, thus nurturing domestic industry. Unprofitable businesses will become profitable! The problem is, of course, it that prices of domestically-produced products increase as well. Oddly enough, the people who make this argument about tariffs insist it will not raise domestic prices! But if tariffs increase prices to the point where domestic industry takes up the slack, don't prices have to be hgher by default? You can't have it both ways. If domestic production was profitable at current prices, people would be motivated to produce, domestically. And indeed, some are, many of which are foreign companies - such as Mercedes, Nissan, Toyota, Honda, KIA, Hyundai, BMW, and VW, to name a few, as well as a host of companies whose names and products you never heard of. Most all of them use non-union labor, however. Hmmmm...... something there I can't quite put my finger on!
No, prices will go up with tariffs - full stop. But what about the greed factor? I noted before that prior to the income tax (enacted as a result of our entry into WW I) the Federal government was pretty small and weak and funded mostly by tariffs and other government fees. The greedy faction wants to go back to that old model - of a tiny government and no income tax, like the days of the "robber barons" and trusts. I mean, that is swell for Billionaires to consolidate their wealth and take over huge sections of the economy, but sort of a raw deal for the rest of us.
I live on an island where these robber barons used to vacation. South of us is Cumberland Island, home of the Carnegies. Adjacent that is Little Cumberland, home of the Coca-Cola heirs. Back in the late 1800s and early 1900s (the "guilded age" for a privileged few) you could make unlimited amounts of money and pay little or nothing in taxes and leave it all to your heirs. As a result, we were devolving into the class-based society they have (or had) in Olde Englande, where Lords and Ladies and titled persons owned all the land an everyone else was a servant or serf, living as a perpetual tenant with no hope of climbing the social ladder. You were born into poverty, you stayed there.
I mean, I get it. If I was Elon Musk, I would want no income tax and no gifts and estates tax. But I'm not Elon Musk, and I have to get by on my savings and Social Security. I don't want to see the stock market turned into a casino (which it already has, to some extent) or Social Security abolished, just so some filthy rich guy can get even richer. Others seem less bothered by this and assume that the "savings" will somehow trickle down to them through unknown means. You gotta have faith - right?
Faith-based economics, however, are always doomed to failure, whether it is the Tulip bubble of 1637, the real estate bubbles of 1989, 2008, and today, or the global trade war of 2025. Like I said, at least with the anti-dumping tariffs, there was some sort of judicial process and logic applied. Traditional tariff levels of 1-5% don't seem to affect markets too much. But today, we are seeing numbers as high as 100%, which generally amounts to an exclusion order.
All I can say is, stock up on coffee, because it is about to get expensive. And enjoy your bananas while you can. And if you have a reliable working car, keep it, because in the next four years, new and used car prices are going to increase at least 25% or more.
Those who don't learn from history are doomed to repeat it. And sadly, the MAGA set all flunked history or simply believe "this time, it's different!'
It isn't.
