Tariff Update: Indecision May or May Not Be The Problem
It’s Monday, March 10th at 8:44 pm as I write this. I feel that I need to document the date and time of these tariff articles from now on because by the time it gets to you, things may have changed. Again.
So last week was rather eventful. While the Game Manufacturers (GAMA) show was underway and then leading into the New York Toy Fair, Trump implemented the 25% tariffs on Mexican and Canadian products that he announced on February 1st and subsequently backed off on February 3rd, announced an additional 10% tariff on all China produced goods (on top of the 10% tariff already in place- that totals 20% for the math-impaired), a global 25% tariff on steel and aluminum products (not just the raw material mind you, but products that are produced with steel and/or aluminum- think backyard soccer goals and kitchen utensils), then about 24 hours later “paused” the Canadian and Mexican tariffs for another month. Oh, and don’t forget the reciprocal tariffs on multiple countries around the world that are due to be announced on April 2.
For those of you taking notes, here’s a summary:
Jan. 20: On the day of Trump’s inauguration, he promises tariffs on Mexico, Canada, and China will be implemented Feb 1st. It’s worth noting that these countries represent more than 40% of U.S. imports combined.
Feb. 1: Trump signs executive order to implement tariffs on Canada, Mexico, and China, set to start on Feb 4th. The official justification for the tariffs is to force Canada and Mexico (and China as well) to address the supposed “extraordinary threat” posed by illegal immigration and fentanyl crossing the borders from both countries. Trump has the authority to unilaterally implement these tariffs (without legislative approval from Congress) under the guise of a “national emergency”. Never mind the fact that illegal border crossings in Mexico plummeted last year to near-record lows, fentanyl seizures at the border dropped by 20% last year, and Canada was responsible for 1.5% of illegal immigration and 0.2% of fentanyl seizures.
Feb. 3: After phone calls with Canadian Prime Minister Trudeau and Mexican President Clauida Sheinbaum, Trump then delays tariffs on Canada and Mexico by a month, pausing them until March 4th. He says Mexico will send 10,000 troops to the U.S. border in order to curb migration (this is nothing new- they had already committed to this a year ago), and he was trying to work out an economic structure with Canada.
Feb. 4: 10% tariffs are, in fact, put in place against China, which immediately issued retaliatory tariffs. The Postal Service puts a ban on packages from Hong Kong and China. This effectively eliminated the de minimus exception to tariffs: packages shipping from China that were less than $800 in value were not previously subject to tariffs.
Feb. 5: Oops, never mind: The Postal Service reverses course and lifts the ban it put in place on Chinese packages because of the potential to create massive disruptions for online retailers and U.S. shoppers.
Feb. 10: Trump says he will impose 25% tariffs on steel imports from all countries, and he raises aluminum tariffs from 10% to 25%.
Feb. 13: Trump signs a memorandum that sets the stage for “reciprocal tariffs” to go into effect across the board on April 2. This impacts numerous countries around the world (Vietnam, Thailand, Taiwan, Malaysia, India, and many more)
Feb. 26: Trump says at Cabinet meeting he might give Canada and Mexico a one-month reprieve on tariffs until April 2.
Feb. 27: Trump reverses course one day later and says they will go into effect March 4.
March 1: Trump signs executive order to increase U.S. lumber production and orders probe into potential lumber import tariffs. The U.S. imports billions of dollars in lumber products from Canada.
March 2: Commerce Secretary Howard Lutnick says tariffs on Canada and Mexico remain a “fluid situation” and that they could be less than 25%.
March 3: Lutnick again says it’s possible the tariffs don’t go into effect, but Trump later confirms they will.
March 4: Trump levies 25% tariffs against Mexico, Canada, and China. China hits the U.S. with retaliatory tariffs, including on some agricultural imports, including chicken, pork, soy and beef. Canadian Prime Minister Trudeau blasts Trump for cozying up to Russian President Putin and imposing tariffs against allies. He threatens to hit the U.S. with retaliatory tariffs; Mocking Trudeau as “governor,” Trump says he will hit back if that happens. The stock market tumbles in response. Lutnick says some of the tariffs could be rolled back as soon as the next day.
March 5: After the Big 3 auto makers raised hair-on-fire level pleadings, Trump delays tariffs related to autos until April 2.
March 6: Another call from President Sheinbaum, and Trump delays tariffs on Mexican goods. Later, he does the same for Canadian goods. The reprieve expires April 2.
March 9: In a Fox News interview, Trump refused to rule out that his aggressive trade practices could cause a recession.
March 10: Following the delivery of that fecal sandwich, the Dow Jones Industrial Average closed lower by 890 points, or 2.08%, pulling back from a loss of more than 1,100 points at one point. The broader Standard & Poors 500 also plunged, dropping by 2.7%, while the tech-heavy Nasdaq Composite plummeted 4%. The Dow and S&P 500 each posted their worst day of the year. The Nasdaq posted its biggest single-day decline since September 2022. The sell-off came as the Canadian province of Ontario put in place retaliatory surcharges on energy (as much as 25%) it exports to Michigan, Minnesota and New York, and as Mr. Trump’s trade war with China intensified with Beijing responding to his tariffs by imposing levies on many American farm products.
Certainly, talk throughout the aisles of the New York Toy Fair last week was rife with concerns about the 20% tariff on China-produced goods. Questions were rapid fire around whether or not toy and game companies would increase wholesale prices (at 10% it wasn’t too likely but now that it’s at 20% it’s virtually inevitable), whether retailers will pass price increases on to consumers (probably, but at what percentage remains questionable), and what this all means for consumers in general. If the reciprocal tariffs go into effect on April 2nd around the world, by that point it is estimated that consumers will incur additional costs up to $3,400 a year.
Of course, the question now is how long will these tariffs remain in effect. Perhaps the swift backlash on Wall Street and throughout the political landscape will compel Trump to find a new pretext to declare victory, claim hero status, and get rid of the tariffs promptly. Or, maybe not. It seems to me that one thing is certain: what’s in place today could easily not remain in place tomorrow. That level of uncertainty is not without substantial impact on consumer sentiment and buying trends. I’m actually not quite sure how all this will make us great again, but I’m sure that the great soothsayer in the oval office will clarify that for us all sooner or later.
