Why President Trump? The start of a trade war With your biggest trading partner? Why does he risk inflation, recession and stock market corrections? Why is he like that? I'm obsessed with customs?
If you really want to know, what you have to do is This map. Created by the Economist Mark Perryit shows the relative size of each US economy compared to countries with relative GDP.
It's eye-opening.
California's economy is bigger than the UK economy. Pennsylvania is bigger than that of South Korea. Mexico, with a population of 130 million, has only a size of Florida (23 million). Canada's economy is smaller than Texas' economy.
In fact, about all their fuss, the US economy is no secret to both Mexican and Canadian leaders 8 times bigger than the economies of both countries combined.
Trump knows this map very well. He knows that America's economy is huge. He fully recognizes it is the largest, most stable and most judicial in the world. It's bigger than China. It's warring Russia.” And it certainly controls all European countries (combined) not to mention Canada and Mexico.
Something doesn't make sense to him. Why should the world's largest economy be treated unfairly?
Trump doesn't think it's fair German tariffs In American cars, he wants reciprocity, as it's 10% compared to the 2.5% rate we charge for theirs. He's not amused about the fact that he can price dairy products purchased from Canada as much as possible. 200-300% It's more expensive than what we're selling back. Or in Mexico 16% “Value Added” Tax on most imported products.
Trump wants equality. Like other businessmen, he doesn't want to see costs go up. In fact, he wants to defeat them.
His aim is to allow American businesses and consumers to purchase cheaper by simply lowering the artificially raised prices of the goods. And if the country doesn't level the arena, he is ready to make our goods more expensive for their businesses and consumers. Sometimes you have to endure some kind of pain to achieve that goal.
To level the arena, Trump engages in a tariff war. He raises taxes charged on foreign products to discourage consumers and businesses from using them to build products. In doing so, he encourages businesses to purchase and create these products in the United States.
Of course, this takes time. But there is patience.
Trump is able to fight this war because he has the US economy, the world's biggest weapon. If consumers of our size change their purchase patterns, it can have a devastating impact on others. Canada and Mexico can talk big games. But the US has all the resources to last them in the long run.
Of course, the higher the tariff, the higher the price. Yes, they generate supply chain interference. They are disruptive towards the market. They create uncertainty and anger our partners. But Trump asks: Shouldn't we be mad too?
When we are in such a position of power, is it right for us to pay more for our products? Usually, squeezing a little guy is a big guy – a big company – (I know this. I'm a little guy). So why is that not happening in international trade?
Will Trump's trade war work? Economists hate it. Scholars dislike it. But a businessman? Well, that depends.
My clients in the construction industry are not very happy with the possibility of paying more for Canadien wood. Some farmers aren't excited either. But the people I work with in the steel industry support me. Some companies that manufacture furniture and cabinets in the US Faced with damping of a competitor product from China. Automobile manufacturer I'm excited. A union like that. Equipment and Materials Manufacturers I want more.
In the long term, US companies will adapt. They will bring more work here. They will reinvest in infrastructure, especially as Trump plans. US businesses will find new trading partners in countries that provide a more level playing field. They will renegotiate terms with existing international suppliers facing a serious slowdown in orders from these biggest customers, which have skyrocketed by higher tariffs. They pivot, adjust and modify the purchase pattern.
They operate in the world's largest and most powerful economy, so this can be done freely, legally, and with minimal interference. And they can do this more easily than their counterparts in most other countries facing more regulation and bureaucracy. What will ultimately happen is that these countries will wear hats on the negotiation table.
Customs duties are never excluded. But they have been revised and further support the interests of the US. There are no options. This happens. If you don't believe me, look at the map.
Gene Marks is the founder of Marks Group, a small business consulting company.
