A reader thinks that because prices didn’t rise in Trump’s first term, the same is true now.

Why Trumps Tariffs Didn’t Cause Price Hikes Before

1. Tariffs were much smaller and targeted to specific countries.
2. Tariff avoidance. Trade shifted from China to Mexico and Vietnam
3. The dollar strengthened.

I have discussed this before, many times but refuting nonsense is hard when people have TDS Type II, and believe anything Trump says.

Tariff Avoidance

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US balance of trade, chart by Mish.

The US trade deficit with China decreased from 2018 to 2024 but it was at the expense of big increases elsewhere.

The improvement with China was mostly a mirage.

I have posted that chart or something similar a dozen times.

Balance of Trade 2018 vs Now

• Vietnam went from -39 billion to -123 billion
• Mexico went from -69 billion to -172 billion
• China improved from -418 billion to -295 billion (yeah right)

The US Trade Deficit with China is Understated by as Much as 30 Percent

On January 18, 2025, I noted The US Trade Deficit with China is Understated by as Much as 30 Percent

Normal trade math does not add up. US imports and China exports are not in sync.

Brad Setser Comments

• Chinese exports started exceeding US imports only in those categories with tariffs, and only after the tariffs were imposed — which provides the basic answer.
• We know the US isn’t counting 1 billion small value (de minimis) packages in the trade data, and that alone is at least $60b in missing US imports that appear in the Chinese trade data. There are other sorts of tariff avoidance/ circumvention as well.
• So right now the Chinese export data is better guide to US China trade than the US import data — which is why I now emphasize the $500b or so China reports in exports to US rather than the $400b or so the US reports in imports

This appears to be an amusing case of China cleverly avoiding US tariffs but not clever enough to hide it better.

The US Dollar

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On March 22, 2018, Trump signed a memorandum under the Section 301 of the Trade Act of 1974, instructing the United States Trade Representative (USTR) to apply tariffs of $50 billion on Chinese goods. Trump said the tariffs would be imposed due to Chinese theft of U.S. intellectual property.

The US dollar index rose 10 to 12 percent depending on your end point.

What About Now?

• Tariffs are now 104 percent on China.
• Tariffs on Vietnam are now 46 percent.
• Tariffs minimums are now 10 percent everywhere.
• The US dollar is no longer strengthening.

But hey, don’t worry because prices didn’t rise last time.

Besides Trump says prices won’t rise. He is so confident that Trump Tells Auto CEOs No Price Hikes, Did Comrade Kamala Win?

Now who are you going to believe, Trump or Ford CEO Warns Automakers Could Lose Billions if Tariffs Take Effect

A 25% levy on goods from those countries would cost the company ‘billions and billions’ in profit and lead to industrywide layoffs, he told Bloomberg TV.

Another reader touted the alleged success of steel tariffs.

What About Steel and Aluminum?

After President Trump’s steel tariffs took effect on June 1, 2018, Mid Continent Steel & Wire reports they lost close to 200 employees while losing more than 70 percent of its sales.

Mid-Continent is the US largest producer of nails. It nearly went under until Trump granted the company a tariff exemption.

Tariffs on products (e.g. steel) are not as easy to avoid as tariffs on countries.

Trump’s 2018 Aluminum Tariffs in One Picture

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Please consider The Amazing “Success” of Trump’s 2018 Aluminum Tariffs in One Picture

I hope you can take a bit of headline sarcasm because the true story follows.

The 2018 tariffs were such a big hit that Trump needs to double up. And note that Biden kept all of Trump’s tariffs and added more.

The high taxpayer cost of “saving” US jobs

Also consider The high taxpayer cost of “saving” US jobs through “Made in America”

“Buy American” or “Made in America” as a slogan for excluding imports is an economic loser. We calculate that the annual taxpayer cost for each US job arguably “saved” by Made in America probably exceeds $250,000. We put “saved” in quotation marks because buy national requirements essentially shuffle jobs from other sectors of the economy to the procurement sector. And the shuffling takes a toll on economic efficiency, which shows up in elevated price tags on everything from computers to bridges. On balance, buy national requirements create no new jobs, but they do save jobs in domestic firms that supply government needs, often at a high cost to taxpayers.

Trump’s Tariffs Will Increase the Cost of a Pickup Truck by $8,000.

On February 26, 2025, I commented Trump’s Tariffs Will Increase the Cost of a Pickup Truck by $8,000.

A new analysis by the Anderson Economic Group examines the potential tariff damage.

Start with auto prices. The study estimates that a 25% tariff on the U.S. neighbors would increase the cost of a full-size SUV assembled in North America by $9,000 and a pickup truck by $8,000. The cost of an electric-vehicle cross-over would increase by $12,200. Canada is the biggest supplier to the U.S. of nickel, a key critical mineral in lithium-ion batteries.

Such higher prices owe partly to the compounding effects of tariffs on auto parts that sometimes cross the border multiple times. Mexico exports some $136 billion of vehicles and parts to such auto-manufacturing states as Michigan ($53.8 billion), Texas ($26.9 billion), Tennessee ($8.1 billion), Ohio ($2.4 billion), South Carolina ($2.2 billion) and Alabama ($1.8 billion). Canada exports $50.4 billion in vehicles and parts, with large amounts going to Michigan ($22.1 billion) and Texas ($14.8 billion).

Mr. Trump says tariffs will force auto makers to make more cars in the U.S. Not likely, and that would take time in any case. Domestic demand for some vehicle models—especially sedans—isn’t sufficient to justify the cost of building new U.S. factories. Auto makers will have to absorb the tariff, increase prices on cars, or stop selling some models because they are too expensive.

There are about 17,000 fewer U.S. workers employed in motor vehicles and parts than there were six years ago. Average weekly hours worked in the industry have fallen. The President can’t blame imports, which have fallen even more than U.S. car production.

That $8,000 number assumes Trump would not back off. For now, Trump has exempted parts that are USMCA compliant.

Trump Says “Car Companies Will Be Thrilled With Tariffs”

Here’s an amusing revelation from April 2 News Flash: Trump Says “Car Companies Will Be Thrilled With Tariffs”

The word of the hour is “thrilled” by 25 percent tariffs on autos starting April 2.

The lies by this administration on tariffs are nonstop.

Realistically, the only case where tariffs and subsidies make any sense is in cases of genuine national security risks.

The chip sector and AI are possible examples. In contrast, cars and clothes are not security threats.

Conundrum Solved

Tariffs did not cause big price hikes before, for three key reasons that I have explained many times.

I don’t expect better results with this post because extreme TDS II is incurable.

Meanwhile, no one speaks for the little guy anywhere. So it is the little guy who pays the price for export subsidies and tariffs.

Perhaps we ultimately gain a few thousand UAW jobs, with an emphasis on perhaps. But the cost of cars will jump and the loss of jobs elsewhere will be stunning.

For discussion, please see How One Small Business Owner Is Coping With Trump’s Tariffs

Meet Daniel Rogge, CEO of Tormach, a machine-tool maker.

Tormach Coping Synopsis

• Reducing spending on marketing by 25%
• Reduce 401(k) retirement savings plan match
• Eliminating work-from-home stipends and anniversary bonuses
• Shift focus to foreign sales to take advantage of Mexico’sstability and free trade

Multiply that by tens of thousands of small businesses.

Fifty-four percent of small businesses polled said that tariffs would negatively affect their companies, while just 11 percent said they would benefit.

The overall impact due to these economic frictions and attempts to avoid them is a net loss despite the fact that there are some individual winners and losers.

No one wins trade wars.

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