Coyote Blog

1. Is this the most destructive Federal economic action in my 63-year lifetime? I am trying to think about the competition for this title. Certainly Nixon's wage and price controls would be up there in the top 5. The banking regulations that treated mortgages as preferred risk-free bank capital might be on the list. Perhaps we would include something like Biden's attempt to forgive a trillion dollars in student loans. There was some COVID craziness, including lockdowns and eviction moratoriums. But even looking at this collective Mt Rushmore of economic fail, I still think Trump's tariffs are at or near the top. This is as dumb as even the worst ideas of folks like AOC who the Republicans mock.
2. How is this possibly Constitutional? Article 1 Section 8 gives Congress sole "Power To lay and collect Taxes, Duties, Imposts and Excises" and "All Bills for raising Revenue shall originate in the House of Representatives." I understand the spineless Congresses have delegated all sorts of powers to the Executive Branch, but good God there has to be some sort of limit. Where is that nationwide injunction when you need it? This is as a good a case as any for the courts to test both Executive taxation power, limits to delegation of authority, and the general use of emergency powers.

The tariffs also bring to mind several ironies:

1. Trump called it "liberation day" but the actual day we celebrate liberation is the day the Declaration of Independence was signed. That document explains the King's injustices, including: "[the King] has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:...For cutting off our Trade with all parts of the world [and] For imposing Taxes on us without our Consent" Can't find any exceptions for emergencies in this document or in the Constitution.**
2. Republicans have spent 5 years (rightly) complaining about the exercise of emergency powers when the person who gets the power also gets to declare an emergency. And now they have topped anything Biden ever did with COVID emergency powers
3. In economics, independence is the road to poverty. The most economically independent people in the world are the isolated primitive tribes in the Amazon. This stuff is not hard, we have understood it since David Ricardo was writing over 200 years ago. We literally understood how trade created value before we had invented the telegraph or the railroad or knew that germs caused diseases. We understood it before Iodine was discovered. My post on aluminum tariffs helped show the value of trade.
4. This almost goes without saying, but after campaigning on inflation, Trump is directly adding to inflation. Back of the envelope, given that imports are about 16% of GDP, then a 25% average tariff on imports adds something like 4% to prices. Immediately inflation rates for this year go from 3% to 7%, and I am fairly certain this simplistic approach underestimates the problem. A family member works in the finance department of a well-known low-margin retailer and said that they were absolutely going to have to pass through tariffs and spent today working on the numbers. Sure, Trump is going to identify a few high-profile companies to name and shame for raising prices to pretend that companies should not be passing through these costs, but this is -- ironically again -- exactly as ignorant as Elizabeth Warren blaming grocer greed for food price increases, something that Republicans mocked by the way.***

I only have the time, and frankly the stomach, to put down these few quick thoughts on this one. More later.

Update: From Pat Toomey vis Powerline, this is as good of an explanation as I have seen for the theory in Trump's head that is driving tariff actions. This explains pretty well the calculathttps://www.powerlineblog.com/archives/2025/04/toomey-on-trumps-tariffs.phpion of the tariffs, which appear to be more correlated with individual trade deficits than current reciprocal tariffs

This, I’m afraid, is going to take us down a bad path, Dominic. I think that we’re going to experience more aggressive tariffs than a lot of people think, because the president really believes that — what he really wants to go after is the trade deficits. What he really objects to, and from all of my arguments with him, I’m convinced that he believes — and if you listen to his language — he believes that if you have a trade deficit with another country, that is the measure of the amount that country steals from you. And that of course disregards that we get something when we purchase products from other countries, but this is the way he views it. He thinks that the Canadians are ripping us off, because we buy some more goods from them than they buy from us (by the way, the difference is fully explained by oil imports that are quite useful and important to us). But this is where we are. We’re going to have relearn this lesson. I do think the markets are going to respond very poorly, if I’m right and on April 2 we discover we’re having a more aggressive round of tariffs than we expect.

We are really in trouble. This is really next-level ignorance.

** Postscript: Tariffs rather than immigration is the topic of the day, but I was reminded in perusing the Declaration of Independence for this post that it also says this: "He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither"

***Postscript #2: The reason this likely underestimates inflation is because it does not take into account domestic producers raising their prices to partially match the price increases of their foreign competitors