Trump’s tariffs will lead to his long-term goals

The tariffs allow Trump to negotiate from a position of strength and create a sense of urgency. The outcome will be positive.

President Trump has just imposed rather large tariffs on our largest trading partners. He imposed a 25% tariff on imports from Mexico, a 25% tariff on Canadian imports except oil which got a 10% tariff, and an additional 10% tariff on goods from China. Trump has some very specific long-term goals he hopes the tariffs will reach.

Many people object to the tariffs. After all, a tariff adds to the cost of the product and tends to raise the price. The president has vowed to reduce inflation in the US. Tariffs could do just the opposite.

There is a question about who actually pays the tariff. Does the American consumer pay the tariff, or will the tariff be paid by the producing country?

The answer is it depends. (Economists will say it depends on the elasticity of demand.)

If the product is something that consumers feel they must have and if there are few, if any, substitutes (inelastic demand), then the consumer will pay most of the tariff. That is likely the reason Trump imposed only a 10% tariff on oil products.

If the product is not a necessity and/or if there are substitute products available (elastic demand)…