Economic indicators in The Bahamas and elsewhere in our part of the world are blinking red.  This is because some six weeks into his new administration U.S. President Donald Trump, despite being warned by most Economists insists on imposing high tariffs on imports from Canada, Mexico and China.

Whether you are a housewife or a global investor you would be worried about the global trade war that Trump brought about by the imposition of a 25 percent tariff on goods from Mexico where America gets fruits and vegetables or materials from Canada.

Canadian Prime Minister Justin Trudeau was right to call this “a dumb move” by Trump.  Trump backed down when he postponed the tariff on automobiles from Mexico and Canada for 30 days.

Prices on the New York Stock Exchange fell sharply after Trudeau spoke and many people worry about a recession or even a depression because of the Trump blunder.  Effective Tuesday at 12:01 a.m., the President imposed the tariffs, saying the three countries were responsible for the flow of illegal fentanyl into the United States, which has led to more than 250,000 overdose deaths in recent years.

These tariffs and others planned on goods from the European Union, automobiles, pharmaceuticals, semiconductors, copper, steel, aluminum and lumber — will encourage manufacturers to move their plants back to the United States, Trump says.  But Trump’s tariffs will mean higher unemployment, higher prices and reduced competitiveness of the United States.

These tariffs are utterly ill-conceived. They disadvantage American producers who are integrated across Mexico and Canada relative to producers in the rest of the world, particularly in Asia.  This is a prescription for turning the economy back into the economy of the 1950s when Americans were much poorer than they are today.

In countries like The Bahamas where economies are rebounding from the Coronavirus, governments will be hard pressed to explain to their citizens who suffer from low information and who are inattentive to what is happening in a trade war, why the cost of goods and services are extremely expensive.

We import inflation in The Bahamas, even though detractors of the government give the impression that this is not so and that high prices for food and other consumer items can all be controlled by edicts from the Cabinet.

Farmers in many Midwest States in the U.S. who backed Trump in the 2024 election will be among the first to feel the trade war’s sting.  Trump’s tariffs will make the Canadian fertilizer those farmers use more expensive, while retaliation by U.S. trading partners will cost them soybean sales in China, corn sales in Mexico and ethanol sales in Canada.  Many Economists believe if the tariffs remain in place all year, alongside retaliation by U.S. trading partners, they will cut more than one percentage point from the economy’s growth rate.  Before Trump carried out his threat to increase taxes on goods from Canada, Mexico and China, the U.S. economy was expected to grow this year at an annual rate of about 2 percent, according to a survey by Bloomberg.

Economist Carl Weinberg at High Frequency Economics predicts it will be even gloomier.  He expects the economy to shrink all year and tip into “a prolonged recession,” the first since the pandemic in 2020.

We should all hope that Trump’s supporters will impress upon him to come to his senses, that he is going too far with his tariffs and that he is harming the wellbeing and livelihood of the people who made him president and other people who are struggling for survival
in places like The Bahamas.