What’s Really Behind Trump’s Tariffs?

Three theories to explain the method to Trump's tariff madness

Canada's Prime Minister Justin Trudeau speaks during a news conference about the US tariffs against Canada. Photo by Dave Chan / AFP.

Earlier this week, Trump imposed punishing 25 percent tariffs on our neighbors Canada and Mexico while hiking tariffs on Chinese products another 10 percent. He did this despite strong pressure from groups like the U.S. Chamber of Commerce not to take this escalatory step, as it would precipitate retaliatory tariffs and could provoke an all-out trade war.

The markets plunged in response, and economists began warning of the impact the new tariffs would have on the prices of consumer goods, everything from gasoline to avocados to cars.

Then on Wednesday, Trump signaled he would exempt U.S. automakers from the tariffs for another month after speaking to CEOs of the Big Three automakers, General Motors, Ford, and Stellantis (Chrysler). On Thursday, Trump announced that, through April 2, he would exempt Mexico from the 25 percent tariffs for any goods that fell under the existing trade agreement known as the U.S.-Mexico-Canada Agreement (USMCA). Then hours later, he extended this pause to Canada as well.

The markets remain spooked by Trump’s mercurial lifting and reimposing and re-lifting of sanctions, leading many to wonder if he is serious, if he is bluffing, or whether he has any strategy or motive at all. To date, there has been a great deal of reporting on the likely impact of tariffs, as well as Trump’s asserted justifications, including his claims that fentanyl and migrants are crossing the border uncontrolled. But we still don’t really know why Trump is willing to create so much chaos and hardship by imposing, then postponing, then reimposing, then again postponing, tariffs on our allies and neighbors.

There are theories out there to explain Trump’s actions, and today I’d like to explore three of them a bit deeper. To do so, we’ll need to peer back some 130 years to a time when tariffs were a big thing with a different president. We’ll also need to look at Trump’s recent power grab within our government to see how tariffs fit into it. And we’ll review some recent history with Trump and tariffs to draw logical inferences about his motives that are unsettling yet completely on brand for him.

Trump wants to be a modern McKinley

“President McKinley made our country very rich through tariffs and through talent. He was a natural businessman,” Trump once said. He has repeated some version of this claim multiple times. At a rally in Phoenix, for example, he declared of McKinley, “He was a strong believer in tariffs, and we were actually probably wealthiest of any time, relatively speaking, at any point in the history of our country.”

President William McKinley

That’s a wild claim. The 1890s were a period of robber barons, extreme wealth disparity, and protectionist tariffs, known somewhat pejoratively as the Gilded Age. Republicans were in bed with rich industrialists, and President McKinley was their guy. After consolidating power, he helped define the GOP for the next few decades. Trump loves McKinley so much that he issued an executive order renaming America’s highest mountain, Mount Denali in Alaska, after him.

Trump, of course, overlooks the fact that there was a terrible recession in 1893 during McKinley’s term. He instead leans into McKinley as a territorial expansionist who annexed Hawaii, took Cuba from Spain, and expanded into the Pacific with Guam and the Philippines. Under McKinley, Trump believes, America started to become an imperial power—which is why we should not simply ignore Trump’s bizarre threats upon Greenland and Panama. He might pull a McKinley over them.

But there’s something less often discussed that happened under McKinley. And it may provide clues as to why Trump is being so bellicose with Canada.

As historian and host of the podcast “Canadian History Ehx” Craig Baird noted in a recent thread,

In 1890, the Tariff Act came into place in the United States. It placed tariffs on imports of up to 50%.

While touted as a way to build American industry, there was also the hope it would force an annexation of Canada.

Sounds familiar. The fact that this play has been run before—i.e., that the U.S. under a Republican president tried to use tariffs to force Canada into becoming a state—may come as a shock to many Americans, but most Canadians learned about it in school.

Historian Marc-William Palen explains that the GOP in the late 19th century very much wanted to annex Canada, which at the time was a British colony. McKinley’s Tariff Act in 1890 was seen as a great opportunity to do so:

To pressure Canada into joining the U.S., the McKinley tariff explicitly declined to make an exception for Canadian products. Republicans hoped that Canadians, who were becoming ever more reliant on the U.S. market, would be eager to become the 45th state to avoid the punishing tariffs.

Everybody on both sides of the Atlantic knew what was up. Notes Palen,

Members of the Cobden Club, a prominent and influential London-based free-trade organization, called it an “outrage on civilization”—one that promised “to lead to the [American] annexation of Canada.” British Liberal Lyon Playfair warned that the law looked like “a covert attack on Canada.” If the tariff act’s objective “really be (as the Canadian Prime Minister, Sir John Macdonald, thinks) to force the United States lion and the Canadian lamb to lie down together, this can only be accomplished by the lamb being inside the lion,” he warned.

But the strategy backfired.

First, the tariffs wound up diverting Canadian goods to Britain, with agricultural exports from Canada to that country quadrupling within two years. The U.S. lost out on market share, and many U.S. manufacturers eventually moved their factories across the border to avoid Canada’s reciprocal tariffs.

And instead of lying down and submissively becoming part of the U.S., Canadians came together to fight back. Baird writes,

People began to rally behind their "love for Queen, flag, and country."

Sir John A. Macdonald used the tariffs as a rallying cry in the 1891 election and was able to win another majority government.

We’re seeing a similar reaction today in Canada toward Trump’s punishing tariffs, his taunts about “governor” Trudeau, and how much better off Canada would be as the “51st state.” There are now widespread boycotts of American products, booing of American sports teams, and a surge in popularity of the once electorally doomed Liberal Party of Canada, which has erased a 20-point polling deficit and is now able to message that the Conservatives are too Trumpian for the country.

It doesn’t help that Trump apparently also has personal grievances with the current Prime Minister¹. During his first term, Trump took things to a highly personal level with Trudeau, calling him “very dishonest and weak” and accusing him of making up “false statements,” even while suggesting that the U.S. might impose tariffs on Canadian-made cars.

Personal spats aside, Trudeau understands what’s at stake with Trump’s tariffs and the troubling history behind them. On Tuesday, after the tariffs went into effect, Trudeau openly accused Trump of planning “a total collapse of the Canadian economy because that will make it easier to annex us.” He added, “That is never going to happen. We will never be the 51st state.”

Trump may believe he is the modern McKinley, but his threatened tariff wars could suffer a similar fate, with Canada rapidly becoming a pissed-off neighbor that will look elsewhere for markets for its vast minerals, energy, and lumber—likely even to adversaries like China².

Trump wants even greater control over federal money

I’ve written earlier about how Trump, through the act of impounding federal funds, sought to seize for himself powers expressly reserved to Congress under Article I of the Constitution. Specifically, he is encroaching upon the legislative branch’s power of the purse, that is, the power to cause the federal government to raise and spend revenues collected from its citizens by way of taxes.

It’s important to note that Congress used to be the branch responsible for levying tariffs. After all, before the creation of the national income tax, the primary source of revenue for the federal government was tariffs. During the 1930s, tariffs remained the province of Congress, which passed the disastrous Smoot-Hawley Tariff Act of 1930, tragically deepening the effect of the financial crash of 1929 and helping lead us into the Great Depression.

Today, the vast power of the president to levy import duties, without any input from Congress, exists because Congress has delegated that authority to the White House. It did so over time, bit by bit, by way of dozens of statutes. These include the Trade Expansion Act of 1962, which empowers the President to adjust tariffs on imports that threaten to impair U.S. national security. It also includes the so-called “Trading with the Enemy Act” and the International Emergency Economic Powers Act (IEEPA), both of which contain sections to regulate imports in a time of war or national emergency.

Pay attention to that last bit. The “national emergency” exception is truly the tail wagging the dog nowadays. As the Congressional Research Services notes,

As of January 15, 2024, Presidents had declared 69 national emergencies invoking IEEPA, 39 of which are ongoing. History shows that national emergencies invoking IEEPA often last nearly a decade, although some have lasted significantly longer—the first state of emergency declared under the NEA and IEEPA, which was declared in response to the taking of U.S. embassy staff as hostages by Iran in 1979, is in its fifth decade.

This helps explain why Trump goes on and on about fentanyl smuggling and migrant border crossings, even though deaths from fentanyl and migrant border crossings are way down.

Source: New York Times

Source: Semafor

With the former, as it applies to Canada, the amount of fentanyl seized at the border is miniscule, making up just 0.2 percent of all border fentanyl seizures.

Trump knows he has to set out some justification—one that rises to the level of a “national emergency”—in order to increase tariffs so suddenly and harshly on friendly states such as Canada and Mexico. Otherwise, the tariffs don’t fit within the power delegated to him by Congress.

It should come as no surprise, then, that the opening salvo of tariffs, announced in February before being suspended for 30 days, led with a claim of a “national emergency” under the IEEPA:

ADDRESSING AN EMERGENCY SITUATION: The extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl, constitutes a national emergency under the International Emergency Economic Powers Act (IEEPA).

The order goes on to say that the tariffs will remain in place “[u]ntil the crisis is eliminated.” In other words, Trump is going to continue to insist that we’re still in a crisis of fentanyl overdoses due to lax border security, even from the few pounds coming over the Canadian border, in order to maintain his legal authority to levy the tariffs.

Trump also wants to get around the fact that the tariffs violate the terms of the USMCA that he himself negotiated and signed back in 2020. There’s no legal way to raise tariffs of 25 percent under that agreement unless he can somehow exploit an exception to it. If Canada and Mexico take him to court before the WTO, Trump likely will argue that the tariffs are “exceptional and justified” due to the “national emergency” caused by migrants and fentanyl crossing the border³.

So, couldn’t Trump’s power grab over the purse strings be challenged in court? Couldn’t his pretense of a “national emergency” be tossed out as absurd? The prospects of a victory in the U.S. legal system aren’t high. Federal courts are generally highly deferential to the executive branch when it comes to the declarations of states of emergency. They have traditionally left it up to Congress, acting through a joint resolution, to claw back the power to impose tariffs.

The drafters of the IEEPA probably didn’t anticipate that a president would simply manufacture a crisis and use it to justify tariffs, let alone ones so high they effectively impose thousands of dollars in new taxes upon every American family. By continuing to allow the White House to do so, Congress has abdicated its own authority over raising federal revenues.

Unfortunately, the Republican majority in Congress is more than willing to hand this power over to Trump without further issue or complaint. As a result, Trump likely will continue to press for even more tariffs in order to bring in more federal dollars, all so he can give a bigger tax break to his wealthy backers and friends.

But there should be some point at which the power to levy new taxes in the form of tariffs becomes an unconstitutional delegation of power⁴.

Here’s a thought experiment. Imagine if Trump raised tariffs on our friendly trading partners to 100 percent. Or even 200 percent. And imagine from there, he declared he was eliminating the IRS and all income taxes, as he claims he wants to do, because we will have gained enough from tariffs to no longer need any taxes on income. Through such moves, Trump would have created an entirely regressive taxation system without any input from Congress—something the Constitution clearly does not contemplate.

Assuming the majority of justices, who are presumably ideologically opposed to the wholesale congressional delegation of power to the executive branch, were to grant that this was an unconstitutional overreach. After all, under Chief Justice John Roberts’s own reasoning, this ought to qualify as a “major question” that must be decided by our elected Congress and not by delegation to the executive branch. But if it’s a problem at 200 or 100 percent tariffs, why not at the 25 percent point announced by Trump, which is still, to use the technical term, a BFD?

Unless and until the Supreme Court steps in—and that seems unlikely—Trump’s use of “emergency powers” under a fabricated “national emergency,” especially as to Canada, should be viewed for what it is: a power grab by the White House to assert further control over the public purse. Rather than “impound” funds, as Trump is currently doing with tens of billions in grants and aid already appropriated by Congress, Trump is effectively “levying” a major tax, through tariffs, upon the American consumer that he has no constitutional right to do.

It is an extraordinary flex of power that under normal circumstances an outraged Congress would move quickly to stop. The fact that it does not—and will not—opens the door for Trump to seize even more power, relegating Congress to a mere advisory role.

In short, tariffs are a way for Trump to act even more like a king who answers to no legislature.

Trump is setting up an extortion racket

In order to better understand how Trump might benefit from high tariffs in 2025, it’s helpful to look at what happened back in 2018 the first time he imposed them.

In his first term, Trump imposed 20 percent tariffs on Chinese goods, initially covering around $34 billion in imported items. He later expanded those tariffs to sweep in some $550 billion in imported goods from China.

Alongside the tariff regime, the Trump White House set up a system where companies could apply for exemptions from those tariffs. There were three considerations, including whether

the tariffs would impose significant harm on American business interests;

any substitute products were available outside China; and

the products were “strategically important” to China

That first factor granted significant discretion over which companies would receive tariff exemptions. And that in turn gave Trump two things: a carrot to reward companies that were friendly to him and his allies, and a stick to punish companies that he deemed were unfriendly.

According to a study published in The Journal of Financial and Quantitative Analysis, this had the expected result. Politically connected companies were far more likely to receive valuable tariff exemptions than those that were not connected to Trump or Republicans. Specifically, the authors found that companies that had invested substantially into the GOP before or at the start of Trump 1.0 were more likely to win exemptions to Trump’s tariffs than those that had not.

With Trump now laying down and then yanking the threatened tariffs seemingly at will, he is signaling that he has all the power. He can make the pain disappear or remain in place whenever and on whomever he wants. Extending the deadline by another month, for example, gives time for companies who might be devastated by the tariffs to come fill the coffers of the GOP. They could even pay Trump directly, for example by buying his $TRUMP meme coin using untraceable funds or by paying for the right to have dinner with him to the tune of millions of dollars.

In the past, it would be relatively easy to connect a pay-to-play tariff exemption with a political donation. But by setting up so many opaque ways to corruptly funnel money directly to Trump or his cronies, it will be increasingly hard to draw such direct connections.

Further, the potential for insiders using Trump’s yo-yos on tariffs to profit should not be underestimated. When Trump shakes the markets with his announcements and stocks tumble, those with foreknowledge could clean up considerably.

With Trump, there is always a grift, always another way to make another dirty buck. We already have clear examples of quid pro quos on tariff exemptions from the last Trump presidency. He could be, and likely is, running the same game on steroids this time around.

Why not all three?

These three theories of why Trump is creating economic chaos through threatened tariffs are not mutually exclusive. He could well be seeking to finish the job his hero President McKinley started some 130 years ago. He could see tariffs as yet another way to exercise greater executive branch control over Congress. And he could well be doing this to line his own pockets, knowing how much importers and exporters would pay to receive a valuable exemption from those tariffs.

Understanding his likely motivations is key to thwarting his objectives. The Canadians may understand the history of tariffs and efforts to annex their country as a state, but it’s time for Americans to as well and to begin a public discourse about how badly this failed the last time around.

Congress needs to wake up and understand that Trump has yanked more power for himself by stealing the power to tax away from them, and the courts need to figure out where they will draw the line on this unconstitutional delegation of congressional power.

And for whatever tariffs that do kick in, the investigative press needs to start to track who is applying for exemptions and which of those folks are in and out of Mar-a-Lago, making it harder for Trump to set up a successful pay-to-play system.

The public should better understand and call out what 47 is up to every time he shifts his stance on tariffs or claims fake national emergencies over fentanyl and migrants. We can all be on to his game, and in that way stay a step or two ahead of the chaos.

Speaking of chaos, there’s a fourth rather dark theory out there that I’ve chosen not to explore today: that Trump and Musk hope to crash the world economy and swoop in while everything is distressed to take over. Musk has indicated that he supports a period of “severe overreaction” where “markets will tumble” in order to achieve long-term prosperity. The problem with this theory is that it can neither be proven nor disproven. To my mind, while this may fit the “evil villain” persona of Musk, it doesn’t really align with Trump’s M.O. While Trump appreciates chaos enough to take advantage of people and businesses in distress, he doesn’t want to be swallowed up by it, if the past is any guide.

If it starts to look like this is Trump’s endgame too, I’ll come back to report on that. Until then, it’s prudent to assume Trump is a malignant narcissist, is hungry for power and is eager to extort others. Tariffs are a great way for him to flex on all three.

1. Melania Trump’s alleged affection for Prime Minister Justin Trudeau, captured in a famous photo in 2019 that blew up on social media, surely didn’t help.

https://x.com/lonilove/status/1165894022734303232?s=61&t=dlYuBcwzZXmET9Xd_RRdaQ

Or perhaps it was his daughter Ivanka’s admiration for the dashing leader that bothered Trump, who knows?

https://x.com/phil_lewis_/status/831280292379910144?s=61&t=dlYuBcwzZXmET9Xd_RRdaQ

2. Trump’s actions on tariffs have validated the position of hawks in China. As The Guardian reported this morning,

China’s ministry of foreign affairs has promised that China will ‘fight to the end’ with the US in a ‘tariff war, trade war or any other war,’ marking China’s strongest rhetoric on US president Donald Trump since he entered the White House.

3. As I noted in my earlier piece,

While Trump might present a colorable claim that the tariffs are somehow “justified” by international circumstances, it would be far harder for the administration to argue that a blanket tariff is somehow “exceptional” under the agreement. Exceptional means deserving of special consideration, other countries likely will argue, the very opposite of an across-the-board hike.

4. The radicals on the Supreme Court have been on a tear lately to make clear that Congress does not have the power to delegate so much of its legislative authority to the President or his agents, especially over “major questions” of policy. But does that principle only apply to rules and regulations that conservatives don’t like? Shouldn’t it also apply to the fundamental responsibility of Congress to raise and spend revenues?