Hey, Jer here.
25% tariffs on goods from Canada and Mexico are going in place just after Midnight on Tuesday. [The Economist] [Sky News]
The tariff on energy from Canada will be 10%.
Although national stories aren't usually our bag at Daily Detroit, the reality is this one is going to have a large local impact and change the lives and careers of thousands of our neighbors.
On today's Daily Detroit podcast, I talked with Jason Miller, a professor of Supply Chain Management at Michigan State and Daniel Ortega, a food economist and professor at MSU.
In short, this going to mean more expensive automobiles, more expensive prices at the grocery store... heck, even more expensive gas as I learned a bit more about how that works.
Not to mention, if we continue the trade war to the European Union? More expensive pharmaceuticals.
Ortega told me that Michigan imports $3 billion of food and agricultural products each year, half of that attributed to Canada alone. Not to mention foods like Avocados from Mexico and staples like peppers that are available year-round due to the ability to import reasonably.
Part of the conversation that really made me sit and realize I may be looking at things wrong, was when I asked Jason Miller about the "genie being out of the bottle" on globalization and large scale manufacturing and if we can put it back in through tariffs.
...that's I think the difficult thing for many Americans to accept. But when we liberalized trade, especially with China back in October of 2000, we let the genie out of the bottle. Certain manufacturing industries in the United States like apparel, making plumbing fixtures, making steel springs, et cetera, were certainly negatively affected by that.
However, it doesn't mean that putting tariffs on these goods is going to lead to a renaissance of production of these products. In fact, a good example is we put tariffs on Chinese furniture in October of 2018, and then in 2019, US domestic production of furniture fell 6%. And so you didn't see any type of reshoring bump. If anything, domestic production was hurt further.
If you're looking to understand what's happening and get beyond talking points, I hope you listen to this conversation on our website (with a full transcript), on Apple Podcasts, or Spotify.
Here are some related stories as I write this around 8pm on Monday night:
🔻 The Dow Jones was down nearly 650 points Monday. [PBS]
🇨🇦 Ontario Premiere Doug Ford (a position roughly equivalent to a state governor) said on Global News he'd halt sales of nickel and potash:
- Nickel is a key element in some manufacturing. We import most of it and the U.S. has no facility to refine it ourselves - in fact, the nickel mined in Michigan goes to Ontario for processing
- Potash is used for fertilizer, and more than 80% of what's used in the U.S. is from Canada
⚡️ The Energy Minister of Ontario said there could be a surcharge on every megawatt of energy sold over the border, in retaliation. Ontario's three biggest power customers are Michigan, New York State and Minnesota. [National Post]
🚙 The price of new vehicles could go up by more than $12,000 says an Anderson Economic Group report. [CBS News]
🏭 The auto sector can't just move on a dime, as the lead times and investments in the industry take far longer than the whims of political cycles. [Detroit Free Press]
🚗 Sales heading into this situation aren't good for Ford, down 8.9% year over year. [Detroit News]
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That's it for now. I'll be back with future updates and hopefully some better news sprinkled in.
-Jer
p.s. - Can't leave without a song. I'm a BNL fan (of course I am, and no I'm not using the whole name of the band from Canada so as not to trip your filters), so the song for today's newsletter is "Lovers in a Dangerous Time." Figure it appropriate considering today's cross-border topic and overall bad vibes.
