Tariff Follies Scene 47

Last week featured another round of tariffs—this time on Canada, Brazil, and 60 nations over their forced labor practices, plus renewed threats against the European Union. The forced labor tariffs were widely expected as the latest Trump effort to replace the tariffs the Supreme Court invalidated last February. The Brazilian tariffs were the result of a separate Section 301 investigation and were also expected in light of the deteriorating relations between the two governments. The Canadian tariffs were more of a surprise because of the timing, the size and scope, and the novel use of an old statute.

Since all these actions were front-page news last week, I am not going to repeat the details, although I will discuss the Canadian tariffs. Instead, I want to put them in the larger context of Trump’s trade policy. At the beginning of his second administration, I noted that as far as trade was concerned, he had one narrative: The United States is a victim of evil foreigners trying to steal our jobs and undermine our economy, a challenge that can be measured by one metric—the bilateral trade deficit—and mitigated by using one tool—tariffs. (Ironically, the Democratic left has a similar narrative, although in its explanation, American workers are being exploited by large corporations and their overpaid executives rather than evil foreigners. The victims are the same; only the culprits are different.)

While Trump’s narrative has not changed much, his actions have not always been in accord with it. Foreigners are still evil, but in a number of cases, notably Brazil and to a lesser degree Canada, the tariffs have more to do with the overall political relationship and real or imagined slights than they do with the trade balance. The United States actually has a trade surplus with Brazil. Similarly, the forced labor tariffs are ostensibly based on actions (or failures to act) by other countries that have little actual impact on the trade balance and are a not-so-thinly disguised effort to replace the invalidated tariffs. The tool—tariffs—remains the same, but it is now being used in furtherance of a broader set of objectives.

The original purpose of the tariffs can be summarized as the three R’s: revenge, revenue, and reshoring. Revenge fits the narrative described above. Revenue became a more important objective following enactment of last year’s One Big Beautiful Bill, which will significantly increase the U.S. debt burden. Reshoring has reemerged as Trump has begun to condition tariff relief, most notably for pharmaceuticals, on commitments to reshore manufacturing. That may be because, beyond the occasional promise, there is little evidence reshoring has taken place, although, in fairness, that normally takes a long time and we won’t know if Trump’s efforts are successful for some time.

Lurking behind these announcements is the tactic that has characterized all of Trump’s moves: the desire for leverage. Trade negotiators usually strive for win-win outcomes, where each side can tell its citizens it got something important. Trump has a win-lose approach. He tries to achieve his negotiating goals by exerting leverage over his opposition in order to force them to submit. Nowhere is that better illustrated than in the case of Canada, whose economic dependence on the United States is significant, with few viable short-term alternatives. Canada was the first country he tried to squeeze last year, and he has continued to pressure it on a range of trade issues as well as his 51st state proposal.

Unfortunately for both sides, many of the issues, such as lumber and dairy products, are intractable and have been around for decades. Litigation and dispute settlement have produced mixed outcomes, with both sides winning and losing at different times. Trump, however, has fundamentally misunderstood the political dynamic at work in Canada. While it has been in the Mexican government’s interest—and that of its business community—to try to accommodate the United States, Canadians have been deeply offended by Trump’s rhetoric and pressure campaign, and it has been in the Canadian government’s domestic political interest to push back. The harder Trump pushes, the more difficult it is for Canada to make concessions.

His latest move is also novel in its application of Section 338 of the Tariff Act of 1930, a provision not previously used. It permits the president to impose tariffs up to 50 percent if he finds that another country has discriminated specifically against the United States, meaning a general market access barrier would not qualify. It would have to be specifically aimed at the United States. In the examples the administration cited, the argument against Canadian provincial bans on U.S. spirits is probably within the ambit of Section 338. The objection to Canada’s dairy supply management program may not be, even though the United States may be its biggest victim. Of course, if the tariffs are actually imposed, there will be lawsuits, and questions about the provision’s scope will be sorted out in the courts.

That, however, may be a big “if.” The statute provides a 30-day waiting period before the tariffs can go into effect, which provides time to negotiate. Many in the trade policy community expect Trump’s announcement to be a leverage move designed, once again, to force Canada to submit. It is unlikely to succeed given Canadian domestic politics, and in view of the potentially significant economic impact on both countries, we may be heading for another TACO moment (Trump Always Chickens Out, for readers with short memories).

If so, it will be a reminder for the many other countries watching closely that despite all the bluster and threats, Trump frequently backs down once he realizes his tactics are not working. The sad thing is that, like the movie Groundhog Day, we have to go through this over and over again, which means a continuation of the uncertainty that has plagued the business community in all three North American countries. Unfortunately, it looks like breaking out of this doom loop will be very difficult.

Author’s note: I retired from CSIS on March 29, 2026. I plan to continue writing this column and participating in The Trade Guys podcast, so please continue to read and listen. However, my CSIS email address will no longer be working, so if readers or podcast listeners want to contact me directly, they should do so at [email protected].

William A. Reinsch is a senior adviser (non-resident) and Scholl Chair emeritus with the Economics Program and Scholl Chair at the Center for Strategic and International Studies in Washington, D.C.