Business
Americans rallying behind Trump’s tariffs
The Trump administration’s new tariffs are working:
The European Union will delay tariffs on U.S. exports into the trading bloc in response to the imposition of tariffs on European aluminum and steal, a measure announced in February by the White House as a part of an overhaul of the U.S. trade policies.
Instead of taking effect March 12, these tariffs will not apply until “mid-April”, according to a European official interviewed by The Hill.
This is not the first time the EU has responded this way to U.S. tariff measures. It happened already last time Trump was in office. One of the reasons why Brussels is so accommodative is that the European Parliament emphasized negotiations already back in February. Furthermore, as Forbes notes,
The U.S. economy is the largest in the world, and many countries rely on American consumers to buy their goods. By import tariffs, the U.S. can pressure trading partners into more favorable deals and protect domestic industries from unfair competition.
More on unfair competition in a moment. First, it is important to note that Trump did not start this trade skirmish. Please note what IndustryWeek reported back in 2018:
Trump points to U.S. auto exports to Europe, saying they are taxed at a higher rate than European exports to the United States. Here, facts do offer Trump some support: U.S. autos face duties of 10% while European cars are subject to dugies of only 2.5% in the United States.
They also noted some nuances, e.g., that the United States applies a higher tariff on light trucks, presumably to defend the most profitable vehicles rolling out of U.S. based manufacturing plants. Nevertheless, the story that most media outlets do not tell is that Europe has a history of putting tariffs on U.S. exports to a greater extent than tariffs are applied in the opposite direction.
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Facts notwithstanding, this trade war has caught media attention and is reaching ridiculous proportions. According to CNBC,
Auto stocks are digesting President Donald Trump’s annoncement that he would place 25% tariffs on “all cars that are not made in the United Sates,” as well as certain automobile parts. … Shares of the “Detroit Three” all fell.
They also explain that GM took a particularly hard beating, and that Ferrari is going to use the tariffs as a reason to raise prices by ten percent. This sounds dramatic, but keep in mind that stocks fly up and down with impressive amplitude; what was lost yesterday can come back with a bonus tomorrow. As for Ferrari, a ten-percent price hike is basically meaningless since these cars are often sold in highly customized, individual negotiations before they are even produced.
Despite the media hype, these tariffs will not last the year. One reason is the retaliatory nature in President Trump’s tariffs, which—again—has already caught the attention of the Europeans and brought them to the negotiation table. We can debate whether or not his tactics are the best in order to create more fair trade terms between the United States and our trading partners, but there is no question that Trump’s methods have caught the attention of the powers that be (which include Mexico and Canada).
There is another reason why I do not see this tariffs tit-for-tat continuing for much longer. The European economy is in bad shape, especially compared to the U.S. economy. With European corporations already signaling increased direct investment in the U.S. economy, Europe is holding the short end of this stick.
But the bad news for the Europeans does not stop there. They are at an intrinsic disadvantage going into a tariffs-based trade war. The EU has a “tariff” of sorts that we do not have, namely the value-added tax, VAT. Shiphub.co has a succinct summary of how the VAT affects trade:
When importing (into the European Union), VAT should be taken into account. … VAT is calculated based on the customs value (the good’s value and transport costs … ) plus the due duty amount.
The term “duty” here, of course, refers to trade tariffs. This means that when tariffs go up, the VAT surcharge goes up as well. Aside from creating a tax-on-tax problem, this also means that the inflationary effect from U.S. imports is significantly stronger than it is on EU imports to the United States—even when tariffs are equal.
If the U.S. government wanted to, they could include the tax-on-tax effect of the VAT when assessing the effective EU tariffs on imports from the United States. This would quickly expand the tit-for-tat tariff war, with Europe at an escalating disadvantage.
For these reasons, I do not see how this “trade war” will continue beyond the summer, but even that is a pessimistic outlook.
Before I close this tariff topic and declare it a weekend, let me also mention that the use of tariffs in trade war is neither a new nor an unusual tactic. Check out this little brochure from the Directorate-General for Trade under the European Commission’:
Trade defence instruments, such as anti-dumping or anti-subsidy duties, are ways of protecting European production against international trade distortions.
What they refer to as “defence instruments” are primarily tariffs on imports. In a separate report the Directorate lists no fewer than 63 trade-war cases where the EU imposes tariffs to punish a country for unfair trade tactics.
Trade what, and what countries, you wonder? Sweet corn from Thailand, fused alumina from China, biodiesel from Argentina and Indonesia, malleable tube fittings from China and Thailand, epoxy resins from China, South Korea, Taiwan, and Thailand… and lots and lots of tableware from China.
Like most people, I would prefer a world without taxes and tariffs, and the closer we can get to zero on either of those, the better. But until we get there, we should take a deep breath in the face of the media hype and trust our president on this one.
Larson’s Political Economy is a reader-supported publication.
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MxM News
Quick Hit:
In a bombshell revelation at a White House cabinet meeting, Elon Musk announced that the Department of Government Efficiency (DOGE) had uncovered over $330 million in Small Business Administration (SBA) loans issued to children under the age of 11.
Key Details:
- Elon Musk stated that DOGE found $330 million in SBA loans given to individuals under the age of 11.
- The youngest recipient was reportedly just nine months old, receiving a $100,000 loan.
- SBA has now paused the direct loan process for individuals under 18 and over 120 years old.
Diving Deeper:
At a cabinet meeting held Monday at the White House, President Donald Trump and Elon Musk detailed a staggering example of federal waste uncovered by the newly-formed Department of Government Efficiency. Speaking directly to ongoing efforts to eliminate corruption and abuse in federal agencies, Musk explained that the SBA had awarded hundreds of millions in loans to children—some of whom were still in diapers.
“A case of fraud was with the Small Business Administration, where they were handing out loans — $330 million worth of loans to people under the age of 11,” Musk said. “I think the youngest, Kelly, was a nine-month year old who got a $100,000 loan. That’s a very precocious baby we’re talking about here.”
DOGE’s findings forced the SBA to abruptly change its loan procedures. In a post on X, the department revealed it would now require applicants to include their date of birth and was halting direct loans to those under 18 and above 120 years old. Musk commented sarcastically: “No more loans to babies or people too old to be alive.”
The discovery was just the latest in a series of contract cancellations and fraud crackdowns led by DOGE. According to Breitbart News, DOGE recently canceled 105 contracts totaling $935 million in potential taxpayer liabilities. The agency’s website currently lists over 6,600 terminated contracts, accounting for $20 billion in savings.
The president praised Musk and DOGE for rooting out government inefficiencies, noting his administration was focused on “cutting” people and programs that were not working or delivering results. “We’re not going to let people collect paychecks or taxpayer funds without doing their jobs,” Trump said.
Also during the cabinet session, USDA Secretary Brooke Rollins revealed her department had eliminated a $300,000 program aimed at teaching “food justice” to transgender and queer farmers in San Francisco. “I’m not even sure what that means,” Rollins said, “but apparently the last administration wanted to put our taxpayer dollars towards that.”
These revelations highlight what many conservatives have long suspected—that during prior administrations, including under President Joe Biden, massive amounts of federal funding were funneled into unserious, ideologically-driven projects and mismanaged government programs. Under the Trump administration’s second term, DOGE appears to be living up to its mission: trimming fat, exposing fraud, and putting American taxpayers first.
MxM News
Quick Hit:
A new study finds Cuba has lost nearly a quarter of its population since 2020, driven by economic collapse and a mass emigration wave unseen outside of war zones. The country’s population now stands at just over 8 million, down from nearly 10 million.
Key Details:
- Independent study estimates Cuba’s population at 8.02 million—down 24% in four years.
- Over 545,000 Cubans left the island in 2024 alone—double the official government figure.
- Demographer warns the crisis mirrors depopulation seen only in wartime, calling it a “systemic collapse.”
Diving Deeper:
Cuba is undergoing a staggering demographic collapse, losing nearly one in four residents over the past four years, according to a new study by economist and demographer Juan Carlos Albizu-Campos. The report estimates that by the end of 2024, Cuba’s population will stand at just over 8 million people—down from nearly 10 million—a 24% drop that Albizu-Campos says is comparable only to what is seen in war-torn nations.
The study, accessed by the Spanish news agency EFE, points to mass emigration as the primary driver. In 2024 alone, 545,011 Cubans are believed to have left the island. That number is more than double what the regime officially acknowledges, as Cuba’s government only counts those heading to the United States, ignoring large flows to destinations like Mexico, Spain, Serbia, and Uruguay.
Albizu-Campos describes the trend as “demographic emptying,” driven by what he calls a “quasi-permanent polycrisis” in Cuba—an interwoven web of political repression, economic freefall, and social decay. For years, Cubans have faced food and medicine shortages, blackout-plagued days, fuel scarcity, soaring inflation, and a broken currency system. The result has been not just migration, but a desperate stampede for the exits.
Yet, the regime continues to minimize the damage. Official figures from the National Office of Statistics and Information (ONEI) put Cuba’s population at just over 10 million in 2023. However, even those numbers acknowledge a shrinking population and the lowest birth rate in decades—confirming the crisis, if not its full scale.
Cuba hasn’t held a census since 2012. The last scheduled one in 2022 has been repeatedly delayed, allegedly due to lack of resources. Experts doubt that any new attempt will be transparent or complete.
Albizu-Campos warns that the government’s refusal to confront the reality of the collapse is obstructing any chance at solutions. More than just a demographic issue, the study describes Cuba’s situation as a “systemic crisis.”
“Havana (Cuba, February 2023)” by Bruno Rijsman licensed under CC BY-SA 2.0 DEED.
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