When The Range spoke with Wichita State University business professor Usha Haley in 2020, a new trade deal between the Trump administration and China had just been signed.
Her assessment?
“This deal, and I don’t want to spoil it, is really more hat and less cattle. But it’s a nice hat,” she said.
Donald Trump is back for another term. And this time, he’s planning to impose 25 percent tariffs on Mexico and Canada, which are Kansas’ two biggest trading partners. (The state exported $5.6 billion in goods to both countries in 2023.)
So we once again called Haley, the W. Frank Barton Distinguished Chair in International Business at WSU and director of the school’s Center for the Advancement of International Business.
She spoke to The Range about the tariffs, what they mean for trade and how they could affect consumers.
The interview has been edited for length and clarity.
Tom Shine: For us non-economic diplomats, explain what a tariff is.
Usha Haley: A tariff is a tax, and what it does … is it kind of punishes some countries that are exporting, and there can be different reasons for that quote, unquote “punishment.” It could be because they are subsidizing, as China did with its manufacturing. It could be because, as President-elect Donald Trump wants to do, it punishes Mexico for allowing illegal immigrants across the border and also transporting illegal drugs across the border. But it is a tax.
President-elect Trump has threatened 25% tariffs on Mexico and Canada, which are Kansas’ two biggest trading partners…
Exactly. The two largest trading partners of the United States.
What might be the effect in Kansas and, I think, on a broader basis in the United States.
Farmers are worried that, say, Trump imposes a tariff and the Chinese won’t buy as much from Kansas. They would say, ‘Well, why should we come to Kansas for soybeans? Let’s go to Brazil.’ And so … that kind of replacement will happen.
These tariffs will probably affect wheat, corn and soybeans. But the last time he also touched the pork.
Is there a direct link between tariffs and inflation?
No. Tariffs feel like inflation because they raise the price of goods, but they are not really inflation because inflation is caused by the difference between what we produce and what consumers are willing to spend.
The average consumer, it is estimated, will pay about $500 more per year. What do consumers do? … If some products are absolutely essential and they come from China or they come from Mexico or Canada, consumers will pay more for them, but then they will stop buying local products. So in that sense, it will curb inflation. But it will also curb savings, so consumers likely won’t save as much.
Your average consumer might not be interested in discussions of fees and trades and things like that, but they probably should be, right?
Well, I think it’s a little premature to start panicking because we don’t currently know the details of any of these charges. We just know that it’s probably bad policy if Trump says he’s going to tax … 60% on everything that comes from China and 20 to 25% on everything that comes from Mexico and Canada. And the reason is that we barely produce anything in this country.
We import 99% of our shoes, and 56% of them come from China. Our clothes, but also video game consoles, almost certainly smartphones.
If the administration follows through (and) imposes tariffs on some goods from Mexico and Canada, they will likely retaliate. Is this to be expected?
This is to be expected. I mean, they will get revenge. It is a matter of national pride. It is also a matter of what they would consider unfair.
Trump left a meeting with new Mexican President Claudia Sheinbaum and said: “Well, everything is under control. She has agreed.’ And she said, “We didn’t agree on anything except that we’re going to get revenge…”
Does anyone win a trade war?
Maybe not in the short term, but in the medium term, yes.
(Trump) also thinks about national security. He thinks about economic security, and he thinks about elections — he’s a politician — and so I think it really depends on his goals. At the moment, I think some companies have already decided that they are leaving China, but their decision to invest in the United States is a completely different decision.
If I’m a small business owner and I buy items from Canada or Mexico or sell items there, what advice would you have for them?
I have no advice because I don’t know what will happen. I don’t know what fees will be imposed.
One reason Trump favors tariffs is that they don’t have to go through Congress. I mean, he can decide who’s a player, who’s not, who’s going to be affected, who’s not, pretty much on his own.
We don’t really know what he’s going to do when he comes in. We are hanging on his every word.
