McKinley tariff–a subject for another day, but my general take is that the best you can say is it was like 19th century dentistry, ok only if there were nothing better

the damage tariffs do

protects incompetent management

The gold-standard example is the US auto industry since 1970. It has been US policy to protect US car manufacturers from foreign competition, sometimes through tariffs sometimes by guilting Japan for its role in WWII, for two-thirds of a century. The result has been more or less to create space for domestic firms to remain frozen in time. The resulting failure to innovate has led to three domestic bankruptcies (GM and Chrysler twice) and a gigantic loss of domestic market share.

The numbers:

In 1970, the Detroit Big Three had 90% of the US market, with VW at 6% the leading foreigner

In 1980, it was Big Three 80%, foreigners 20%

Today–Big Three 40%, Toyota-Hyundai-Honda 35%.

That’s only US market share. Worldwide, the largest manufacturers today are Toyota, Volkswagen, Honda and Hyundai-Kia, with Ford in fifth place and GM eighth–just behind Suzuki and just ahead of BYD.

GM itself is a famous business school case in dysfunction, falling from half the domestic market to Chapter 11, despite continuous, large government support (the consensus view–mine, too–is that this insulated the company from the need to boost its product quality). In 2009, GM finally declared bankruptcy and was reorganized by the US and Canadian governments, which assumed control by injecting $50 billion+ in cash in return for 72% ownership of the company.

the oddness of tariffing Canadian exports

The Trump plan: 10% tariff on imports of Canadian energy, 25% tariff on everything else.

–non-energy=25% tariff: One weird thing about the Trump plan is that, ex-energy, the US exports more to Canada than we import from them. So tit-for-tat tariffs here do more harm to the US than Canada. Hard to see how self-flagellation can be an effective way to change Canadian behavior.

–energy=10% tariff: For affected areas in the US, much of it in the Northwest states, utility bills will go up as fuel costs rise.

In addition, a lot of the oil we import from Canada is more like tar than like heating oil. So it requires special purpose refineries that contain highly specialized machinery designed to process heavy crude. They don’t work as well with higher-grade oil. The net result will be that these refineries will operate at less than full speed, meaning lower profits and less output available for their customers. As Canada has already pointed out, could also end up with the the affected refineries buying similar crude from the autocratic state of Venezuela.

So, yes, Canada will be hurt by the tariffs but the US will be hurt more. Sort of like the attempt to cut off Medicaid payments or food stamps.