Economists baffled by Trump’s tariff threat on John Deere

The company first announced the partial manufacturing shift to Mexico in June, according to Fox Business, after several rounds of layoffs.

“I know a lot about John Deere. I like the company, but as you know, they announced a few days ago that they’re going to move a lot of their manufacturing business to Mexico,” Trump said at Monday’s event. “Right now I’m putting John Deere on notice: If you do this, we’re putting a 200 percent tariff on everything you want to sell in the United States.”

“They think they’re going to make the product cheaper in Mexico and then sell it at the same price as before, they’re going to make a lot of money by getting rid of our work and our jobs,” the Republican presidential candidate added.

Trump also said that any company doing the same would face the same 200 percent tariff.

John Deere did not respond to a request for comment from Business Insider.

Jonathan W. Coppes, director of the agricultural policy program at the University of Illinois at Urbana-Champaign, said Trump is taking advantage of concerns about companies moving jobs out of the country — and it’s a pattern we’ve seen for a long time. times.

“John Deere is a major manufacturer, and the consequences of moving these jobs are significant,” Coppess said.

But Coppess said Trump’s response to the problem may not be the right solution — and several trade economists told BI that Trump’s proposed tariff is a terrible idea.

“You won’t find any serious, respected trade economists who think this is a good idea,” Ian Sheldon, Andersons Professor and Chair of Agricultural Marketing, Trade and Policy at The Ohio State University, told BI.

“That’s a huge rate,” Sheldon added. “It seems almost a prohibitive rate. By prohibitive I mean it would stifle imports of John Deere skid steers would be my guess”.

Gary Hufbauer, a non-resident senior fellow at the Peterson Institute for International Economics, echoed Sheldon’s concerns.

He told BI that Trump’s proposed huge tariff is not only a “terrible idea” but would also violate the US-Mexico-Canada Agreement (USMCA), which followed NAFTA in 2020.

“I mean, it’s just a simple, simple violation,” Hufbauer said.

Sheldon said he’s not even convinced Trump’s threatened tariffs would even be feasible under the USMCA. He expects Mexico to immediately file a dispute with the USMCA dispute settlement mechanism.

And it could prompt Mexico to retaliate against the U.S., Sheldon added.

“We have this integrated market in North America and we’re already in a trade dispute with Mexico over GM corn,” Sheldon told BI. “I find it counterproductive to exacerbate trade relations with one of our major trading partners. It doesn’t make sense to me.”

Hufbauer also warned that such a tariff, if imposed, would weaken US-Mexico relations.

“The immediate effect would be very hostile relations with Mexico,” Hufbauer told BI, adding that with Mexico the US’s largest trading partner, the US would have a lot to lose.

“So we’re getting a higher cost for a lot of products in the U.S. that we’re now used to getting from Mexico,” Hufbauer said.

“It will be costly for the US,” he continued. “But beyond that, if we enter into a hostile trade relationship with Mexico, that will certainly spill over into Central America and South America. It will start with Mexico and you will only get many parts of the West. The hemisphere feels quite hostile towards the US.”

Experts say it could also cost American consumers.

Nicole Bivens Collinson, managing director at international trade and policy law firm Sandler, Travis & Rosenberg, said any tariff applied to products is ultimately paid by the consumer.

Coppess said there would also be concerns about equipment availability.

This is not the first time Trump has threatened companies, and Trump’s threat to impose high import tariffs is also not new. In fact, it is a pillar of his economic policies.

Trump has already promised to implement a 10% tariff on all US imports and a 60% tariff on Chinese imports. The former president also called for 100 percent tariffs on cars made in Mexico in a speech in Georgia on Tuesday.

The Republican nominee’s goal is to bring manufacturing back to the U.S., but some economists said the plan could increase inflation.

“The word tariff properly used is a beautiful word…A lot of bad people didn’t like that word, but now they’re discovering that we were right, and we’re going to take hundreds of billions of dollars in our treasury and use that. money for the benefit of American citizens,” Trump said in a statement to BI.

“And it won’t cause inflation, by the way,” Trump added.

Trump’s tariff goals for the next election go beyond his previous policy on international imports. During Trump’s presidency, the US imposed a 25% tariff on various Chinese goods, including steel and industrial equipment.

China has retaliated with its own tariffs on US imports, including soybeans, the largest US agricultural import to China.

Collinson said it’s unusual for farmers to receive every component that goes into a tractor from the US. She said many products cannot yet be fully manufactured in the US.

Imposing a 200 percent tariff on the company for manufacturing in Mexico would be a way to “kill a company,” Collinson said.

“Our farmers today are already spending hundreds of thousands, sometimes millions on farm equipment,” Collinson said. “If you make it more expensive, they can’t grow it anymore.

Collinson said both administrations could do better and there needs to be a holistic review of the tariffs in place.

Kamala Harris’ campaign did not respond to a request for comment from Business Insider.