Shortly after winning the election, President-elect Donald Trump pledged to impose new tariffs on goods from Mexico, Canada and China on day one of his administration. Trump vowed to enforce a 25% tax on all products entering the U.S. from Mexico and Canada, and another 10% on goods from China.
Among economists there is ongoing debate about the impact these proposed tariffs would have on inflation. For historical perspective, economist Eliott Eisenberg, founder of Graphs & Laughs, reported that in 2018-2019, President Trump imposed tariffs of $380 billion on thousands of imported products. The action, he said, reduced GDP by 0.2% and raised core-goods inflation by about 4% in the first year. “The newly proposed tariffs, if fully implemented, are likely to have quadruple the impact,” Eisenberg wrote.
Others, including some Wall Street observers, see Trump’s tariff rhetoric as merely diplomatic leverage as opposed to strict economic policy.
FCNews asked several flooring executives for their views on the matter, with the majority viewing tariffs as a bargaining chip that is already having a positive effect. “I’m not pro-tariff; I am, however, an advocate of using tariffs as a hammer to get what we want—like stopping drugs and criminals from crossing our borders,” said Olga Robertson, president of the FCA Network, Shorewood, Ill. “Put the onus on Mexico, for example. They need to sell their goods in the U.S.—it’s a huge market for them. The same with Canada. We already have a tariff on Chinese goods; that hasn’t changed. Trump is talking about another 10% tariff if they don’t stop sending chemicals used to make fentanyl into Mexico. He can only deliver safety and security by leveraging the threat of tariffs.”
Some executives see the president-elect’s actions as vintage Trump, straight out of his 1987 bestseller “The Art of the Deal” playbook. “The tariff gambit is textbook Negotiation 101,” said Sam Roberts, founder of Roberts Carpet & Fine Floors in Houston. “Like any good negotiating position, it needs to be something that can be implemented if need be and occasionally must be utilized to achieve current and future goals. Anything identified as an empty threat loses all efficacy. I think the likelihood is very high that significant tariff increases will not be realized in most cases. Some relatively onerous tariffs probably need to be enforced to make the threat of other tariffs more effective.”
Along the same lines, Kevin Frazier, owner of Frazier’s Carpet One Floor & Home, Knoxville, Tenn., said, “A focused negotiator employs all tools, and given Mexico’s quick response [to Trump’s threats], I would absolutely say that tariffs are, at the least, a powerful bargaining chip. We need to be employing all our powerful bargaining chips.”
Calling himself a “free trade guy,” Scott Rozmus, president/CEO of flooring distributor FlorStar Sales, Romeoville, Ill., said he “disfavors” tariffs as a general matter. “However, the reality is many other countries don’t truly promote fair trade on their end, so the United States certainly needs economic tools of its own to level the playing field one way or another. With respect to present-day specifics, history teaches that President Trump: (1) tends to follow through on campaign promises; and (2) used tariffs in his first term for both economic and political reasons. Moreover, that the Biden administration did not rescind Trump’s tariffs on China when Biden’s team made a point of undoing a vast array of Trump’s other public, regulatory acts and proclamations is both interesting and telling. Accordingly, I think President Trump will institute some level of additional tariffs on China. Regarding Mexico and Canada, President Trump’s recent statements tie the potential tariffs to political activity (or inactivity) of our neighbors vs. specific, anti-competitive behaviors. Therefore, I think we can rightly conclude the primary motivation here is political and that—presuming Mexico and Canada each agree to support tighter border restrictions, etc.—we’re unlikely to see anything approaching a 25% tariff. We might see some thing, but not at that level.”
Among those who see Trump’s tariff talk as both leverage and economic strategy is Dave White, president of distributor TriWest Ltd., Santa Fe Springs, Calif. “I believe it’s a combination of both,” he explained. “It prompted [Canadian Prime Minister Justin] Trudeau to make a trip to Mar-a-Lago. I think Trump will apply tariffs as needed to help secure the border and force improved trade agreements for the U.S.”
White added that he would like to see Trump use these tariff proposals as a great starting point as leverage for future trade negotiations. “I’m sure these tariffs are a starting point and doubt he will assess them at these levels without some serious negotiations. Remember, he threatened Mexico with additional tariffs in his previous term to assist with the border, and it worked.”
The mere threat of additional tariffs, some observers say, seems to be doing what it was intended to do. “Seeing the immediate reaction from these countries shows that this is going to work,” said Steve Kleinhans, president of Big D Flooring Supply, a Phoenix-based distributor. “From what I have read, much of the illegal drugs that come into the U.S. flow through Mexico but are initiated in China. Hopefully using these negotiations will reduce this amount. I see it as having very little impact for our industry.”
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