Follow the Money Flow

PUBLISHED APRIL 2025

Earlier this month, President Trump unveiled potential reciprocal tariffs in a Rose Garden ceremony, and they were bigger than just about anyone expected. The base was a 10 percent tariff on all imported goods. Additional tariffs were to be imposed based on a ratio of the trade gap to the total trade with individual countries. Trump’s aim is to address trade imbalances. 

Canada and Mexico appear to be big winners, as no additional tariffs were to be imposed on them. Once goals are met on border security and fentanyl trafficking, tariffs on both nations will even drop to 12 percent, except for USMCA-eligible goods, which will be tax free. The Big Three auto companies will also be big winners as a result, as their trade falls under the USMCA umbrella. 

Future negotiation could reduce Canada and Mexico’s rate to zero, but only if Canada and Mexico join U.S. drug-interdiction efforts, join the U.S. border-control efforts, eliminate tariffs on U.S.-made goods and join the U.S. with tariffs on other nations. It is a big ask, but both countries would significantly benefit economically as a result. Canadian officials initially seemed amenable to the idea.

China would be the big loser. Its goods would be subject to a 34 percent additional tariff on top of the 20 percent tariff imposed until China stops shipping fentanyl and fentanyl-precursor chemicals to America. The Chinese tariff is high in part because the tariffs are designed to offset both tariff and non-tariff import restrictions. China is a big proponent of the latter. Not surprisingly, the Chinese government responded angrily, promising retaliation. 

Tariff news will continue to dominate the headlines, assuming President Trump also unveils the largest set of tariff increases seen in a century or more. There have been plenty of references to the Smoot-Hawley Tariff Act of 1930, but the presidential era that Trump has seemingly modeled his economic platform after is what occurred in the 1890s. 

At that time, William McKinley was making waves from the White House, and the 25th president continues to be referenced in many of Trump’s speeches, media interviews and even his inaugural address. “I am a tariff man, standing on a tariff platform,” McKinley declared on the presidential campaign trail in 1896, appealing to America’s core manufacturing base and dominant industrial states. 

This followed decades of his work in Congress that culminated in the McKinley Tariff of 1890, which raised the tariffs on most imported manufactured goods to around 50 percent, as well as the 1897 Dingley Tariff when he assumed the presidency.

McKinley also oversaw a period of American expansionism, from the annexation of Hawaii to territories like Puerto Rico and Guam, aligning with Trump’s current view of expansion, maybe including Greenland, the Panama Canal, or even making Canada the 51st U.S. state. 

Trump’s crackdown on illegal immigration also mirrors McKinley’s stance of “securing the United States from invasion by the debased and criminal classes of the old world … against all such our gates must be tightly closed.”

Economically speaking, Trump has pointed to the 1890s as an era when the U.S. ran a massive surplus and “didn’t know what to do with all of the money we were making.” As they did then, and still do today, economists debate the impact of tariffs, especially in different periods for the economy, such as rapid industrialization or integrated globalized supply chains, as well as their relation to federal government spending as a share of GDP. 

Before McKinley was assassinated in 1901, he also discussed the value of “reciprocity treaties” and opening more trade with the outside world once the U.S. had “produced beyond our domestic consumption … under the domestic policy now firmly established.” Whether McKinley’s stances helped the markets, or whether they align with Trump in the modern age, they may be just as controversial as they were then. 

One thing that is certain is that Trump is out to remake the U.S. economy and the world trading system. 

“In the coming days, there will be complaints from the globalists, the outsourcers, and special interests, and the fake news,” he declared from the Rose Garden. “Never forget, every prediction our opponents made about trade over the last 30 years has been totally wrong. They were wrong about NAFTA, they were wrong about China, they were wrong about the Trans-Pacific Partnership. In my first term, they said tariffs would crash the economy; instead, we build the greatest economy in the history of the world.”