Tariffs, Tactics, and a Power Play

Contrarians,

The louder the headlines, the harder it is to separate strategy from hysteria. So let’s make this simple. When we sat down to write this…

• President Trump had threatened Canada and Mexico with 25% tariffs, China with 10%, and everyone began scrambling.
• The economy was (and still is) having a minor panic attack, as Canada promised $155 billion in retaliation, and Mexico threatened retaliation.
• Debates raged: Is this an economic strategy, or a policy grenade with no clear exit plan?

The question isn’t if this is a strategy. This is a clear, hardball negotiation. The Art of the Deal, live-streamed. This is about leverage. And when you understand leverage, you see how it moves everything…

Today in 5 minutes or less:

✔️ What’s actually happening?

✔️ What this means for your wallet

✔️ 1 BIG hidden cost

✔️ The great global chessboard

What’s Actually Happening?

Is this 4D economic chess, or did Trump just start a trade war because he got mad at Justin Trudeau’s eyebrows? It’s Tru-deau. ;) Our take? This is all about leverage. Let’s step back…

Based on government data released yesterday, the US trade deficit hit a record in 2024.

• With China: The U.S. trade deficit last year came in at around $295 billion, up from $279 billion in 2023. This deficit has been a political punching bag for years.
  
• With Mexico: The trade deficit was $172 billion, up from $152 billion in 2023, fueled by auto parts, electronics, and agriculture. Mexico recently became America’s largest trading partner — a tariff war here has serious consequences.
  
• With Canada: The deficit is smaller, a mere $63 billion, about the same year-over-year.

Altogether, these 3 countries make up more than 1/3 of the products imported into the United States, worth well over $1 trillion annually.

A core argument for tariffs: leveling these playing fields. Because these countries are so reliant on the U.S. to import their goods, by making those imports more expensive, the idea is that the U.S. can get better trade terms and potentially bring more manufacturing back home.

But on paper, the official reason behind Trump’s tariffs wasn’t even much about trade imbalances or manufacturing — it was about fentanyl.

The official name of his executive order? “Imposing Duties To Address The Flow Of Illicit Drugs Across Our National Border.” The message: Do your part to address this, and maybe the tariffs go away.

Trump isn’t exactly subtle when it comes to negotiating, and analysts at Goldman were already estimating this move was a temporary one:

"In light of their potential economic effects and the fact that the White House has set general conditions for their removal, we think it is more likely that the tariffs will be temporary, but the outlook is unclear."

Translation? The smart money was assuming this could be a flex, suggesting the administration sees tariffs not as less of a long-term trade policy but more as a short-term bargaining lever.

Here’s what (we think) the plan is:

1. Create a lever, but don’t pull it. Threaten tariffs, and watch as markets, businesses, and foreign leaders enter crisis mode.
2. Force a reaction. Give a deadline, call out bluffs, don’t budge, and watch Mexico, China, and Canada rush to the table to avoid economic pain.
3. Find the off-ramps. Get them to agree to something tangible. As Sun Tzu said, “Give your enemy a golden bridge on which to retreat.”
4. Claim victory. Signs new trade deals and border protection agreements. Best case? There’s a real impact, and the economic crisis never actually comes to fruition.

Of course, this approach carries significant risks and uncertainties:

• Tariffs don’t guarantee cooperation. There’s no certainty that China or Mexico will take action that satisfies the administration. Our bet is that they will. Trade accounts for 67% of Canada’s GDP, 73% of Mexico’s GDP, and 37% of China’s GDP, but only 24% of U.S. GDP.

• If there isn’t cooperation, U.S. businesses and consumers may absorb the cost. Tariffs function as taxes on imported goods, and costs could pass down the chain.
  
• Retaliation was already happening. Canada and Mexico announced counter-tariffs, escalating economic tensions. This was likely bluffing, and backroom deals will happen.

Either way, the outcome depends on how China, Canada, and Mexico respond. And as it turned out, as we were writing this, China, Canada, and Mexico did exactly that. China returned the favor with tariffs of their own. As for the others…

Exhibit A:

Exhibit B:

As JD Vance put it, “How do you like them apples?” It was by the book, as we expected. Trump:

• Created a “lever” (by threatening very real tariffs)
• Forced a reaction (by giving a deadline and calling out bluffs)
• Found the right off-ramps (immediate border enhancements and renewed economic negotiations)

Now he’s working on closing the deal on a 1-month timeline. That’s good news, but if this saga has taught us anything, it’s that certainty is an illusion. So here’s what you should know to stay sharp because the next move could flip the board all over again…

What Tariffs Would Mean for Your Wallet

Some argue that smart tariffs used as an economic tool or weapon can help protect U.S. jobs, boost domestic production, and strengthen national security, even if they drive inflation up.

However, critics point out that higher consumer prices, inefficiencies, and trade wars could create more problems than they solve. (When was the last time you heard “war” and thought, Yes, that’s great for my grocery bill?)

Tariffs may sound like a problem for CEOs in corner offices, but make no mistake — the impact could eventually land on your doorstep. Industries aren’t charities. If they can pass the cost down to you, they probably will.

How Much More Would You Pay?

• The Budget Lab at Yale estimated these tariffs could eventually cost U.S. households $1,000 to $1,200 a year in lost purchasing power.
• The Tax Foundation pegged an initial hit at $830 per household, with costs rising.
• The Tax Policy Center said after-tax incomes could drop by 1% next year, if enacted

Where Would You See It?

All over, including:

• Groceries: Fresh produce, especially anything from Mexico (avocados, tomatoes, berries).
• Electronics: Phones, computers, and appliances rely heavily on Chinese components.
• Cars: Mexico is a key auto parts supplier, meaning your next repair or new vehicle could cost more.
• Energy Bills: Tariffs on Canadian natural gas and oil mean heating and cooking costs could rise. Some fuel providers might raise prices preemptively.

One California ice cream shop we learned about was gearing up for a rise in costs of Chinese-made refrigerators, blenders, and even sprinkles, all of which affect profit per scoop. Sprinkles!

Our take? This administration has little interest in legitimately endangering American businesses, especially will small business sentiment surging since the election.

Trump is applying a pressure-inducing strategy, not as an end, but as a means to an end. It appears he already may be employing it in other geopolitical matters, too.

Sure, it’d be nice if all this could be done without the theatrics — but without the theatrics, perhaps it couldn’t be done.

1 Hidden Cost (That No One’s Talking About)

Buried inside this week’s events is something that might actually reshape ecommerce in America— the potential end of the "de minimis" exemption.

For years, this loophole let foreign companies ship small packages (under $800) into the U.S. tariff-free, avoiding financial and operational costs that U.S. businesses had to pay. The result?

Companies like Shein, Temu, and Alibaba flooded the market with ultra-cheap goods, making it nearly very difficult for domestic retailers and small brands to compete. Recent government data from U.S. Customs and Border Protection (CBP) should put it into perspective:

• In 2023 alone, the U.S. processed 1 billion de minimis parcels.
  
• From 2018 to 2021, China accounted for 67.4% of U.S. de minimis imports, totaling $228.3 billion.
  
• While CBP doesn’t track which de minimis imports come from e-commerce sales, the U.S. International Trade Commission estimated that 83% of U.S. e-commerce imports in 2022 fell under de minimis.
  
• China reported exporting $18.4 billion worth of de minimis shipments to the U.S. in 2023 — about one-third of all U.S. de minimis imports.

Winners: Small Businesses & American Makers

Some assume only giants like Walmart will benefit from these changes. They could see less competition from ultra-cheap mystery sneakers made in Guangzhou.

The reality is that there could be positive effects on American creators across the board, including small business owners, independent brands, and makers who have been crushed by a tidal wave of impossibly cheap foreign imports.

Why This Change Is Overdue

This isn’t just about cheap t-shirts and gadgets — it’s about protection and fairness.

• Counterfeits & unsafe products have flooded the market. Shein, Temu, and Alibaba benefited from little oversight on de minimis shipments. Many counterfeits and unhealthy materials have also likely been able to enter the U.S. unchecked.
• American brands are held to strict quality, wage, and regulatory standards. Meanwhile, low-cost imports were able to sidestep much of this.
• The U.S. government could also finally get its cut. Officials claim de minimis not only cost the U.S. billions in lost tax revenue but also made it easier to smuggle in illicit drugs. Now they could fix both in one move.

Big picture, this isn’t just a random tweak — it could be a massive shift in how global ecommerce businesses work. The flood of fast fashion and bargain-bin goods won’t vanish overnight, but the days of Chinese sellers exploiting tax loopholes to crush small businesses?

That era might be coming to an end.

The Great Global Chessboard

Trump’s moves this week — whether you see them as strategic brilliance or unnecessary chaos — are more likely than not deliberate plays to force better terms where previous leaders have failed.

Is it working? Mexico and Canada were at the table within days. Perhaps China won’t be far behind. There’s a real risk here. Things could backfire. If these negotiations stall, if tariffs stick, the economic pain won’t be theoretical. But so far, this administration is clearly looking to put its leverage to use.

Expect more threats, more back-and-forth, and eventually, more deals. Whether you like it or not, we’re all now front-row spectators to a live, high-stakes, case study in this global game of negotiation.

The information contained here is educational, may not be typical, and does not guarantee returns. Background, education, effort, and application will affect your experience and the profitability of any business. Individual results may vary.