| This is Bloomberg Opinion Today, a free trade agreement between Bloomberg Opinion's opinions. Sign up here. When Beyoncé announced her Cowboy Carter tour over the weekend, you could almost hear the wallets around the world weeping. "Klarna, can you handle this?" one person tweeted. "Beyoncé taking the Valentines Day money y'all. Candlelit dinner for two at Wendy's," another said. And this tweet about tariffs got 85,000 likes: Google tells a similar story, with interest in "tariffs" far greater than in her tour. Although searches spiked when she took home her first-ever Album of the Year Grammy last night, fears of President Donald Trump imposing 25% tariffs on Mexico and Canada quickly resumed: The good news — for enthusiasts of both Beyoncé and the Bloomberg Terminal — is that some of those fears dissipated on Monday. In the morning, Trump and Mexico President Claudia Sheinbaum reached a friendly agreement to postpone tariffs and curb drug cartels for a month. And by late afternoon, Trump and Canada Prime Minister Justin Trudeau had agreed to a 30-day delay as well. The bad news, according to JP Spinetto, is that Mexico remains in trouble: "If the free trade agreement in North America — known as USMCA — is permanently put into question by the US, there is no point in establishing new factories south of the border to serve the American market," he writes. Even though costs are often cheaper in Mexico, companies would much rather invest in factories in Texas, Alabama and South Carolina, because the risk of doing business over the border is too high. And what about America's northern neighbor? "If fentanyl is really driving this, then putting tariffs on Canada isn't even in the top 100 policies that might deal with it," notes John Authers, who is doubtful about Trump's true motives. So too are Joel Griffith and Marc Short: "Trump is eager to impose disruptive tariffs even when not in pursuit of meaningful economic and national security goals," write the pair of conservative policy analysts. "In his first term, he placed tariffs on Canadian lumber — driving up costs for US consumers on furniture, home construction and even books — along with tariffs on aluminum and steel." The 2018-19 tariffs cost American families more than $300 per year — a figure that could triple this time around. No matter what happens when the clock strikes 12 a.m. EST Tuesday, JP says "the threat of tariffs will hang like the Sword of Damocles over any investments in Mexico and Canada for the remainder of his administration or longer, giving persuasive arguments to corporations to stay at home." On the other hand, from the perspective of Mexico or Canada, it's a good opportunity to make new friends. As Jonathan Levin says, expect to see "stronger trade alliances with other countries, including our adversaries." Bonus Tariff Reading and Watching: - The outlook for economic policy is anybody's guess. The Federal Reserve can't afford to speculate. — Bloomberg's editorial board
- Europe is next in line for tariffs, and Trump might aim squarely for Germany and France. — Marcus Ashworth
- Trump is unpredictable — and so are his tariffs. Is there a strategy behind the chaos? Join Tim O'Brien, Nia Malika-Henderson and Jonathan Levin for a live discussion on Feb. 4 at 8:30 a.m. EST.
Are we sure that DOGE doesn't stand for Dismantle Operations & Gut Employment? Because in the last 72-ish hours ... - Musk's team got access to the Treasury's payments system, which includes Social Security and Medicare.
- Musk's aides locked civil service workers out of OPM (United States Office of Personnel Management) computer systems.
- Protesters gathered outside of the OPM building to chant "Elon, Elon, have you heard? You're a nasty, fascist nerd."
- A group of young Musk aides — known as the "DOGE kids"— raided desks and had a standoff with a security official at the United States Agency for International Development.
- More than 100 USAID employees were placed on administrative leave and Musk said the Trump administration is prepared to "shut down" the agency.
- Secretary of State Marco Rubio became the acting head of USAID and he might fold it into the State Department.
- Federal workers have published several op-eds to document the internal turmoil.
It's all part of a wider "effort to get lots of people to quit their jobs," explains Matthew Yglesias. Trump officials have ordered federal workers back to the office five days a week. They've made dubious "buyout" offers to weed out weak links. They've fired senior staffers for legally suspect reasons. They've reassigned workers to nudge them to resign. "It's clear that Trump's goal is not to make the civil service better or more responsive or to enact any kind of systemic change," he writes. "This is a reckless effort to reduce headcount or, failing that, to create vacancies the new administration can fill." By the time you read this, who knows what other agencies will be on the chopping block. FEMA wouldn't be so surprising, considering Trump said he'd like that agency to "go away" prior to signing this executive order for a "full-scale review." Reform would be welcome, but eliminating it entirely would be a major mistake, says Mary Ellen Klas. "States like Florida, which has been pummeled by 14 hurricanes in the last decade, are so dependent on the federal government to fund its emergency management operations that the state's Division of Emergency Management is supported almost entirely with federal grants," she writes. "If Trump cuts those, the rising cost of eggs will be pennies compared to the soaring cost of living in Florida." Of course, who lives in Florida and a bunch of other disaster-prone states? A lot of the president's voters. |
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