Business
Trump's Inauguration Will Not Alter the Reality That People Resent High Gas Prices
2025-03-15 23:51:07
The new administration is facing challenging political repercussions due to the tariffs that Trump intends to implement.
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After a meeting with President-elect Donald Trump at Mar-a-Lago, Alberta Premier Danielle Smith told reporters that she does not expect Canadian goods to gain any special exemptions from the tariffs Trump plans to levy soon after taking office.
Smith had pitched Trump on exempting Alberta's crude oil exports from the 25 percent across-the-board tariffs that the incoming president has threatened to impose, the Edmonton Journal reported. Alas, Trump seems unmoved. "I haven't seen any indication in any of the president's public commentary or even in the comments that he had with me that he's inclined to change his approach," Smith told the paper.
On the American side of the border, it might be helpful for someone to game this out. More than 50 percent of the crude oil imported to the U.S.—the stuff that is used to make gasoline and other essential products—comes from Canada (and much of that total comes from Alberta, specifically).
A new tariff on that crude oil will be passed along to consumers down the supply chain. Among other things, that likely means higher prices at the pump. The specifics remain to be seen, but analysts believe prices could jump by 40 cents or even 70 cents per gallon. If those tariffs spiral into a broader trade war, energy companies are already warning about "volatility in crude oil prices, impacting refineries and downstream fuel markets, especially for gasoline and diesel."
Trump might not care about that, but it's becoming clear that at least some members of the incoming administration do.
Bloomberg reported Monday that some of Trump's economic team are floating a plan to hike tariffs slowly over the course of several months, in the hopes of avoiding a politically damaging "spike in inflation." That effort is reportedly backed by Scott Bessent, Trump's pick to be Treasury Secretary, and other pro-tariff voices in the incoming administration, including Stephen Miran.
But, wait a moment. Tariffs cause inflation? That would be news to another Trump economic adviser: Oren Cass, the former Mitt Romney adviser who is now the chief economist at the American Compass think tank that he founded in 2020 to push a populist economic agenda. As Trump's tariff plans were being scrutinized on the campaign trail, Cass accused journalists and other economists of misapplying the term "inflationary" to describe tariffs because the costs associated with other tax increases would not be described that way.
From a technical standpoint, Cass makes a valid argument. Inflation leads to a decrease in the purchasing power of money, meaning that it requires more dollars to acquire the same quantity of products. Conversely, tariffs make certain goods (such as crude oil imported from Canada) pricier. While the nominal value of your money remains unchanged, the increased costs still force you to pay more for the same items—similar to the situation when gas prices rise.
Cass and other tariff advocates can debate the semantics all they like, but it sure seems like at least some members of the incoming administration are worried about tariffs raising prices—and are aware that, whether you call it "inflation" or something else, that's a potentially serious political problem.
Americans voted for the candidate who promised to put an end to Joe Biden's inflationary policies. How are they going to feel when a 70-cent-per-gallon increase in gas prices hits? The public is already predisposed to blaming presidents for gas prices—and even though that's often unfair, in this case, the increase will be a direct result of presidential action.
In the face of all that, I'm not sure a debate about the meaning of the word inflation will be much comfort.
A far more effective approach? Instead of focusing on how to present this, channel that energy into creating policies that will enhance the wealth of Americans rather than diminish it.
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