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The Tariffs Are Real, and They Are Spectacularly Foolish

The Atlantic

www.theatlantic.com › ideas › archive › 2025 › 03 › trump-tariffs-canada-mexico › 681912

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If you were setting out to design a trade policy that would harm the American economy while undermining political support for its leadership, you might come up with something like the tariffs that Donald Trump just imposed on Canada, China, and Mexico.

The new tariffs will raise prices for American consumers, weaken the American auto industry, and prompt severe retaliation from America’s top trading partners. With respect to China, a case can be made that tariffs would promote U.S. national security and domestic industry if they were targeted and well designed. But Trump’s blanket 20 percent tariff on all Chinese imports is neither. Meanwhile, the 25 percent tariffs on Canada and Mexico are utterly incomprehensible. There is no grand economic vision, geopolitical strategy, or even political logic behind them. International trade, like all areas of public policy, is a game of weighing costs versus benefits. Trump’s tariffs are the rare policy that might turn out to represent nothing but cost.

The most widespread and direct effect of the new tariffs will come in the form of inflation. Tariffs, which are literally a tax on imported goods, are often passed on to consumers in the form of higher prices, and Mexico, Canada, and China together account for more than 40 percent of U.S. imports. Yale’s Budget Lab estimates that the new tariffs will cost the average household anywhere from $1,600 to $2,000 a year.

[William J. Bernstein: No one wins a trade war]

Those higher costs will disproportionately affect the specific items that American consumers pay the most attention to. Survey after survey has shown that discontent with the broader economy in recent years has been driven more by high grocery prices than any other category of spending. Mexico is the largest exporter to the U.S. of fruits, vegetables, alcoholic beverages, and sugar, and Canada is the top exporter of meat, grains, baked goods, and cooking oils.

In theory, American farms could ramp up production to offset some of those higher prices. But that process could take months or years, and will be made all the more difficult by Trump’s deportation agenda—nearly half of the agricultural workforce is composed of undocumented immigrants—as well as the tariffs themselves, which will raise the costs of foreign fertilizer and farming equipment, on which domestic producers rely heavily.

The primary economic case for tariffs is that they shift demand toward domestically produced goods, which, in theory, should boost American industry. “I would just say this to people in Canada or Mexico: If they’re going to build car plants, the people that are doing them are much better off building here,” Trump told reporters at the White House when he announced the new tariffs yesterday afternoon.

That may come as a shock to, well, the American auto industry. The Big Three car companies have practically begged Trump not to go through with the tariffs. Canada and Mexico produce more than half of the individual car parts that American automakers import every year to assemble their vehicles in the U.S., including multiple components for which there exist literally no American suppliers. A recent report found that the new tariffs could raise the cost of a full-size SUV assembled in North America by $9,000 and a pickup truck by $8,000. American automakers “should not have their competitiveness undermined by tariffs that will raise the cost of building vehicles in the United States and stymie investment in the American work force,” Matt Blunt, the president of the American Automotive Policy Council, which represents the Big Three automakers, said in a statement yesterday. And automakers aren’t alone here. A broad survey of U.S. manufacturers found that the industry was already experiencing higher costs and lower employment in anticipation of the new tariffs.

The full economic cost of the tariffs will hinge on how Mexico, Canada, and China respond. Last month, Beijing placed 10 to 15 percent tariffs on American energy and car exports; today it added chicken, wheat, corn, soybeans, dairy, and other food products to the list. Canada has also announced that it will apply 25 percent tariffs on $30 billion worth of American goods and extend them to $125 billion worth of goods in three weeks. (Mexico has yet to respond with measures of its own but has said it will do so soon.) These retaliatory measures will make it harder for American producers—the ostensible beneficiaries of tariffs—to sell their products abroad.

The official justification for the tariffs is to force Canada and Mexico to address the supposed “extraordinary threat” posed by illegal immigration and fentanyl trafficking at America’s borders. This is a transparent pretext to allow Trump to declare a “national emergency” that empowers him to impose tariffs immediately and unilaterally. Last year, the Canadian border was responsible for just 0.2 percent of the fentanyl seized by U.S. border authorities and 1.5 percent of illegal border crossings. Meanwhile, illegal immigration at the southern border has plummeted since early 2024 to near-record lows, leading Trump himself to declare, “The Invasion of our Country is OVER.” The amount of fentanyl seized at the southern border fell by about 20 percent last year, and Mexican President Claudia Sheinbaum has presided over a major anti-cartel crackdown since taking office in October.

[Rogé Karma: Reaganomics is on its last legs]

Usually, when elected officials implement foolish policies, they do so because they believe the political upside outweighs the substantive downside. What makes Trump’s tariffs so unusual is that the politics of them also appear to be terrible. Trump promised to impose major tariffs during the campaign, and so he might feel that failing to follow through would undermine his credibility. But voters consistently cited inflation, not trade, as the single-most important issue in the 2024 election, and Trump also made promises to lower prices. Now he seems to be going out of his way to break them.

A month ago, when Trump decided to postpone the Mexico and Canada tariffs just before they were set to take effect, I argued that they were never anything more than a hollow threat. I now know I was wrong—but I still don’t understand why a president would follow through on a policy likely to generate so much political backlash for so little gain.

The question now is how long the new restrictions will last. Perhaps a swift political backlash in response to rising prices will compel Trump to find a new pretext to declare victory and get rid of the tariffs promptly. Or perhaps the president will not only keep the tariffs in place, but open up new frontiers in his trade war. Trump has already announced plans to levy reciprocal tariffs on all countries that currently impose any kind of trade barriers on the U.S.—a policy that the Budget Lab estimates would cost American consumers up to $3,400 a year—as soon as April 2. Until yesterday, I would have said there’s no way that would happen. Now I’m not so sure.

One Potential Benefit of RFK Jr.’s Crusade Against Outside Influence

The Atlantic

www.theatlantic.com › health › archive › 2025 › 03 › doctors-influence-trump-medicare › 681909

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For his second presidential term, Donald Trump stacked his health team with men who disdain the medical consensus. Mehmet Oz, who awaits Senate confirmation as the head of the Centers for Medicare and Medicaid (CMS), promoted hydroxychloroquine to treat COVID-19 (it doesn’t work this way) and once faced a Senate panel over his hawking of miracle weight-loss cures (they didn’t work either). Dave Weldon, Trump’s nominee to lead the CDC, has a long history of anti-vaccine comments. So does Robert F. Kennedy Jr., now secretary of Health and Human Services.  

These perspectives are worrisome and divisive. Nonetheless, the incoming administration’s skepticism of entrenched health-care groups, if properly channeled, could help address a specific problem in the nation’s medical system: changing how Medicare pays health-care providers—in particular, specialists and primary-care physicians. In a recent executive order creating a Make America Healthy Again Commission, the president wrote of “protecting expert recommendations from inappropriate influence.” And HHS recently affirmed the administration’s aversion to outside views when it curtailed public comments on policy changes, which are often dominated by interest groups. By reexamining the priorities of doctors’ and hospitals’ groups, the Trump health team could do the miraculous: improve care and save money.

In the United States, physicians’ work is measured in relative value units (RVUs), which account for the time, technical skill, and mental effort involved in any office visit, test, or treatment. Those RVUs determine how much Medicare pays for specific services. Medicare payment also serves as the model for all other insurers, and thus influences most physician payments nationally. Doctors’ pay isn’t necessarily determined by RVUs alone, but for many physicians, compensation is closely tied to the number of RVUs someone working in their specialty is expected to generate. Even doctors who are paid a salary are often expected to meet certain RVU goals, and are paid bonuses for exceeding them.

The RVU system is biased in its very design. CMS relies on an American Medical Association committee to propose adjustments each year to RVU allocations. That committee is made up of 32 doctors—overwhelmingly specialists—and other health-care professionals. Those physicians have an inherent conflict of interest: They are in effect setting their and their colleagues’ pay. The committee estimates time spent for various types of work in part by surveying just a few dozen physicians, who, according to a 2016 report by the Urban Institute, give inflated guesstimates. CMS accepts more than 90 percent of the AMA committee’s recommendations.

As a result, surgeries, scans, and other medical procedures are consistently assigned higher RVUs than office visits or interactions in which a doctor, say,  talks to a patient about smoking or regularly taking medications for their chronic disease—so-called cognitive patient encounters. A cardiac surgeon’s time and effort for an hours-long triple-bypass operation clocks in at about 40 work RVUs. A dermatologist applying liquid nitrogen to freeze benign skin growths—a simple, low-risk procedure that takes less than five minutes—amounts to about 1.11 work RVUs. Meanwhile, a primary-care doctor spending 40 minutes with an established patient who has diabetes, kidney problems, and a heart condition generates only 1.8 work RVUs. This visit is not comparable to removing benign skin growths. And while a primary-care visit might take less time than the surgery, it is not 20 times less valuable—especially because good primary care can prevent the need for the surgery to begin with.

The AMA has made some adjustments to address these problems. In a statement, the association said that its RVU committee is working within the bounds that the government requires: For instance, its work is limited to determining the work value of different codes, not their value to patients. And the group pointed out that nine committee members have a background in primary care. The association also noted that its recommendations are nonbinding, and that its committee has worked with CMS to increase the value of cognitive patient encounters and approved those increases knowing that they would require cuts in other codes, because of Medicare’s budget-neutrality rules.      

But these adjustments are clearly insufficient, and fail to accurately reward high-value physician interventions. Indeed, the higher RVUs for specialty-related procedures mean specialists are paid more, whether or not that reflects the value of the work to patients’ overall health. A 2019 study published in JAMA found that increasing the number of primary-care physicians improved life expectancy more than increasing the same number of specialists by more than 2.5 times. It is clear that primary-care physicians deliver life-saving care—and deliver it efficiently. But their compensation does not reflect this utility. By one estimate based on tax returns, the average orthopedic surgeon or dermatologist earns roughly three times as much as the average primary-care doctor. And those pay differences mean that fewer medical students and residents will train to become primary-care physicians, which endangers Americans’ health.   

The AMA likes to emphasize that its committee provides invaluable expertise and engages thousands of physicians in giving uncompensated advice to the government. This all may be true, but no advice is free. If the federal government disregarded the AMA committee’s advice, it could improve the system through three important reforms.

First, a committee made up of medical experts, health-policy and health-economics experts, actuaries, and others—unaffiliated with the AMA and free of conflicts of interest—could reevaluate the few hundred medical codes that account for the lion’s share of medical costs. They could reassign RVUs based not on physicians’ time, but on health benefit, cognitive skills, and difficulty, when possible. Second, if still relevant, the time that a given procedure takes could be determined by data from electronic health records, as opposed to physicians’ self-reports.

Finally, payments to physicians could be adjusted based on both quality and cost savings. For instance, Medicare could weigh physicians’ success in taking care of diabetes patients by the proportion of patients who have their blood sugars, blood pressure, and cholesterol controlled, and pass annual examinations tracking complications with their eyes and feet. Then, the program could adjust payments going forward: Physicians who achieve or maintain results above a certain threshold would be eligible for higher levels of payment. Similarly, surgeons should be bonused—or penalized—based on surgical-site infections, unexpected emergency-room visits, unscheduled post-procedure hospital admissions, and other quality metrics. These types of changes could usher in improved care, potentially in just a few years.      

In its statement to The Atlantic, the AMA said that its committee does rely on medical records to inform its work when possible, but needs those data sets to meet certain criteria. The association also underlined that it supports alternative payment models, including value-based models, if they’re voluntary for physicians. Still, under the banner of more physician autonomy without financial penalties, the AMA and other medical societies have also frequently opposed payment programs or made them impossible to evaluate because they are voluntary and thus biased.

But payment programs could help improve the nation’s health quickly, and could allow CMS—soon to be led by Oz, if he’s confirmed—to focus on chronic illnesses, particularly high blood pressure, the nation’s most common and deadly chronic disease.  Just under half of American adults have hypertension, and fewer than a quarter of them have their blood pressure controlled. We know how to treat this problem. Since the 1950s, more than 100 cheap, effective medications that lower blood pressure have been developed, and some medical systems and physicians have achieved blood-pressure control for 80 percent or more of their hypertensive patients. These systems all rely on care teams rather than the work of individual physicians, diagnose a patient in their home (where blood-pressure measurements tend to be more accurate), prescribe combination pills that contain two blood-pressure medications, encourage lifestyle changes, and have patients connect to a team member every two to four weeks.


In 2015, the AMA did launch a trademarked blood-pressure-control program—Target: BP, which shares some of these same insights. But despite all of these efforts, blood-pressure control has not improved, according to the CDC. Financial incentives could change that. Judging by previous experiments, those incentives would need to be large. For instance, Covered California, the California exchange, made blood-pressure control one of four quality measures for insurers, and penalized insurers who failed to meet targets with escalating reductions in premiums. In 2023, the first year the program ran, the penalty was a 1 percent reduction; blood-pressure control improved a remarkable 12 percent.  

Adopting this approach, CMS could make achieving a certain threshold of successful treatment of hypertension the dominant measure for the quality assessment of Medicare Advantage plans, and link that measure to bonuses. CMS could also penalize those achieving less than 50 percent control.

Faced with such reforms—which could lower hospitals’ and doctors’ bottom line—the medical lobbying groups would, no doubt, rebel. The AMA, for one, has long had an aversion to what it calls “scope creep”: proposals enabling nonphysician providers to take some clinical responsibility for patients that is essential to team-based care. The association claims that scope creep results in worse quality and more expensive care. At the same time, physicians and health-care organizations would likely claim they can’t take an approach that requires more intensive contact with patients, because they aren’t paid enough to spend the time. Plus, those threatened by penalties for their poor  performance would likely claim they have sicker and noncompliant patients.

Perhaps an administration filled with people willing to dismiss such self-interested pronouncements would be better at addressing chronic illness, as the president has said he intends to with the Make America Healthy Again Commission. If Kennedy and the rest of the administration focus on delegitimizing vaccines and defluoridating water, the nation’s health will suffer. But Trump’s Cabinet could also ignore special pleading by the medical establishment and fix physician payment and hypertension. That’s certainly a better prospect than more measles deaths.