Trump: The Expert At Using Leverage

The big story of the weekend was that President Trump launched massive tariffs on Canada, China, and Mexico. 

The big question when it comes to tariffs is whether President Trump is using them as leverage or whether he’s doing this ideologically. This is always the big question with President Trump, because by using them as leverage, he’s been quite successful. When it comes to making deals, there is no one in the business world who’s better at leverage than President Trump.

President Trump loves using leverage to get what he wants. He did this just a couple of weeks ago with Colombia. He threatened them with 25% tariffs and said they would escalate unless they took back illegal immigrants; they immediately caved. 

And that seems to be happening with Mexico and Canada.

As of Monday, President Trump was sending some strong signals. He said, “Listen, I like tariffs. Tariffs are going out.”

When you’re playing chicken, you put a brick on the accelerator and say, “Listen, I’m perfectly happy to go off this cliff. Let’s do this thing, man. Let’s make it happen.”

Trump talks up tariffs as a way of saying, “Listen, I don’t mind, we’ll do it. You think we won’t do it? We will 100% do it. It’s not a bluff. I’m happy. I’d rather do it.” And then, when he gets what he wants, he can back off the tariffs.

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We found out on Monday morning that the tariffs were anything but permanent. In fact, President Trump was able to leverage major concessions out of the Mexican government. 

Trump wrote on Truth Social:

I just spoke with President Claudia Sheinbaum of Mexico. It was a very friendly conversation wherein she agreed to immediately supply 10,000 Mexican Soldiers on the Border separating Mexico and the United States. These soldiers will be specifically designated to stop the flow of fentanyl, and illegal migrants into our Country. We further agreed to immediately pause the anticipated tariffs for a one month period during which we will have negotiations headed by Secretary of State Marco Rubio, Secretary of Treasury Scott Bessent, and Secretary of Commerce Howard Lutnick, and high-level Representatives of Mexico. I look forward to participating in those negotiations, with President Sheinbaum, as we attempt to achieve a “deal” between our two Countries.

President Trump used his emergency authority to stop all illegal immigration in order to make the tariffs happen. And he’s now saying that because Mexico is alleviating the emergency, presumably this is going to be delayed by a month, so a new trade deal can be negotiated. 

So it was all leverage. It was not, in fact, an overall love for tariffs.

Meanwhile, he made clear exactly what he wanted from Canada. He wrote:

Canada doesn’t even allow U.S. Banks to open or do business there. What’s that all about? Many such things, but it’s also a DRUG WAR, and hundreds of thousands of people have died in the U.S. from drugs pouring through the Borders of Mexico and Canada. Just spoke to Justin Trudeau. Will be speaking to him again at 3:00 P.M.

Using tariffs as a form of leverage is something President Trump is very good at.

As for overall tariff policy, it should be noted, trade wars are bad and not easy to win. Trade wars tend to impoverish people. Trade wars tend to impoverish the American consumer, in particular. 

That’s why we saw the stock market take a dive at the very beginning of the day when it looked as though Trump was pushing tariff policy as a net good to the United States.

But it’s clear that President Trump is doing this as a leverage play. 

The Canadian government responded by getting very militant. Justin Trudeau, who is still titularly the prime minister of Canada, announced retaliatory tariffs right away, saying:

Tonight, I am announcing Canada will be responding to the U.S. trade action with 25% tariffs against $155 billion worth of American goods. This will include immediate tariffs on $30 billion worth of goods as of Tuesday, followed by further tariffs on $125 billion worth of American products in 21 days’ time to allow Canadian companies and supply chains to seek to find alternatives.

And then, on Monday afternoon, Trudeau suddenly capitulated. He wrote on X:

I just had a good call with President Trump. Canada is implementing our $1.3 billion border plan — reinforcing the border with new choppers, technology and personnel, enhanced coordination with our American partners, and increased resources to stop the flow of fentanyl. Nearly 10,000 frontline personnel are and will be working on protecting the border. In addition, Canada is making new commitments to appoint a Fentanyl Czar, we will list cartels as terrorists, ensure 24/7 eyes on the border, launch a Canada- U.S. Joint Strike Force to combat organized crime, fentanyl and money laundering. I have also signed a new intelligence directive on organized crime and fentanyl and we will be backing it with $200 million. Proposed tariffs will be paused for at least 30 days while we work together.

A trade war would hurt Canada more than it would hurt us; if they tariff American products, they’re taxing their own consumers.

But this is what happens in a trade war. You increase your tariffs. The other countries being targeted increase their tariffs to retaliate because they say, “We’re not going to let your goods in our market. You’re not letting our goods in your market.”

Then, if this sort of thing were to be carried out over a long period of time, it would be a real problem, because China, in particular, would be more than happy to fill that gap with cheap free trade with Canada, Mexico, or Europe.

But when it comes to playing chicken, President Trump is very, very good. Mexico is sending 10,000 troops to the border and pledging to stop the flow of fentanyl. Canada is now doing the same.

These are big wins for President Trump.

There’s no other way to put it.