Last month, Nicholas Gilbert received a delivery of grain for the 1,400 cows he tends at his dairy farm in Potsdam, New York, 20 miles from the Ontario border. The feed came with a surprise tariff of $2,200 tacked on. “We have small margins,” he told me. “I had a contracted price on that grain delivered to my barn. It was supposed to be so much per ton. And they added that tariff right on top because it comes from a Canadian feed mill.”
Gilbert cannot increase the price of the milk he sells, which is set by the local co-op. He cannot feed his cows less food. He cannot buy feed from another supplier; there aren’t any nearby, and getting it from farther away would be more expensive. When he got the delivery, he stared at the tariff for a while. Shouldn’t his Canadian supplier have been responsible for paying it? “I’m not even sure it’s legal! We contracted for the price on delivery! If your price of fuel goes up or your truck breaks down, that’s not my problem! That’s what the contract’s for.”
But the tariff was legal, and it was Gilbert’s responsibility. The dairy farmer is one of tens of thousands of American business owners caught in a spiraling trade war, and lives in one area of the United States that might already be tipping into a recession because of it. Businesses near the Canadian border are particularly vulnerable to the rising costs and falling revenue caused by tariffs, and are delaying projects, holding off on hiring, raising prices, letting workers go, or wondering how they are going to keep feeding their cows as a result.
President Donald Trump kicked off his long-promised trade war by applying levies to steel, aluminum, and goods from China, Canada, and Mexico soon after he took office—insisting, incorrectly, that foreign companies would pay the tariffs and that American growth would surge. On Wednesday, he unleashed a global shock-and-awe campaign, announcing tariffs on every American trading partner.
The measures are meant to counter foreign countries’ tariffs and trade barriers, Trump said. But the numbers announced have nothing to do with such policies, where they even exist. The White House set a minimum 10 percent levy on imports from around the world, and imposed higher rates on imports from more than 60 countries, territories, and trading blocs. The administration appears to have derived those higher rates by dividing the value of the country’s bilateral trade deficit with the United States by the value of its exports to the United States.
The tariffs are capricious, haphazard, and weird. The Trump administration took into account only trade in goods, not services. It slapped tariffs on countries with long-standing free-trade agreements with Washington, including Australia, South Korea, Israel, Panama, Singapore, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic. It put tariffs on countries with a trade surplus with the United States. It implemented tariffs on remote, uninhabited islands. It implemented tariffs on a territory occupied predominantly by American and British soldiers.
The nonsensical policy will nevertheless have real effects. American consumer goods will get more expensive, with the average family paying an estimated $3,800 more a year for groceries, cars, clothing, furniture, and everything else if the tariff rates remain this high. Thousands of American firms, mostly small businesses, will go under. The United States risks collapsing into an astonishing voluntary recession, caused solely by a few powerful ideologues’ erroneous beliefs about trade.
If you want to understand where the American economy is heading, head to the border.
From Bellingham, Washington, to Calais, Maine, the United States has dozens of communities that are not so much linked to Canada’s economy as interwoven with it. Gas stations in these places rely on business from Canadian commuters. Ski resorts and water parks rely on Canadian tourists. Manufacturing firms rely on Canadian industrial inputs. Farms rely on Canadian feed. Hotels rely on Canadian business conferences.
Contrary to Trump’s pronouncements, tariffs are paid by domestic importers, not foreign exporters. Most companies pass the cost increase on to consumers. Others, like Adon Farms, cannot. “We’re taking that right on the chin,” Gilbert told me, explaining that he would have to pay tariffs on the fertilizer and farm equipment he buys too. “We’re not like other businesses,” he told me. “We’re very slow moving. I can’t pivot at all.”
Manufacturing firms and construction companies near the border face the same quandaries as the costs of steel, aluminum, lumber, and machine parts rise. These firms can’t quickly relocate their operations or find new suppliers either. “We surveyed 40 of our manufacturing companies in the region,” Garry Douglas, of New York’s North Country Chamber of Commerce, told me. “One sources raw materials from Canada and is looking at a $16 million cost increase to their U.S. operation. Another company is a paper mill that sources wood pulp from Canada. It’s the one source of the type of wood they need.”
At the same time as it is raising costs for border businesses, Trump’s quixotic trade war with Canada is depressing revenue for these businesses too. Dan Kelleher runs a tourism-promotion agency in the Adirondacks. “We had a terrific January in terms of overall visitation,” he told me. “Our numbers were up 24 percent over the five-year average. And then February came.” The president kept referring to Canada as the “51st state,” and hit the United States’ closest ally with a 25 percent tariff. Spending on lodging dropped 4 percent in February, Kelleher told me, with retailers reporting a 20 percent decline in sales.
“We have a lot of cross-border events, particularly hockey tournaments,” Kelleher said. “The teams are locked in to come play, but when they come, they’re not spending any money here.” He worried about the summer tourist season, and more so about the relationship between residents of the Adirondacks and their neighbors across the border. “Our Canadian friends—they’re upset, they’re hurt, they’re betrayed.”
Ron Kurnik is a dual citizen who lives in Canada and commutes across the border to run Superior Coffee Roasting, a café and coffee distributor in Sault Ste. Marie, Michigan. “One of our premier labels is an espresso blend, which I aptly termed the friendly neighbors,” he told me. “We spell it both ways on the label, neighbors and neighbours. It’s been the centerpiece of our business, and our relationship with the residents of this area.”
Kurnik imports his coffee beans from Mexico and his coffee bags from China; both are more expensive, thanks to Trump’s levies. “With the added tax, we’re currently underwater on distribution,” he told me. With fewer Canadians crossing the Saint Marys River, sales at his café have dropped too. Superior Coffee Roasting has a “bit of a war chest,” in the form of profits from last year, Kurnik said. “That will probably, probably, get us through this year.” But he’s cut back on employee hours and laid one person off. “I’m trying to hold the line and not make too many big, consequential decisions,” he said. “If these things continue for six, eight months or beyond, it’s going to get bad.”
Residents of border towns see their shopping malls and greasy spoons half empty. They read stories in the local paper about rising construction costs and Candians detained at border crossings. They notice the lack of hiring signs. They hear about the trade war on the evening news. As a result, many are reducing their own spending in expectation of a downturn: putting off home repairs, delaying the purchase of a new car, canceling vacations, eating in instead of ordering out.
“It is definitely having a rippling effect, and it’s been immediate,” says Michael Cashman, the supervisor of the town of Plattsburgh, New York, 20 minutes south of the border. “These may seem like small trade restrictions in Washington. But they’re devastating for our region.” He told me he was “deeply concerned” about sales-tax revenue dropping. Plattsburgh is preparing to pull back on public spending “until there is more clarity in the forecast.” Of course, the town cutting its budget would worsen the downturn.
What is happening in Plattsburgh and Sault Ste. Marie is happening in rural Nebraska, Kentucky’s bourbon country, and Las Vegas too—in every community that relies on foreign tourists, foreign imports, foreign exports, and cross-border traffic. Now, Trump’s new policies have put the whole country at risk. I surveyed my inbox the morning after the president’s Liberation Day announcement, reading market analysts’ notes: a “self-inflicted economic catastrophe,” a “large headwind,” a “transformed outlook,” “unconditionally bad,” an “extended period of volatility,” a “historic shift,” “madness.”
In Michigan’s Upper Peninsula, Kurnik was penciling out numbers on Wednesday—when retailers might raise prices for a bag of beans, how much to slow down production—while Trump was preparing for his speech in the Rose Garden. “We can’t operate a business flying by the seat of our pants,” he told me. “The administration can organize itself in that fashion. But how do you realistically expect me to follow suit?”
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