The Art of Retaliation

Tariffs, innit

Well, that was a busy weekend.

I imagine you are all up-to-date, but in summary, The Donald has signed some executive orders hitting Canada, Mexico and China with new tariffs to penalise them for not doing enough to prevent fentanyl and its precursor products from entering the US.

Or at least that’s what he says the tariffs are in response to. A cynic might suggest that it’s not really the real reason and more of a convenient excuse that provides a legal basis of sorts for the tariffs. But I am not a cynic.

All three countries have indicated they plan to retaliate.

But what could retaliation look like?

By my reckoning, if someone be Trumping you with tariffs and you want to hit back (ostensibly to make them reconsider their actions), you have three broad options available to you:

1. Stop buying their stuff. In practice, rather than stopping buying their stuff entirely, this usually involves using tariffs to make their stuff more expensive so that they sell less of it. But you can go further than that — Ontario’s decision to remove US alcohol from shelves in response to Trump’s announcement is a good example of this.¹ At the “dark arts” end of the spectrum, in the dingy corners of the trade circuit (by which I mean in a pub or at a white wine reception), you occasionally hear rumours of a country (usually China) lightly suggesting that unless the offender changes their ways the products the offending country’s companies export will become massively unpopular with the country’s consumers, overnight.

2. Stop selling them what they need. If the country threatening you with tariffs really needs something you have, stop selling it to them. We’ve already seen this in the context of the pre-Trump trade beef between the US and China over advanced semiconductors and associated tech, with China threatening to cut off the supply of key critical minerals. At the punchier end of the spectrum, and as threatened by Canada this time round, you could cut off the tariff-aggressor’s energy supply. And if you find yourself thinking that surely no one would go that far, remember that in the dark days of Brexit, France once threatened to cut off The British crown dependency of Jersey’s power supply to … encourage … the UK to let French fishermen catch more fish.

3. Mess with their companies. Away from the tariffs and trade space, governments have lots of tools available to them if they want to mess with foreign companies. What a country can and cannot do is only really limited by imagination and their own adherence to the rule of law. Interventions could include fines, punitive taxes, regulatory interventions, shutting down factories ostensibly for health inspections, restricting imports until a company lets your officials inspect their factory in a foreign company yet conveniently keep forgetting to send your officials, etc.

The battle-hardened among you will note that there are some other options available to countries that want to inflict maximum economic pain on another and its citizens. These include cutting their companies off from financial markets, freezing the assets of key people, arresting people, and invading with soldiers. However, these tend to stray into the sanctions/actual war side of things, and I don’t think we are quite there yet.

(On the sanctions side, I also find myself wondering whether it would even be possible to apply a regime anywhere close to what has been applied to Russia to the US, given the US’s centrality to, well, everything.)

So if those are your options — next you need to decide who to hit.

Here, I think there are two categories of intervention (not mutually exclusive):

• Maximum economic pain. By this I mean that you try to impose broad economic pain on as many companies and people as possible in the hope that it will have a big enough negative impact on the economy of the tariff aggressor to make them change their minds. Energy restrictions probably fall into this category, but there are other examples you could look to if you were getting very creative. For example, you could require all imported US-originating products to be cleared by customs in one very out-of-the-way town at a customs clearance site staffed by one person who works part-time and is often called away to other offices. That kinda thing.

• Maximum political pain. Again, not mutually exclusive with the point above, but here you specifically target individuals and companies that hold some political salience in the country that is tariffing you. In these instances the overall economic impact could be small (and while I remember, when retaliating you do obviously have to account for the fact most measures will also negatively impact your consumers) but the political impact bigger.

  As I mentioned on Bluesky, creating these lists is one of the most enjoyable trade jobs around, and because I am a very boring man, I quite enjoy working my way through retaliatory tariff lists and reverse engineering the rationale.

  This is sometimes very easy. For example, drawing on the EU’s list of items it targetted with tariffs last time around — reminder, these automatically kick back in on 1 April 2025 unless the EU decides otherwise — everyone knows why the EU did this:

  

  Clue: the answer rhymes with Darley Havidson.

  But how about playing cards (CN code 9504 40 00)?

  

  I did some digging, and it turns out the US’ biggest exporter of playing cards is the United States Playing Card Company, which happens to be located in Kentucky. Kentucky is famous for many things that get hit with tariffs, but it is also famous for being the state of then-Majority-Leader Senator Mitch McConnel.

  Which, y’know, kinda makes sense.

The final question is whether any of this will work. I have no idea, but I guess we’re about to find out one way or another.

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Reddit Question of the Week

Don’t ask …

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Chart of the week

I thought this chart (diagram?) shared by Gina C. Pieters, PhD on Bluesky was pretty cool:

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Best,

Sam

1. Someone remind me to write about the Canadian Liquor Control Boards at some point. Wild.