Trump Tariffs: Classic Carrot and Stick Strategy

by Jeffery A. Keill, CFP,CIM,FMA,FCSI, CEA

When Donald Trump rolls out sweeping tariffs during his presidency, it isn’t just an economic maneuver - it’s part of his  strategic game of incentives and penalties, perfectly aligned with the old age approach of “carrot and stick”. Set em’ up with the Carrot and beat them with the Stick. Not much different than the formula used in his commercial projects or reality show. You do it or “your fired!”

The Carrot is the alure. The expected tasty result one can expect by following plans. It is the promise of a better tomorrow. MAGA (Make America Great Again). Sometimes it works and sometimes it does not . In the case of Mr. Carrot himself the tariff promise is/was/should be:

• Favourable access to U.S. markets if nation plays ball

• Exemptions or reductions in tariffs if new terms were accepted

• Economic security and growth for U.S. industry and labour

The Stick- Tariffs. Tariffs - especially those targeting China, the EU, Mexico, and Canada - served as the “stick.” These imposed costs on imported goods are designed to:

• Punish nations perceived as exploiting U.S. trade policies.

• Create leverage in renegotiating trade agreements.

• Encourage domestic manufacturing by making foreign goods more expensive.

Industries like steel and aluminum are hit hard, but so are everyday items like washing machines, electronics, and even agricultural exports in retaliatory rounds. It isn’t just foreign producers feeling the sting - American consumers and business are going to be absorbing higher costs too.

Supporters of the plan hailed it as bold negotiations keeping with his election promises. Critics called it a blunt instrument going beyond promises. In other words: a stick. Either way, the strategy continues to rely on:

• Pressure through economic pain or the threat of pain

• Encourages deal-making renegotiations

• A high stakes bet that foreign powers would bend rather than retaliate

In practice, some countries are returning to the negotiating table. Others, like Canada, continue to fire back with their own tariffs - triggering trade tensions that rippled through global supply chains and investment markets. Unlike the US Administrations, Canada is taking a more diplomatic approach and keeping most comments limited.

As everyone has come to realize all to well, Trump’s tariff approach is not subtle- it is an all-in move that continues to test patience, pain tolerance, and power. The “carrot” was always dangling, but the “stick” often hit home first. Whether it builds long-term leverage or stains international alliances is still to be debated from trade circles to coffee shops.

Last edit August 13, 2025