Trump is threatening tariffs on yet another business — and economists say it makes no sense

• Trump threatened a 200% tariff on John Deere if it moves some of its manufacturing to Mexico.

• Experts say the tariff would harm US-Mexico relations, cost consumers, and may not even be feasible.

• John Deere first announced plans to move some of its production to Mexico in June following layoffs.

Donald Trump has lodged a hefty threat against John Deere: move manufacturing to Mexico, and your imported products will face a 200% tariff.

Now, trade economists say Trump's latest trade threat makes no sense.

On Monday, the former president said at an agricultural policy roundtable in Smithton, Pennsylvania, that he would impose the massive tariff if John Deere follows through on its plans to move some of its production — specifically, skid steer loaders and compact track loaders — from Iowa to Mexico by the end of 2026.

The company first announced the partial production shift to Mexico back in June, according to Fox Business, following several rounds of staff cuts.

"I know a lot about John Deere. I love the company, but as you know, they've announced a few days ago that they're going to move a lot of their manufacturing business to Mexico," Trump said at Monday's event. "I'm just notifying John Deere right now: If you do that, we're putting a 200% tariff on everything that you want to sell into the United States."

"They think they're going to make product cheaper in Mexico and then sell it in for the same price as they did before, make a lot of money by getting rid of our labor and our jobs," the Republican presidential nominee added.

Trump also said that any company that did the same would be slapped with the same 200% tariff.

John Deere did not respond to a request for comment from Business Insider.

Jonathan W. Coppess, director of agriculture policy program at the University of Illinois Urbana-Champaign, said that Trump is tapping into concerns about companies moving jobs out of the country — and it's a pattern we've seen many times.

"John Deere is a major manufacturer and the consequences of moving those jobs is significant," Coppess said.

But Coppess said Trump's answer to the problem might not be the right fix — and several trade economists told BI that Trump's proposed tariff is a terrible idea.

"You'll find no serious, respected trade economists thinking that this is a good idea," Ian Sheldon, a professor and Andersons Chair of Agricultural Marketing, Trade and Policy at The Ohio State University, told BI.

"This is a huge tariff," Sheldon added. "It looks almost like a prohibitive tariff. By prohibitive, I mean it would choke off imports of John Deere skid steer loaders would be my hunch."

Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, echoed Sheldon's concerns.

He told BI that Trump's huge proposed tariff is not only a "terrible idea," but it would also violate the United States-Mexico-Canada Agreement (USMCA), which succeeded NAFTA in 2020.

"I mean, it's just a plain, simple violation," Hufbauer said.

Sheldon said he's also not convinced Trump's threatened tariffs would even be feasible under USMCA. He expects that Mexico would immediately file a dispute with the USMCA dispute resolution mechanism.

And it could lead Mexico to retaliate against the US, Sheldon added.

"We have this integrated market in North America, and we're already in a trade dispute with Mexico over genetically modified corn," Sheldon told BI. "It seems counterproductive to me to potentially exacerbate trade relations with one of our large trading partners. It doesn't make any sense to me."

Hufbauer also cautioned that such a tariff, if it were to be imposed, would weaken US-Mexico relations.

"The immediate effect would be very hostile relations with Mexico," Hufbauer told BI, adding that, with Mexico as the US's biggest trading partner, the US would have a lot to lose.

"So we get a higher cost of a lot of products in the US that we are now accustomed to having from Mexico," Hufbauer said.

"It's going to be costly for the US," he continued. "But beyond that, if we get into a hostile trading relation with Mexico, that's going to reverberate down into Central America and South America for sure. It'll start with Mexico, and you're just going to get many parts of the Western Hemisphere feeling pretty hostile about the US."

Experts say it could also cost American consumers.

Nicole Bivens Collinson, managing principal at international trade law and policy law firm Sandler, Travis & Rosenberg, said that any tariffs applied to products are ultimately paid by the consumer.

Coppess said there would also be concerns about equipment availability.

It's not the first time Trump has threatened companies and Trump's threat to impose large tariffs on imports also isn't new. In fact, it's a pillar of his economic policies.

Trump has already vowed to implement a 10% tariff on all imports in the US and a 60% tariff on Chinese imports. The former president also called for 100% tariffs on cars produced in Mexico at a speech in Georgia on Tuesday.

The Republican candidate's goal is to bring production back to the US, but some economists have said the plan could increase inflation.

"The word tariff properly used is a beautiful word…A lot of bad people didn't like that word, but now they're finding out I was right, and we will take in hundreds of billions of dollars into our treasury and use that money to benefit the American citizens," Trump said in a statement to BI.

"And it will not cause inflation, by the way," Trump added.

Trump's tariff goals going into the next election go beyond his former policy on international imports. During Trump's presidency, the US imposed a 25% tariff on various Chinese goods, including steel and industrial equipment.

China retaliated with its own tariffs on US imports, including on soybeans, the biggest agricultural import to China from the US.

Collinson said it's uncommon for farmers to get every component that goes into a tractor from the US. She said many products can not be fully manufactured in the US yet.

Imposing a 200% tariff on the company for manufacturing in Mexico would be one way to "kill a company," Collinson said.

"Our farmers today are already spending hundreds of thousands, sometimes millions on farm equipment," Collinson said. "If you're going to make it more expensive, they can no longer farm. You're pricing them out of the equipment."

Collinson said the both administrations could be doing better though and there needs to be a holistic reexamination of the tariffs in place.

Kamala Harris' campaign did not respond to a request for comment from Business Insider.

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