For years when I lived in Uruguay we’d buy laptops and phones overseas and bring them back for ourselves but also everyone we knew. Uruguay like most countries in Latin America have very high tariffs on electronics. It’s a stupid tax which hurts the local economy a lot. There is no world in which it makes sense to manufacture high tech electronics in a tiny country of 3 million people whose economy is based on banking, tourism, and agriculture. Nor does it really make sense on Mercosur (South American trade block) level.

So it was cheaper to buy a round trip ticket to Miami and buy your iPhone than to buy it locally. There are restrictions on how many devices you can bring in, and to be safe unboxed everything to show i wasn’t bringing in products for resale. But basically every time someone from Uruguay travels outside of South America they’ve got a list of things to buy and bring back for friends and family.

There were attempts and making peer to peer market places for the informal tech mule economy but those got shutdown for obvious reasons.

Now I live in New Zealand which is a country which strongly believes in free trade and I’m able to buy whatever I want locally or directly from overseas. I’ve got to pay the VAT (GST style sales tax) but other than that it doesn’t matter where I buy it. It’s great.

The US is choosing to move towards the system that has failed to serve Latin American countries for decades. Ironically enough given Trump and republicans are pushing it but these trade barriers are really popular with a lot of Marxist economists. 😆

The thing is we know what will happen. The price of an iPhone in Canada and Mexico will be 40% cheaper than in the US. Same thing with laptops and everything else made in China. This will cause a booming retail business along the border. Initially out of reclaimed shopping centers, temporary pop up stores, etc… but there will be so much money in it that you’ll see it get established fast. It doesn’t require much to do a pop up electronics store.

Then Americans discovering they can get their name brand consumer and electronics goods across the border will start rushing to get goods at the old pre-Trump prices. Fly to San Diego, take the light rail train to the border, go shopping, come home. At first it’ll be folks buying for personal consumption and friends. But we know if a tax on consumer goods is over 10% then there becomes an economic incentive to evade it. All of a sudden instead of having a problem smuggling drugs and people in to the US you induce economic demand for mass smuggling! Gangs control smuggling partially because it’s illegal and you need extra legal use of violence to regulate the market, but partially because you can control access to the supply.

With electronics and other consumer goods, these will be imported and sold freely in Mexico and Canada. So anyone can buy them. And once inside the US then there’s a massive digital market to resell them, after all there’s nothing illegal about reselling that iPhone or Nike shoes you bought but never used or even unboxed. This is similar to the reason people steal Amazon deliveries. Fencing the stolen items is really easy.

So it’s easy to smuggle stuff (especially at low volume), easy to buy the product, easy to sell it. The effect of these tariffs is going to be an absolute explosion of cross border smuggling in to the US. It’ll make focusing on drugs and people trafficking really hard. It’s is going to completely undermine effective border control. It’s ironic because Trump has built his political career around the idea of border security. But these protectionist tariffs will undermine that project.

Large systems with strong economic incentives are complicated and hard. The global economy is the largest of these complicated systems.