T is for tariff
The beautiful word.
While markets are crashing
That sounds quite absurd.
____________
T is for Tesla
Whose shares are worth less.
And DOGE has turned government
Into a mess.
___________
T is for tax cut
Trump’s party’s big bet.
No one has seen
The great benefits yet.
__________
T is for tyrant
What Trump has become.
So far, just for migrants
But the day is still young.
The April Fools’ Day +1 tariffs actually have two components. The first is a universal 10 percent tariff that has nothing to do with trade deficits; it presumably was enacted either to raise money for tax cuts or to encourage import substitution, but not both, since one precludes the other. The second, the “reciprocal tariff,” assumes that trade imbalances with particular countries must be due to legal barriers, most of them having nothing to do with tariffs. What is Trump’s objective with them?
He may be using them as leverage to make deals. The problem, of course, is that the assumption behind them is faulty; most trade imbalances exist for reasons other than legal barriers, and they won’t go away with the stroke of a pen. There is no way, for example, that we can have a trade surplus with Vietnam even if the Vietnamese completely eliminate their tariffs because the population simply can’t afford to buy large quantities of expensive goods made in America.
I think Trump’s end game with the reciprocal tariffs is a series of managed trade agreements along the lines of the unsuccessful one he negotiated with the Chinese in his first term. The problem with that idea is that democratic states can’t order their citizens to buy American products and limit their exports. Mercantilism can work with authoritarian governments, but not with liberal democracies.
Fed up with resistance from the legislature, the South Korean president tried to declare martial law in the name of “democracy.” The public resisted, the military had little appetite for the task, and the constitutional guardrails held. Could you imagine Trump doing the same thing if the GOP does poorly in the midterms?
Of course you can! And, thanks to the Supreme Court, the base, and a core of craven supporters in Congress, he can’t be prosecuted or removed from office through the impeachment process. He will have appointed the new heads of the military, too.
It would be a mistake to assume he won’t try it just because there is no American precedent for it. The consequences for trying and failing will be minimal, and the benefits to him of succeeding would be quite large.
Against the run of play, I predicted there would be no recession in 2022 and 2023. I was right. Today, I’m predicting that there will, in fact, be a Trump slump. Why?
For two reasons that have nothing to do with partisanship. First, the economy, both on a global basis and in America, runs on trust. No one in the world is less trustworthy than Trump, so nothing he says can be relied upon by either consumers or investors. Second, the American economy is fueled by the spending of relatively affluent people in blue states–the kind of people Trump really hates, and the feeling is mutual. When their retirement savings and real estate values are threatened, they will pull back, and then what?
As Dickie V might say, “Recession city, baby!”
When Macron decided to hold legislative elections last year, my hope was that the far right would win and then govern incompetently. That would have served as a message to Americans who thought that Trump would bring back the economy of 2019 instead of chaos and decline. The French did not elect the far right, however, so my theory was never tested.
Now we’re going to see the phenomenon in reverse; Trump’s tariffs and insults are going to make the dangers of voting in right-wing populists clear to European voters. The populists will have to do everything in their power to distance themselves from Trump. That, in turn, will mean that the international alliance of populists that Steve Bannon and his acolytes have been working for will never happen.
Not that it ever could. The notion of an international coalition of nationalists is logically absurd.
Due to deep divisions within the party, the GOP tax cut is moving very slowly through Congress. As a result of the delays and the new tariffs, the Trump slump may well be in full swing by the time the bill gets its final approval. What does that mean for the contents of the bill?
The economy will probably need stimulus by that time, but simply extending the 2017 tax cut doesn’t provide any; it is just the status quo. The large spending cuts supported by House fiscal hawks will actually be a drag on the economy. It seems likely, then, that the final version of the bill will look more like the Senate’s proposal than the one contemplated by the House. The spending cuts will be kept to a minimum, and the Trump trinkets–no taxes on tips, etc.–are a better bet than they were a month ago.
Happy Liberation Day! The new tariffs will raise trillions of dollars from foreigners and result in an American industrial renaissance. Given the importance of the American market and the need for American military protection, the foreigners won’t dare retaliate. The tariffs won’t cause inflation, either, based on the events of the first Trump term. Just trust Trump, and the golden age will be at hand.
Except none of this is true. The tariffs cannot both raise huge sums of money and eliminate imports. They will be paid by American consumers, not foreigners. The industrial renaissance won’t happen for two reasons: since there is no guarantee that the tariffs will remain in place for long, business interests will be reluctant to invest in new factories; and if they did, there is no pool of workers to operate them, particularly after the mass deportations. Most of the foreigners will, in fact, retaliate, so the tariff proceeds will be needed to turn our great farmers into wards of the state. The combination of higher prices and lost consumer confidence will result in stagflation. The first Trump term tariffs, which were also a mistake, were lower and less sweeping, and there was little underlying inflation at the time, which is no longer true. Finally, Trump won’t be able to keep his hands off the wheel; there will be additions and subtractions to this list based on purely personal and geopolitical factors, so no one will be able to rely on it.
When the tariffs fail, as they will, Trump will become extremely unpopular. He will have three choices: get rid of them and spin the episode as some sort of a victory; keep them in place and blame the media, Biden, and the Democrats for any problems; or go full authoritarian to stamp out dissent. The story of the Trump presidency will be defined by the answer to that question.
(It’s a pun, you know)
The DOGE cuts will probably remain reasonably popular with the electorate as a whole until reductions in service levels kick in, which won’t be long in coming. Musk himself, however, is extremely unpopular. The results in Wisconsin, which Musk made a referendum on himself, prove it.
Trump will have learned last night that Musk is a political liability. Expect him to behave accordingly. Musk, for his part, probably views Wisconsin as yet more evidence that foolish Americans can’t be trusted with the vote and that liberal democracy needs to disappear.
Trump has authorized a vicious deportation scheme that includes plenty of people who, for various reasons, are victims of American foreign policy. There is one glaring exception to the new regime–disgruntled Afrikaners are welcome here. What’s going on?
Racism is probably part of it. Elon Musk’s ties to white South Africans may also provide some of the explanation. But I think the principal reason is that Trump and the base identify both themselves and the Afrikaners as supporters of traditional values and civilization against an overwhelming tide of barbarism. Whether this view bears any relationship to reality, either here or in South Africa, I leave to your imagination.
Trump will be in his eighties by the time he finishes his term, which means the notion of a third term would be implausible even without the 22nd Amendment. So why does he keep talking about it?
Part of it is to tweak the left, of course. Part of it is because he has grown to love exercising power. He probably can’t imagine the country without him, and he may fear future legal problems in spite of the Supreme Court’s immunity decision. But the biggest reason is that it keeps him from sounding like a lame duck. It gives him leverage against any opposition, and it keeps the GOP’s factions in line. The techno-aristocrats and the populists may despise each other, but they don’t dare break into open warfare as long as he’s in charge.
Of course, the problem for him is that his presence galvanizes the left like nothing else. He will feel that in 2026.
Trump has spent the last two months wrecking the parts of America he dislikes. What exactly is motivating him?
The destruction can be divided into three parts:
Looking at the big picture, the real questions for the administration are whether its tariffs will actually help red America prosper and whether the efforts described in #3 above will turn America into an illiberal or even fascist state. Those are the great known unknowns.