Nothing with Trump is ever final, of course; he will slap additional tariffs on anyone who pisses him off through the end of his term. Some of his agreements are fragmentary at best, and nothing is resolved with the Chinese. For all that, the end game of his trade war is becoming reasonably clear. What is it?
Here are my observations:
- Whether out of fear of market reaction or just out of realism, Trump has abandoned the Godly Society. The tariffs are way too small to create an industrial renaissance in America. It was never going to happen, anyway.
- As I’ve noted many times before, the investment commitments from the EU, Japan, and South Korea are mostly illusory. To the extent that they actually materialize, however, they will give Trump new resources with which to reward his friends and punish his enemies, which is pretty scary.
- Farmers, weapons manufacturers, and natural gas producers will get more export business. They are the American winners of the war.
- The rest of us are the losers. We will pay higher prices for goods for the purpose of financing the tax cuts in the BBB. In the end, the desire for increased revenue appears to have been Trump’s principal objective, not the Godly Society.
- The biggest remaining question is whether the price increases for goods will spark demands for higher wages and thus start an inflationary spiral. I think you will see some of that, particularly since Americans are more sensitive to inflation after the Biden years. If it happens, there will be pressure to raise interest rates, Trump will go berserk, and nothing good will result.