Yves here. This post attempts to make sense of Trump’s thinking and actions on the trade and tariff front. Sadly, it appears that Trump latched on to his beliefs about tariffs 40 years ago, before globalization was anywhere as extensive as now, and is doggedly attached to them. Worse, he’s reported to be completely resistant to mountain evidence of bad outcomes. From Mediate, recapping a Washington Post account:
President Donald Trump has reached the “peak of not giving a fuck,” one White House official told The Washington Post for a lengthy report on what went on behind the scenes leading up to the president’s massive tariff announcement this week.
Now admittedly, Trump did kinda sorta retreat on tariffs, but not enough to seriously alleviate the coming damage to the US economy and Mr. Market’s mood. And he appears to be engaged in displacement activity with Iran.
By Pia Malaney. Originally published at the Institute for New Economic Thinking website
“Tariff is the most beautiful word.” President Trump broadcast his intentions early and often. On what he called “liberation day,” he fulfilled his promise to voters by announcing tariff rates that exceeded all expectations. Markets crashed, major donors balked, economists sneered—but Trump held firm.
His positions on tariffs and immigration were likely the two most pivotal policy stances contributing to his re-election. Despite widespread cynicism that he would ultimately cater to the interests of his wealthy backers, he has thus far resisted intense pushback from many of them. Hedge fund manager Bill Ackman warned of a looming “nuclear economic winter,” and Elon Musk—estimated to have lost $31 billion since the tariff announcement—openly called for a world without trade barriers. Yet, despite his past obsession with market performance, Trump watched the Dow fall nearly 10% in the two days following the announcement, saying: “I don’t want anything to go down, but sometimes you have to take medicine to fix something”.
Observers have filled pages trying to decipher his true motives. Is it, as Paul Krugman scoffed, a simplistic worldview—one in which selling more to the U.S. than we buy is inherently exploitative, and tariffs are the cure? Krugman argued:
He’s got this very crude view that whenever somebody sells more to us than we buy from them, they’re taking advantage, and he’s going to end that. And people will see that he was smarter than everybody else all along…. There’s no indication of a deeper agenda… The shape of those tariffs should tell you: No, it’s just that Donald Trump doesn’t like trade deficits, and he thinks tariffs can cure them.
Or is it about asserting dominance—forcing world and corporate leaders to “kiss the ring,” extracting loyalty through economic coercion? Perhaps it’s strategic brinkmanship: using trade as leverage to achieve broader goals, like pressuring China over TikTok, compelling countries to repatriate migrants, or controlling the drug trade.
Then again, perhaps the rationale is precisely what the administration claims: to reshore manufacturing, revitalize American labor, and safeguard supply chains. It’s worth recalling the real and lasting damage caused by trade liberalization in the 1990s and 2000s, particularly NAFTA and China’s entry into the WTO, which came to be referred to as the “China Shock.”
The work of economists David Autor, David Dorn, and Gordon Hanson on the China Shock is well known. They estimate that between 1999 and 2011, increased Chinese import competition resulted in the loss of 2 to 2.4 million U.S. jobs, mostly in manufacturing. Crucially, these losses were highly concentrated in regions dependent on manufacturing, particularly in the industrial Midwest and South. These communities not only suffered economic displacement but also long-term declines in job growth, wages, and labor force participation.
The damage wasn’t merely economic. The localized shock contributed to broader structural and social breakdown. Displaced workers lacked the mobility and opportunities to adapt. Entire regions slipped into long-term decline, marked by political polarization, social dysfunction, and strained public services.
Sociologist Shannon Monnat added a powerful layer to this analysis. Her research found a strong correlation between areas hardest hit by manufacturing job losses and rising “deaths of despair”—including opioid overdoses, alcohol-related deaths, and suicides. These same regions, especially in the Rust Belt and Appalachia, shifted most dramatically toward Trump in 2016. Monnat argues that Trump’s appeal in these areas cannot be understood solely through economics—it must be seen in the context of broader social and cultural unraveling.
Trump ran in both 2016 and 2024 on a promise to reverse the deindustrialization caused by globalization and free trade, using tariffs as his main tool. But the critical question now is: Can it work?
Shifting from motivation to feasibility, skepticism mounts. The new tariff rates seem, at first glance, arbitrary. How else to explain a 30% tariff on Nauru, a tiny island nation whose total trade with the U.S. is less than $2 million? Or a 10% tariff on the uninhabited Heard and McDonald Islands? The administration insists the rates were strategically calibrated to the value of traded goods, backed by a formula released by the Office of the U.S. Trade Representative.
Yet social media sleuths suggest something more rudimentary: (Trade Deficit ÷ Imports) ÷ 2, with a floor of 10%. The formula is so simple that some speculate it was generated by artificial intelligence. One prompt reportedly posed to a large language model—“What’s an easy way to calculate tariffs that would level the playing field on trade deficits?”—produced a similar rule of thumb.
A serious effort at reindustrialization would require far more: a detailed understanding of the economy, identification of key industries worth rebuilding, thoughtful incentives to encourage domestic manufacturing, and careful alignment with national security goals.
Trump argues that no other president could have undertaken such sweeping renegotiations. And he may be right. Few recent presidents have shown the appetite—or independence—to defy the political donor class. And the parade of foreign envoys arriving in Washington to renegotiate their own, often one-sided, tariffs on U.S. goods suggests that Trump’s aggressive tactics may be having real effects on the global trade balance (Politico, 2025).
While many may have hoped for a more refined, coalition-preserving approach, it may be that the raw force—and even the crudeness—of Trump’s strategy is what gives it power.
One can only hope that the long-term damage to America’s economic institutions and alliances is outweighed by the national security and employment benefits the administration promises.
Disclaimer: This article expresses the author’s views and not those of any organization she is connected to.
At this moment, there is no point in trying to sell Chinese products in the USA as the retail price plus tariff will be far too high.
What if China simply turns away, and sells its stuff to its own population, and to the rest of the world?
China has officially stated that it has plans to do this. From April 7 People’s Daily on responses to US tariffs:
(Emphasis added.)
This is from Bill Bishop’s Sinocism Substack. The entry with the original Chinese text is here.
(My apologies if I’m repeating myself. I’ve been posting this link in response to other people who asked about similar issues.)
The best guess about what will happen is that the United States will become poorer and more isolated, especially as it lacks access to excellent Chinese manufacturing equipment which, ironically, could be imported to the United States to shore up and expand domestic manufacturing. There are of course Chinese businesses that would like to expand into the US market, bringing both equipment and jobs.
Well said. Micheal Pettis wrote a book called, “The Great Rebalancing” on the topic. Classical trade theory talks about natural advantage as being an important advantage in international trade. England couldn’t grow oranges, so it just made sense to trade their cotton or steel production for oranges, that way both parties prosper. The Classical economists would be gobsmacked by today’s globalization because the natural advantage morphed into a country’s ability to exploit its workers, along with ignoring health and safety concerns. This form of trade leads to one side selling production and the other side paying with debt because the producing country does not generate sufficient effective demand. When China moves to distributing the gains for production through the country – ie. paying workers more – they will form their own demand and have less reliance on export-led growth.
For mature economies like the US, it will never be cost competitive with China until Chinese wages increase to a similar level as the US. For the period in between, there will be downward pressure on US incomes – for example non-college educated workers in the US have had stagnant wages since the late 70s. There will also be inflation in the US as Chinese production costs increase toward US levels and the US puts tariffs on imports in order to rebuild the American manufacturing base. In either case, inflation is coming back to stay until trade balances out.
FACE……. Trump has now put Xi in a position that if Xi relents he will lose FACE in the eyes of his people.
Chinese will do painful things in order to not lose FACE..
My company got hit with Trump.01 tariffs, I am afraid Trump.02 tariffs may put me under after 32 years.
Will see how it plays out but because the are few alternatives worldwide, I may get the new price for a while.
i was on the phone with my congress person’s office encouraging Congress to take back there constitutional power to levy Taxes and Tariffs in order to avoid the disruption that will occur if we keep heading in the current direction.. The person on the told me he will pass my message on to the congress person…. I’m not holding my breath but I got a little frustration of my chest..
The good news for me is that the inventory I have in house just rose in value by 145%. The bad news is that since I semi-retired, I have kept the company running for the benefit of my employees and they will most likely lose their jobs.
Update: I just found out my congress person is holding a town hall meeting next Tuesday. I plan on speaking at the meeting.
The administration personnel wish to recreate the economic environment of the late 1800 to early 1900s, in broadest of terms with national income from tariffs ultimately in place of or perhaps supersedes individual income taxes…or I’ve read that enough in recent months.
Instead of a McKinley administration redux what if this version of Trump’s administration wind up being a Hoover administration redux instead? Crashing equities and bond yields trending higher does little to raise everyone’s proverbial boat. Go long prep items and camping gear! ( mild sarcasm but in real terms…hope it’s wrong ).
The article is more of an attempt to plumb Trump’s motivation than to analyze economic policy. Thanks to the extensive coverage by Naked Capitalism of economic malfeasance in the U S of A, commenters here understand the loss of enormous numbers of jobs, the bipartisan dismantling of the already threadbare U.S. social state, and the resultant deaths from despair — and from just plain bad nutrition. (Think about the U.S. foodstuffs that cannot be imported into the EU because of prohibited chemicals / compounds).
Let’s examine the author’s weak tea of solutions: “A serious effort at reindustrialization would require far more: a detailed understanding of the economy, identification of key industries worth rebuilding, thoughtful incentives to encourage domestic manufacturing, and careful alignment with national security goals.”
What’s missing here? Labor. After sixty or seventy years of the war on labor, evinced by right-to-work laws, the Taft-Hartley Act, actions against unions by Biden and by Trump, the author cannot be moved to mention the working class. There has to be a wage-and-jobs policy. First.
What’s missing here? “Key industries worth rebuilding.” I’d like some specificity instead of special pleading. Just about everything in the U S of A, except for speculation on stocks and the casino of Silicon Valley, could use a boost — from agriculture to peanut butter and jelly to eggs to glass to cameras and film to chicken (Make Chicken Taste Like Chicken Again) to textiles to housewares to cars. Plus the U.S. post office.
What doesn’t belong here? “National security goals.” Spare me. The U S of A now consists of a bunch of obese “sovereign citizens” waltzing around in camo. Demilitarize the culture. Demilitarize the language. Stop accepting the fantasies of the intelligence-agency state.
There may be a case for tariffs to protect certain industries (auto? agriculture?) and supply chains (computers?). But in the current US of A, ever panic-stricken, I’m not seeing (from afar) much examination of the underlying problem: The workshop of the world turned into an empire, and now it has to import its own garlic and drinking glasses.
What is to be done, comrades?
I think that supply chain disrupting tariffs are the only hope, because they would disempower managers whose only professional skill is bidding foreign suppliers against each other. We have a lot of young idealistic people who can still learn to do real work if they are properly paid. Perhaps Trump could suspend the Taft-Hartley law too, and really get things going.
I agree people should be paid a decent wage, but the wage needs to be on a PPP-basis competitive with China?
Everything Walmart cannot be US worker-made (maybe maybe a dark factory) at a price Americans can afford. A gas station attendant makes 25 bucks an hour in California (sounds a lot but it’s barely above homeless after taxes, rent, auto, and groceries). If you add benefits and assume better pay for manufacturing – you are talking 80 bucks an hour for a near-homeless workforce – and who will work the noisy, dirty, dangerous factory floor for near homeless-ness – rather than pump gas?
Can the US export with such wage costs and all the other costs (permitting, energy, compliance, insurance, legal) of running a business—all of which are immune to Trump’s utterances? I do this, and my overhead is 125%—but then again, my B2B company lives in the real world— which is not the world of politician/crony billionaires.
Sadly, the US economy has evolved into an oligarch-friendly, monopolistic, rent-extraction, cronyistic, debt economy (per Michael Hudson), rendering it uncompetitive outside areas like finance, DOD, construction, lawyering and doctoring, high-end biopharmaceuticals and devices, etc. I offer my employees health care, but it costs me. It costs a lot, and I pass that cost on. Someone somewhere has to pay the nearly 20% of GDP cost of health care.
And trends in fintech, weapons (aka drones), prefabbed houses, AI doctors, etc., are going to deplete those sheltered jobs, too.
Some of us here have utterly no qualifications to talk about economics but feel we do have the life experience to talk about human psychology, which is increasingly the realm of a US society dominated by rogue individuals aka grifters.
And Trump with his constant talk of “deals” is clearly one of those no matter what rationalizations he chooses to cook up. The theory of Trump was that he would help boot out the previous set of grifters while keeping his own egotism at the petty level and not carelessly wreck this country–maybe we deserve it–or the world economy itself.
Barbara Tuchman, writing during the LBJ dominated 60s, called history a “march of folly” so none of this is new. By one means or another the public, the people just trying to live their lives, are going to have halt this latest episode of elite malfeasance. That too has always been part of history.
Life experience to talk about human psychology is a nice way of saying we all should have a bullshit meter. Trump bullshits most of the time, telling his supporters what they want to hear. Like we’re going to reindustrialize America, bring back jobs that the rest of the world have stolen from us. Bullshit. What Trump is trying to do is lower taxes for the elites. End of story. The elites became fabulously wealthy because they pay so little in taxes. The tariffs and decimating government is all about generating revenue so taxes remain low for the rich.
Manufacturing is a legitimate national security issue, one that the warmongering politicians and oligarchs seem to not comprehend.
Wars (non-nuclear) vs a peer cannot be fought without critical natural resources and processing capacity, a robust and flexible manufacturing base, and transportaion system to get that stuff to where its needed before its needed. This explicitly excludes just-in-time supply chains. The US has lost all of the above and gained the supply chain. It’s going to take many, many years to return that capacity, including both physical infrastructure and re-training labor, if it can be done at all, and I’m 100% sure that those in power at the moment either don’t recognize this (i.e. they’re stupid) or couldn’t care less about it (i.e. they are avaricious).
Yes.
In principle, I’m sympathetic to the idea of rebuilding the domestic manufacturing and technical capacities as well as necessary infrastructure (which, to me includes both k-12 and “vocational” education institutions) for national securith reasons as well as sociological and even moral reasons. But, I don’t see anyone doing anything in a planned systematic mamner that shows some real design. It seems to me that ths thing is driven largely by a dangerous mix of dreamy hopey dope and avaricious grift. That seems to me a most unhappy combination.
Yes, this political hope-a-dope is beating us like Ali on Foreman.
And because corporations are risk-averse, nothing is going to happen without long-term consistent government contributions.
The Trump recipe of austerity ensures a net loss of manufacturing jobs… companies will decline to open new factories, continue any building, or otherwise operate due solely to the uncertainty.
An excellent expose on “DJG’s part.
We concur with all you’ve so plainly expressed.
We no longer live in “A Democracy.” We are ruled by an Oligarchy.
I can’t help thinking that with Trump, that it all comes down to this chart that somebody may have showed him once-
https://upload.wikimedia.org/wikipedia/commons/e/e0/Federal_taxes_by_type.pdf
Just in bits and pieces that he says, it sounds like it. So maybe his idea is to shrink the US Federal government to a size where tariffs mostly pays for government expenses supplemented by the protection racket he is running on so many countries. Then at that point he can announce that he is getting rid of income taxation that would make him popular with, well, everybody. He would then go down as the greatest President in history and cement his legacy as a great man. With Trump you just never know what he is thinking.
Isn’t this the libertarian fantasy interpretation of history? That, and the gold standard.
The other possibility is that he’s using neoliberal principles. Just change the price signals and the market will magically re-shore. For reference, see the approach to PPE during the first years of the COVID pandemic.
I’m old enough to have lived when The Rust Belt wasn’t The Rust Belt. Whatever it is, you always know it’s serious when Ackman feels the need to trot out in front of the teevee.
Ackerman only complains about what is happening to the country when he himself is actually losing money.
Trump is delusional. He does not think past the moment. Starting a trade war with China, right when you need to maintain decent relations with them to put pressure on Russia to obtain a ceasefire?
A stunning lack of awareness that different objectives require coordination. Working at cross purposes.
Xi is going to burst out laughing if Trump tries to put more sanctions on Russia. He’ll personally deliver crude from Russia into Chinese ports.
Sudden thought, what if:
– Trump doesn’t want a war with Russia or China (all those lovely buildings, golden showers, cheap loans, whatever calumny de jour demeans the desire for peace) so Trump therefore sanctions China;
– to cripple the US war effort against Russia; and,
– force the tarring and feathering of the China hawks by the nation for the consequences of their warmongering?
It’s not very likely but it would be amusing. Like the definition of demicracy, giving the people (of the Blob) what they want, good and hard.
When they turn around and say we didn’t want this kind of war with China but the other kind, nobody will be listening to them.ever again.
Give Trump the Nobel Prize for Peace and the Bankster Nobel Prize for Economics! Take that, Obama!
That’s way too few prizes for Trump. You need to throw in a gold plated statue at the center of the Gaza riviera, sainthood in Ukrainian Orthodox Church and Orthodox Church of Ukraine, and a Trump tower in Shanghai (paid by the Chinese).
It is good that we are hopefully having a too long deferred national conversation about tariffs and efforts to get America making more stuff. I recall JFK’s 1960 campaign slogan “We need to get America moving again.” These things require nuance, and we need to get beyond reflex ideological responses. For me the article’s key paragraph is “A serious effort for reindustrialization would require far more: a detailed understanding of the economy, identification of key industries worth rebuilding, thoughtful incentives to encourage domestic manufacturing and careful alignment with national security goals.”
Sadly, these issues cannot be addressed by our current politics with grotesque overemphasis of presidential power and the short-term fixation on the four-year presidential election cycle. This means having a Congress that because of the longevity in office of its members that is willing and able to craft policies for the long term. Congress in so many areas because of the delusional need to prioritize the national security state has shirked its duties. Too many in Congress as their press releases and mailings to constituents show, see their role as providing trichina infested pork. We need campaign finance reform.
There is much to consider. I hope that the debate continues. I suggest pharmaceuticals as an industry to prioritize, I suggest restoring the New Deal prohibition on share buybacks to encourage corporate managements to invest in rather than loot their companies. Marginal income tax rates need to be increased. Ross Perot’s (remember him) proposal of a social tariff to encourage our trading partners to adhere to labor and environmental standards is worth considering.
Excellent points, Earl.
If only we had people in Congress interested in a future that doesn’t involve looting.
Another good proposal would be to ban stock trading for any Congress critter. I get the feeling that’s all they do these days.
Will no one think of the children, and our national hope that could bloom in their hearts once again if child labor returns? No more teachers…no more books ( Sarcasm ).
A great line on CNBC this week came the courtesy of portfolio manager Josh Brown, whose thoughtful articles are occasionally linked here. No matter one’s thoughts on market swings and ongoing volatile nature reflected therein, Mr. Brown had a great retort to the concerns of Commerce Secretary Lutnick for his grandchildren…
“All due respect to Mr. Lutnick but sir you’re a banker and a billionaire. You and yours will be financially quite okay…”
I’ve taken to calling our Secretary of Commerce “Lugnutnik”. Small and petty of me, I know. Wouldn’t it be a damn shame if an accident involving millions of tiny screws would suddenly befall him?
Nutlick, but I am really a petty child
Apparently, pharmaceuticals supply chains are complicated
https://www.science.org/content/blog-post/pharmaceutical-tariffs-what-and-how
Mass deindustrialization on a global scale would be necessary to save the planet, but that wouldn’t be possible without the global capitalist economy somehow self-destructing.
Could that be the outcome here, intentional or not?
It is the logic of the sledgehammer. The bull in a china shop. The politics of purposeful destruction. But the mistake is to assume that, for all the obvious folly, that this is intrinsically the wrong course of action for the US now. The man with the sledgehammer is arguing that the building is falling down anyway, and he is right. True he has no demolition permit, but neither has the owner attempted repair. What is the correct course? Another paint job? While the sledgehammer is reckless, so is allowing the building to decay. Pretending it is still stable kicks the can down the road, as the bricks and glass keep falling out.
I strongly disagree with this. It is the cultural and social unravellings which are downstream of the real, sustained, unaddressed economic declines in much of America. This is about the “economy stupid”, it’s bifurcation, and the ongoing battle between the winners and losers of globalisation. We are currently seeing the losers prefer to take a sledgehammer than try to save or reform the system. This has been 40 years in the making.
In short, it requires the Gordian knot of Washington policy to be unraveled.
And here I think is the reason for the sledgehammer, the proverbial solution to the gordian knot. Trump’s base is unwilling to wait, does not trust, and is out for revenge against Washington, Wall St., and the companies and classes who have benefited from globalization. I don’t think a crash or economic pain is going to deter them, rather it will egg them on. Call it the US working classes Samson option: “We can’t have better lives, neither can you”. I think this is the true political, ideological battle which has been fought, via Trump, since 2016. At it is ideological. Charts about GDP and unemployment figures and trade and policy are not going to shift positions. The GOP and Democrats both are caught in this riptide shift in public opinion. There will be wild efforts to suppress it, but so long as the fortunes of the US working class continue to decline it will only get stronger.
Collectively, the US political system is being manhandled (with a sledgehammer) into addressing the countries chronic economic dysfunctions. Where this ends up is anyone’s guess.
I have been concerned for the past 18 months that the actions of the U.S. in conducting a proxy war against Russia and in enabling the final stage of the genocide in Palestine might trigger sanctions imposed through international bodies. The U.S. may have a veto in the UN Security Council and have hamstrung the WTO by refusing to appoint judges to its appellate body, but now the WTO has instituted a Multiparty Interim Appeal Arbitration Agreement which includes China, the EU, Brazil, Canada, and Mexico.
Yesterday China filed suit against the U.S. at the WTO, calling out, “typical unilateral bullying and coercive practices.” Foreign Minister Wang Yi stressed that China is filing suit, “…to defend the shared interests of the global community and prevent the world from returning to the law of the jungle.” The U.S. does not recognize the MIAAA but that mainly seems to mean that it lacks the power to veto its rulings. If the U.S. is found to have violated WTO rules, what motivation would the MIAAA members have not to impose penalties and sanctions?
Now it looks like the U.S. will give up an “own-goal” by sanctioning itself. I’m typing on an Apple device that was made in China while sipping Ceylon tea from a Hydro Flask stamped “Made in China.” As Carolinian pointed out the other day, everything in a Walmart is “Made in China.” How long will social cohesion last without the imported necessities of daily life?
I would be really, truly, surprised if the world got it together and sanctioned the US for its role in the Palestinian genocide, so far ICJ and ICC cases haven’t even resulted in sanctions of Israel.
As far as social cohesion declining, what social cohesion? Maybe I’m too cynical.
In any case, a decline in quality of life is in the cards.
As usual, Custom and Border Protection Agency released CSMS # 64724565 late Friday night to exempt really good stuff from reciprocal tariffs. It will not get enough coverage over the weekend.
Whatever hsppened last week was just kabuki theater, if you didn’t own stocks or loose your job due to tariffs.
MAGA happy, donors happy. Mission Accomplished.
The exception for phones, computers, and chips is all well and good, but the new tariffs are still the largest tax hike in US history, with all of the economic slowdown that entails.
Suppose America embraced Trump – the breaker of the national parties without which no progress was possible on global heating and more generally, on stressing the planet?
Trump is a breaker and threats are his tool. That’s so much easier than being a maker.
Can we guide him to believing he has done enough by doing his majestic job of beating all political challengers and that it’s time for the builder’s to take over?
China can’t win this way. With a population of 1.3 billion people, no other country will purchase the sheer volume of goods that the USA consumes. I don’t understand why China doesn’t simply implement a guaranteed basic income for unemployed citizens, funded by printing their own currency. This is the only way to beat USA and save the planet. The Chicago Boys did a good job promoting their economic model in Russia and China hat even to this day they will not change course
Per Michael Pettis, China’s structural challenge is too little consumption, and the US structural problem is excessive inequality. Neither is being addressed for the same reason: elites have benefited from the current structure and are loathe to change it.
Pettis had said that China recognizes their issue but changing course is hard. Does the US recognize its issue? I think China has a step on us.
Watching this whole mess, and I have no doubt that the way Trump is doing this appeals to him at some visceral level, but I keep coming back to tax cuts for the rich and mega corporations.
I mean tariffs are not new, Biden raised tariffs:
History of tariffs in the United States https://en.wikipedia.org/wiki/History_of_tariffs_in_the_United_States
Biden was doing this as part of the coordinated effort under the Inflation Reduction Act and the CHIPS Act, protect certain industries and thru industrial policy, grow them. (Now I have my issues with how Biden went about this; I thought they would fail, but that’s a later comment.)
So, why the linking to McKinley, and how does Trump’s enactment of tariffs compare to McKinley? First off, and most important, under McKinley there were no income taxes so tariffs represented the largest source of revenue for the Federal government. Second, since tariffs were so important, there was a real national discussion, negations with other trading nations, and a process thru the Congress and the Senate before these became law:
Dingley Act https://en.wikipedia.org/wiki/Dingley_Act
And how did that work out?
Presidency of William McKinley Tariffs and Monetary Policy https://en.wikipedia.org/wiki/Presidency_of_William_McKinley#Tariffs_and_monetary_policy
Well, I’m not looking forward to that, but Trump dumped the national debate process, dumped any prior negotiations with trade partners, ignored existing trade treaties that he negotiated, and dumped the historical results as just what? Historical oddities to be ignored? Plus even Ronald Reagan the patron saint of Republican Presidents did not believe in tariffs, especially reciprocal tariffs.
So why?
Trump Era Tax Cuts Are Set To Expire — Here’s How Much More You’ll Pay https://finance.yahoo.com/news/trump-era-tax-cuts-set-160750197.html
Why else have Musk and DOGE in there frantically and haphazardly cutting everything and everybody they can as fast as possible? (Well, that’s not entirely true, he tends to make sure he really whacks anything the government was doing that would impact him.) Why have all those billionaires lined up behind him? Tax cuts for the oligarchs and their corporations.
Of course, if we could come up with an indicator for the last fifty years of American decline, and tax cuts, I’m almost willing to bet there is a correlation of some sort.
I get paid to read and dissect land-title docs. I’d like to say I am careful and deliberate.
But Freud steps in—I saw that headline as Trade-in Time for Trump.
That was in 2018, but I really am reading with filters!
When a country buys more than it sells, it incurs debt. The US has had a trade deficit, goods and services sold vs bought, for 50 consecutive years. The offshore holding companies and foreign trade partners that hold this debt do not hold all of it in cash, they buy US debt instruments and other assets like shares in corporations and real estate. If we look over the economy over the past 8 years we can see that the economy has grown at an average of 2.4%, meaning between $500 and $700 billion in growth each year. Then when we compare it to the debt for the same period, the average annual deficit has been $1.9 trillion, which means the US economy is relying on deficit spending to keep the economy going, but the net effect is the country getting deeper in the hole.
The only way the country can turn this around is by selling more to the world than it buys from it and that would mean increasing manufacturing and the tradeable services in relation to imports. Trump is trying to do that by raising tariffs, but he is doing so in a way where he is bullying trading partners and without a plan to bring productive investment into the country.
The normal market mechanisms for getting a country to become more competitive is by its currency falling relative to its trade partners, this will cause inflation in the US, making foreign goods more expensive and eventually production would move back to the US. However, thanks to the curse of reserve currency, this isn’t going to happen or if it does happen it will be a huge shock. The other ways is for the country to cut domestic production costs. This was started by Reagan when he deregulated industry, cut taxes to make production more profitable and stagnant wages for the average American. We can see that all this accomplished was greater inequality, slower economic growth, increasing national debt and a malaise in the working class that has led them to following people like Trump, without a sufficient reduction in production costs.
Even if Trump had a reindustrialization plan, and worked with other countries to share production, the big challenge is the difference in costs of production in different countries. As long as capital is free to go anywhere in the world to seek the best return, it is going to go to low-cost countries and even with tariffs of 10% or 20%, the US isn’t going to be a low-cost country. The country is going to continue struggling economically until those costs are relatively equal. By struggling I mean whenever the increase in federal debt is larger than the value of economic growth a country is struggling economically. The US will also have the added pressure of paying interest on a national debt that will be approaching $2 trillion per year. All those people who thought cheap foreign imports were a godsend and a validation of American exceptionalism, never really thought of the long-term impact.
Trump is triangulated by the US oligarchs, by the bond market, and by a triumvirate of China, Russia, & Iran.
He is destroying consumer and investor confidence. Who actually believes that the US would honor any contract or treaty with this Administration. People may party, play, pretend , & deny but , IMO, there is an economic tsunami about to hit the US. Ask what Trump could do worse,. For Starters: Start a war with Iran or default on treasuries or totally shred what’s left of the Constitution.
I think it’s important to know what the US exports to China, and vice versa, in order to answer the question which country has the upper hand in a trade war. Imo, the US needs China more than China needs the US.
According to the OEC, the top 5 exports from the US to China are soybeans $15B, and other agricultural products like corn $3B, crude petroleum $10.8B, petroleum gas $10B, and cars $7B.
The top 5 exports from China to the US are Broadcasting equipment $54.5B which includes cell phones, transmit-receiver equipment, tv cameras, etc., Computers $37.9B, Office machine parts $14B, electric batteries $13.8B, Motor vehicles, parts and accessories $12.5B.
The OEC provides an interesting graph that lays out the categories of products each country exported to the other in 2023 and, imo, China can more easily replace its US imports from other sources: https://oec.world/en/profile/bilateral-country/usa/partner/chn
The Conversation stated, “Crucially, the importance of the U.S. market to China’s export-driven economy has declined significantly. In 2018, at the start of the first trade war, U.S.-bound exports accounted for 19.8% of China’s total exports. In 2023, that figure had fallen to 12.8%.”
It goes on to say, “By 2022, the U.S. relied on China for 532 key product categories – nearly four times the level in 2000 – while China’s reliance on U.S. products was cut by half in the same period.” https://theconversation.com/in-trade-war-with-the-us-china-holds-a-lot-more-cards-than-trump-may-think-in-fact-it-might-have-a-winning-hand-254173
For some reason not clear to me, Trump thinks the US position vis a vis China is much stronger than reality would suggest.