Admittedly, given the varying rates at which the impact of Trump economic policies, particularly tariffs but also DOGE and immigration crackdowns are progressing, it’s hard to have a good picture of where things stand in in the US and where the bottom might be. That is not merely the result of information being retrospective in what looks to be a rapidly accelerating downswing, but also small businesses and/or intermediate goods producers taking the biggest hits, and they are generally not well studied.
But based on the tone of the press, discussions with people in the US, and a very recent and short trip to New York City,1 much, and arguably too much, of the US seems to be in summer of 1914 mode: cheerfully living in a sense of normalcy that is about to vanish permanently. To put it another way, if there was a sufficiently widespread appreciation of what was looming over the horizon, May 1 would have seen the launch of open-ended general strikes.
Trump really is well on his way to implementing a reactionary restructuring of the US and international economy. “The end of globalization” is too bloodless a formula to convey the severity of the dislocations that have only started to arrive.
Even in the vanishingly unlikely scenario that Trump were to abandon his tariff policies in the next week, the confusion and interruption of supplies will still have done considerable harm. The longer they remain in place, the more that damage, particularly small business closures and downsizings at small and bigger enterprises, will become permanent.
Optimists take undue solace at the idea that Trump will roll back the tariffs as he wrests concessions from other countries. First, as far as the mother of all tariff blowback is concerned, optimistic press noises about China being willing to talk are misleading. Yes, Chinese official media has acknowledged Trump Administration outreach efforts and signaled a willingness to negotiate. But China has also made clear that it is still sticking to its guns: the US must drop (which may translate into “substantially reduce”) its tariffs first. From Global Times:
In response to a question asking whether China’s Ministry of Commerce (MOFCOM) has any further information and comments as the US has repeatedly said that it is negotiating with the Chinese side on economic and trade issues and will reach an agreement, a spokesperson from the MOFCOM said on Friday that China has taken note of the repeated statements made by the US side at a high level that it is willing to negotiate with China on the issue of tariffs. At the same time, the US has recently taken the initiative to convey information to the Chinese side on a number of occasions through relevant parties, hoping to talk with the Chinese side. In this regard, the Chinese side is making an assessment.
The spokesperson said that China’s position is consistent: We will fight, if fight we must. Our doors are open, if the US wants to talk. The tariff and trade wars were unilaterally initiated by the US, and if the US side wants to talk, it should show its sincerity, and be ready to take action on issues such as correcting wrong practices and canceling the unilateral imposition of tariffs.
Now admittedly, Trump may be forced to blink soon in his China staredown due to the US need for rare earths on which China has imposed export restrictions.2 But given Trump’s massive ego, even if he were to cut China tariffs to try to get negotiations going, it seems unlikely he’d roll them back far enough in his first go to satisfy the Chinese. And if Trump eventually climbs down far enough to placate the Chinese, the Trump Administration also seems out of touch as to how long treaty and trade negotiations normally take. Given the US being famously not agreement capable and the Trump Administration not signaling an intent to retreat from its goal of diminishing China geostrategically (which may include military action), there is no reason for China to be accommodating as far as the process of reaching an agreement or its form is concerned.
In an indirect proof of how long these various tariff “deals” are taking, the Bangkok Post reported yesterday that Thailand has yet to start talks with the US, even though earlier stories made clear that these negotiations were a top government priority. So the backlog is not trivial.
Some may also take hope from the idea that Trump will soon have to bend to domestic pressure. He did, after all, waive Chinese reciprocal tariffs and even the 10% baseline tariffs on electronics, such as computers and smartphones, and also gave automakers some relief by not tariffing them for aluminum and steel on top of their 25% for imported vehicles.3 But the Trump Administration partly retreated on the China break, and is also insisting that the electronics carve-out is only short term.4
One reader even went so far as to volunteer that the plutocrats would not allow Trump to cause them undue economic harm. But so far, they don’t seem to be doing much to protect their interests.5
One would think most of them have their Congresscritters on speed dial and could get them to saddle up. Yet the Senate couldn’t even muster the nerve to pass a non-binding resolution opposing the tariffs, let alone a vote challenging the action as a violation of Congress’ supposedly sole tax prerogative. A potentially more promising route for upending the tariffs, and one not subject to Trump whims, is a series of lawsuits contesting the Trump abuse of International Economic Emergency Powers Act as providing him the authority to impose these levies.
Media reports indicated that the reason Trump relented a bit was the severity of the market action, both the stock market and the spike up in longer-dated Treasury yields. The Trump team has assumed that stock market damage would lead investors to pile into what was once the safe haven of Treasuries, instead of shunning US financial assets now that Trump the chaos generator in charge.
Despite growing evidence of pain in the real economy, like a fall in McDonald’s sales to pandemic lows, reflecting a plunge in consumer sentiment…
BREAKING: U.S. Consumer confidence slides for the fifth straight month to levels not seen since the onset of the COVID-19 pandemic. https://t.co/lFODCkjYal
— The Associated Press (@AP) April 29, 2025
Trump is nevertheless likely cheered by the partial reversal of the stock market swoon, the ahead-of-expectations addition of 177,000 jobs in April and perhaps even by the Chinese making a big gold sale on Thursday. The chart below comes from the Wall Street Journal:
But confirming that the economic ship is still taking on more water, the Chamber of Commerce has called for broad-based tariff relief. From CNBC:
- The U.S. Chamber of Commerce is urging the Trump administration to immediately implement a “tariff exclusion process” in order to keep the U.S. economy from falling into a recession.
- The group asked trade officials Scott Bessent, Howard Lutnick and Jamieson Greer to automatically lift tariffs on all small business importers and on all products that “cannot be produced in the U.S.”
- Chamber CEO Suzanne Clark also asked the Trump administration to establish a process for businesses to quickly obtain tariff exclusions.
To get to the key point, which is the potential severity of the downside, consider, as many readers recognize, that shortages are expected to start around May 10 and first on the West Coast.
Not to be overly alarmist but…
This is one of THE BIGGEST AND MOST CRITICAL SHIPPING PORTS IN THE UNITED STATES.
These pictures were taken EARLIER THIS AFTERNOON (at 1:30pm EST)
NOTHING. IS. COMING. IN
This is what ALL OUR PORTS LOOK LIKE RIGHT NOW BECAUSE OF TRUMP’S TARIFFS pic.twitter.com/aFrcjEsEBX
— Andrew—#IAmTheResistance (@AmoneyResists) May 1, 2025
Due to how goods from Asia are trucked across the US, the impact on the East Coast for the most part will show up weeks later. Despite the cutoff of new arrivals being abrupt, the impact will be attenuated a bit due to the stockpiling at the business and even the consumer level.6
And the reason investors, businesspeople, and consumers ought to be at DefCon 1 alarm levels and aren’t? The best guess is that they assume that this Administration, like every one since the Great Depression, will saddle up and intervene to try to prevent worst outcomes.
But the Trump Team has openly and repeatedly expressed its Mellonite goals. It fully intends to tear down big swathes of the American economy, out of their cultish belief that new enterprises will quickly spring up to replace them.
But tons of commercial and investor behaviors are based on the assumption of a rescue, such as buying dips. If worst comes to worst, there will always be the Greenspan/Bernanke/Yellen put. Similarly headlines like the Guardian’s Trump’s tariffs: ‘It feels like Covid 2.0. So many things are getting disrupted’ give an unduly optimistic picture by suggesting that a Covid rerun is as bad as conditions might get.
Listen up: if Trump does not radically change course, what is coming will be much worse than Covid. Then, the US ramped up emergency programs, such as the Payroll Protection Plan and extended unemployment benefits, to preserve jobs and spending.
By contrast, Trump fully expects consumers to suffer considerably and is clearly unconcerned:
This is what tariffs actually look like.
-A $628 jacket now costs $1,797—because the tariff alone added $1,067.– A $90 shirt jumps to $276—not from taxes, not from shipping—but from a $154 tariff.
– A $167K import now comes with a $255K tariff bill.
Tariffs aren’t some… pic.twitter.com/OnxGKF7T7z
— Agent Self FBI (@RetroAgent12) May 1, 2025
The President's point — that tariffs make it harder for families to afford as many dolls — has far bigger consequences than he's letting on.
Let me explain once in very personal language, and then again using the more clinical language of economics. https://t.co/ttlQrgvS7Y pic.twitter.com/Ubj2klbzpu
— Justin Wolfers (@JustinWolfers) May 1, 2025
Because Trump is particularly attached to his America circa 1890 idealism and has surrounded himself with like-minded ideologues, he can’t be expected to reverse course on his tariffs, except at the margin, and then slowly. Even a considerable retreat seems likely to leave in place his 10% tariffs globally, with higher levies on China. Remember that Trump is seriously considering the insanity of putting tariffs on pharmaceuticals.
On top of that, his inability to admit error would translate into late and limited relief efforts. And he would feel constrained by the deficit. Tax receipts are sure to plunge in the absence of a tariff walkback. They fell by nearly 1/3 during the financial crisis when the annualized rate for 4Q GDP growth was -8.9%, from $1.6 trillion in 4Q 2007 to $1.1 trillion in 1Q 2009:
I spitballed to an economist colleague that if Trump didn’t course correct in a big way, it was not impossible for the US to suffer a 15% GDP contraction. He did not disagree. Even a Serious Economist like Noah Smith has mentioned hyperinflation as a possible worst case scenario for Trump policies.7
However, the oligarchs might resort to the other option before that outcome is baked in.
The Trump Team is not good at low-cost relief measures, such as credible pep talks to investors. From the Financial Times early this week:
Donald Trump’s top economic adviser Stephen Miran struggled to reassure leading bond investors in a meeting last week that followed a bout of intense tumult on Wall Street triggered by the president’s tariffs.
Miran, chair of the Council of Economic Advisers, met representatives from top hedge funds and other major investors at the White House’s Eisenhower Executive Office building on Friday, said people with direct knowledge of the matter.
Some participants found Friday’s meeting counter-productive, with two people describing Miran’s comments around tariffs and markets as “incoherent” or incomplete, and one of them saying Miran was “out of his depth”.
“[Miran] got questions and that’s when it fell apart,” said one person familiar with the meeting. “When you’re with an audience that knows a lot, the talking points are taken apart pretty quickly.”
We have not even factored in the impact of DOGE, which does not simply cut government jobs but far more important, guts programs and cashiers seasoned employees who could play essential roles in what would amount to economic relief efforts.
Satyajit Das, in his important two part series (see here and here) set forth other reasons why the coming crisis may prove to be intractable. On the finance/banking side, recall that the 2008 crisis, brewed in spots well watched by the authorities, subprime securities and related credit default swaps. Oddly they missed that this was a derivatives crisis, and that those derivatives exposures were concentrated at highly leveraged, systemically important financial institutions. But the fact that the September 2008 seizure struck at the heart of the financial system meant that government first responders knew where to administer emergency relief (the total botching of reforms is a separate, if deadly serious, matter).
This time, many more types of loans are implicated, such as so-called private credit, which is mainly lending to private equity deals and commercial real estate. And this time, the shadow banking system of non-bank lenders is far more important. Admittedly, enough distress among these non-bank lenders will later if not sooner produce enough insolvencies so as to impair bank loans. And remember that it does not even take an actual bank crisis but the fear of one to create bank runs. However, it is possible that the US will see a lending/institutional investor crisis (particularly among public pension funds) before a banking crisis takes hold.
In other words, the downside risk of Trump’s demolition project is far greater than anyone seems willing to admit. Too many people are operating on the optimistic assumption that somehow that can’t or won’t happen. Tinkerbell thinking didn’t have much success in the runup to the 2008 crisis. It is unlikely to fare better now.
_____
1 The plane to NYC was pretty full and my hotel was fully sold out, countering press reports of a collapse in US tourism. Admittedly NYC may be a lagging indicator. But restaurants seemed reasonably busy and the one luxury store I visited, very busy, and with buyers, not just lookers. NYC may also be buffered for the moment by the fact that big Wall Street firms are making out well on Trump-induced market volatility. But the “things don’t seem that bad” appearance in Manhattan may also be influencing press coverage since NYC is still the heart of the business press and to a large degree, national media.
2 From the Center for Strategic and International Studies:
Q2: What is the significance of the focus on heavy rare earths given U.S. supply chain vulnerabilities?
A2: The restrictions apply to seven medium and heavy rare earths: samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. The United States is particularly vulnerable for these supply chains. Until 2023, China accounted for 99 percent of global heavy REEs processing, with only minimal output from a refinery in Vietnam. However, that facility has been shut down for the past year due to a tax dispute, effectively giving China a monopoly over supply. China did not impose restrictions on light rare earths, for which a more diverse set of countries undertake processing.
Q3: Why are rare earths significant to U.S. national security?
A3: REEs are crucial for a range of defense technologies, including F-35 fighter jets, Virginia- and Columbia-class submarines, Tomahawk missiles, radar systems, Predator unmanned aerial vehicles, and the Joint Direct Attack Munition series of smart bombs. For example, the F-35 fighter jet contains over 900 pounds of REEs. An Arleigh Burke-class DDG-51 destroyer requires approximately 5,200 pounds, while a Virginia-class submarine uses around 9,200 pounds.
The United States is already on the back foot when it comes to manufacturing these defense technologies. China is rapidly expanding its munitions production and acquiring advanced weapons systems and equipment at a pace five to six times faster than the United States. While China is preparing with a wartime mindset, the United States continues to operate under peacetime conditions. Even before the latest restrictions, the U.S. defense industrial base struggled with limited capacity and lacked the ability to scale up production to meet defense technology demands. Further bans on critical minerals inputs will only widen the gap, enabling China to strengthen its military capabilities more quickly than the United States.
Q4: Is the U.S. rare earths industry ready to fill the gap in the event of a shortfall?
A4: No. There is no heavy rare earths separation happening in the United States at present. The development of these capabilities is currently underway. In its 2024 National Defense Industrial Strategy, the Department of Defense (DOD) set a goal to develop a complete mine-to-magnet REE supply chain that can meet all U.S. defense needs by 2027.
President Trump plans to sign an executive order Tuesday that will walk back some tariffs for carmakers, administration officials said, removing some levies that Ford, General Motors and others have complained would backfire on U.S. manufacturing by raising the cost of production and squeezing their profits.
The changes will modify Mr. Trump’s tariffs so that carmakers who pay a 25 percent tariff on imported cars are not subject to other levies, for example on steel and aluminum, officials said in a call with reporters Tuesday.
Carmakers will also be able to qualify for tariff relief for a proportion of the cost of their imported components, though those benefits will be phased out over the next two years.
4 The Administration messaging is so confused it is hard to know where things stand. From Associated Press on April 14:
Late Friday, the U.S. Customs and Border Protection said that electronics, including smartphones and laptops, would be excluded from broader, so-called “reciprocal” tariffs — meaning these goods wouldn’t be subject to most tariffs levied on China to date or the 10% baseline levies imposed on other countries.
But U.S. Commerce Secretary Howard Lutnick later said that this was only a temporary reprieve — telling ABC’s “This Week” on Sunday that electronics will be included under future sector-specific tariffs on semiconductor products, set to arrive in “probably a month or two.”
And not all of the levies that the U.S. has imposed on countries like China fall under the White House’s “reciprocal” categorization. Hours after Lutnick’s comments, Trump declared on social media that there was no “exception” at all, adding to confusion. Trump instead argued that these goods are “just moving to a different” bucket. He also said that China will still face a 20% levy on electronics imports as part of his administration’s prior move related to fentanyl trafficking.
5Perhaps they are getting tips so they can front run executive orders?
6 Yours truly stockpiled. And I don’t believe Apple for one second in claiming they saw no forward buying of iPhones. I saw refurbished iPhones thin out markedly during my short visit.
7 Smith is orthodox, so he does not grok that it’s not the much-demonized “printing” that would cause hyperinflation, but the Trump destruction of productive capacity, which looks to be a feature of his program.
I don’t believe the retail receipt about how much the tariff cost is. For example, the receipt above shows a tariff of 154 on a 90 dollar item, which is 70%. But the CBP duties shown are 53% So which is it 70 or 54?
More importantly, the tariff should be based on the wholesale price. So if the wholesale price is say $45 (50 % profit margin), and the duty is 53%, then the added cost due to tariffs is actually $24. Big difference from 154.
I’m Not saying tariffs are good, just that retailers like Bezos will have a huge incentive to lie.
Those are 3 different images.
One image an online shopping basket with a tariff of 170%
One image a tariff of 170% (not 70%) for the custom jacket.
One image of unspecified imports meaning you’d have to get out the manifest to see what is in there to see what is exempt resulting in a total tariff of 152% (not 54%).
As to your question of should this be whole sale? The first image probably; The second image depends seeing it is a custom item, could be bought & produced in China; Third image, that looks like an importer paying wholesale.
Do keep in mind that margins are in percentages. So even if something gets in wholesale with a +170% tariff that means that everyone in the chain just does (original price * 2.7) * their margin instead of (original price * 1.7)+(original price * margin).
They can do that any time, it is just that they can now claim to be a victim as well.
That’s what I don’t understand, what Powers are allowing this to take place? If there were a systemic threat from Orange King he would have been killed immediately right? Where are the elite? Do they not care about the party continuing?
Or is everyone calling everyone’s bluff like in 1914?
The ultra rich can take a lot more pain than anyone else.
It will need to get real, real bad before such options are exercised by those with the power.
You are most likely correct. This would not be allowed if the most powerful were not in favor of it, if not behind it. PMC just follows orders and can be as blissfully ignorant as anyone; perhaps moreso.
Even the bigger thinkers here seem not to grasp that everything has fundamentally changed. The masks are off, War is on, and major reorganizations are underway. Everyone in the West will have to deal with this reality – that the shaky foundations of all we have based our lives on are giving way slowly, and will then quickly according to history. And Trump’s power is not near what his visibility would indicate. Then again, those with true power are rarely, if ever visible.
Elite incompetence doesn’t uniquely affect the Trump team.
(small typo: “They fell by nearly 1/3 during the financial cricis”)
A very sobering and real analysis. I wish the suspected “coke fiends” and “speed freaks” in the DT2 crew could read this and sober up, but would they understand?
One thing to add: The highly-leveraged, systemically important financial institutions (Too Big To Fail) have been placed effectively above the law. Another example of how both illegal actions as well as (purportedly legal) institutionalized corruption that has been allowed (encouraged?) in the past may come back to bite us. Consequences and all that.
Miran being described as incoherent or “out of his depth” is quite a polite way of putting it. I can think of some creative Carlin-esque language to describe the DT2 kakistocrat crew.
A quick look at the mass media would contradict this analysis, not surprisingly. The “market” is booming, jobs numbers are up, lower rates on the horizon – hooray!
When I talk to “regular folk” about current events, it is usually on partisan talking points: immigrants are a big one. The DT crowd focuses on “closed borders” and rounding up the scary “illegals”. The Ds focus on how terrible assylum seekers are being treated. (the political hypocrisy just won’t go away). And of course hardly anyone mentions the US funding and cheerleading Genocide. The emotional and fearmongering topic of “illegals” is a tried and true political tactic to divide and distract. (scapegoat The Other)
When the consequences take hold, and the “regular folk” experience more decline in living standards, health, and material goods, the opinions might change.
Should we see immigrants simply as partisan talking points or as also having real economic consequences.
The latest Wolf Street mentioned that Biden ‘s surge of millions of immigrants in 2021-2024 is now finally getting picked up in the employment data.
Wolff states: “….there was a sudden supply of very cheap labor on the labor market that has squashed the big wage increase during the pandemic that workers at the lowest levels of the wage scale obtained…”
Exactly, blame others. Don’t hold the centers of power accountable. That’s politics
Neither. We need to identify the root cause that drives immigration, the exploitation of that immigration, and the oppression of the immigrants.
It’s capitalism all the way down.
The capitalists want to steal the resources of the LatAm nations, so they attack (both economically and militarily), overthrow or murder every government that the peoples of LatAm empower to govern in their own interest. These coups, sanctions, and corruption destroy local economies to allow capitalists in the metropole to acquire resources at costs that provide little or no income to the locals. Repression rules in order to keep those locals cowed. The repression and economic destruction drive the immigration (let’s face reality here: these are actually conflict-driven refugee flows). Yes, these immigrants/refugee flows do in fact depress wages, and place a load on social systems, but this is not the fault of the immigrants/refugees. It is the fault of capitalism, and the capitalists that benefit from this system.
If the worst case scenarios come to pass it’s hard to see how Trump and the GOP could allow mid-term elections to happen. They would be wiped out I imagine.
Elections? I would like to believe that the lack of democracy, lack of meaningful choice, rampant corruption, “unlimited political bribery”, and an evermore entrenched oligarchy is obvious by now. Alas, I’m too “optimistic”
Yep. I’m guessing any violent opposition is exactly what Trump & team are hoping for, as then they can justify martial law and cancel elections due to the crisis. And if the opposition doesn’t arrive I would not put it past them to create it themselves!
We don’t use that term “martial law” any longer. “Shelter in place” scores higher on the authoritarian euphemism scale.
Oh joy. Team wrecking ball just went after the next target of Trump, Iran, incidentally exacerbating the tiff they have with China.
Not just secondary sanctions for importing Iranian oil but a total ban of trade with the US.
So the tariff war with China won’t matter any more since there should be no more trade between the US and China seeing China is the biggest importer of Iranian oil and will keep doing so.
What we are seeing here is the story of Cassandra. Many thanks to Yves Smith for taking on the role of Cassandra. It will be thankless.
To wit: “But based on the tone of the press, discussions with people in the US, and a very recent and short trip to New York City, much, and arguably too much, of the US seems to be in summer of 1914 mode: cheerfully living in a sense of normalcy that is about to vanish permanently.”
When I was in Chicago in September 2024, I also caught a serious whiff of economic and political destruction. I moved to the Chocolate City three years earlier, but the contrast between Chicago 2021 and Chicago 2024 was too much in evidence. Prices had gone through the roof, even at reliable places like Middle East Bakery on Foster, where I had shopped for years.
I mentioned an odd anecdote here in comments: I went to a Jewel foodstore on Clark in the same neighborhood. Admittedly, Jewel foodstores have been surreal for years, but in September 2024 there were no tomatoes on display from the U S of A. Only from Mexico and Canada. The free market in action, mateys!
Anecdotally and politically, I saw a woman tootling down Clark Street in an “I’m Speaking” t-shirt. This was after the incident when Kamala “Caligula” Harris trashtalked the demonstrators who interrupted her — demonstrators who included Palestinians with relatives who had been slaughtered in Gaza and the West Bank.
I returned to the Undisclosed Region knowing that the Democrats would lose the election to Trump. I made a comment to that effect on FBk, which elicited remarkably shitty reactions from two friends of mine.
So it isn’t only a desperate attempt to pretend that the “normal” can continue. Much of the U.S. middle class and upper-middle class is in a state of denial. Years of upper-middle-class (upper 5 percent) complicity in looting the social state means that much U.S. discourse now is little more than bad faith.
Anecdote: As a resident overseas, I get my Social Security monthly payment on the third of the month. It arrived this morning — and I calculate that in the last month the USD has lost 3 percent against the euro. Or has been pushed down by bad faith and bad policies against the euro.
I’m not sure how long the tumbling dollar can go on. There may be consequences, ne.
At this point, though, what do USonions do? They have been persuaded that labor unions are patriarchal relics of yesteryear. They think that demonstrations are “kabuki,” whatever that voguish expression is supposed to mean. They have had the sense of solidarity beaten out of them.
Ahhh, thoughts and prayers!
This article addresses it for institutional levels but I do think Americans are used to getting bailouts when things go awry. While the housing/bank crisis of ‘08 had a very lopsided bailout it was still a massive infusion of money into the system. Same with Covid. Even during Trump 1.0 there was an immediate bailout of farmers after the fallout of his tariffs back then.
As Yves states, it seems no one really comprehends how bad things could get because in the past our leadership has had some degree of concern – even if just from a self-preservation perspective – that letting the nation fall into depression would be too drastic and threaten their very cozy position at the top. But, it seems this current crop of leadership is very diligently removing all the levers of resistance possible to their control to protect them from the coming backlash to this approaching depression.
This all makes me think of Bettelheim’s description of the “initial shock” to the various German political groups during the 1940’s but especially the “non-political middle class” and how they thought their own suffering must be a “mistake” in the system and not that the system itself was bad.
The non-political middle-class prisoners were a small minority among the prisoners. They were least able to withstand the initial shock. They found themselves utterly unable to comprehend what happened to them. In their behaviour became apparent the dilemma of the politically uneducated German middle classes when confronted with the phenomenon of National Socialism. They had no consistent philosophy which would protect their integrity as human beings. They had obeyed the law handed down by the ruling classes without questioning its wisdom. Therefore what was wrong was that they were made objects of a persecution which in itself must be right, since it was carried out by the authorities. Thus they were convinced that it must be a “mistake.”
http://www.brown.uk.com/brownlibrary/BET.htm
Geo: This all makes me think of Bettelheim’s description of the “initial shock” to the various German political groups during the 1940’s but especially the “non-political middle class” and how they thought their own suffering must be a “mistake” in the system
Exactly so. “But you don’t understand! This is happening to me!”
This is just how it works. I know some wealthy venture capitalists, some who supported Trump’s accession and some who moved out of the country because of it, either before or afterwards. They have in common that they assume they’ll remain among the privileged wealthy, or, at least, if there will need to to be a lifeboat, they will be in it.
A minor point, but I’ve never heard Chicago called Chocolate City. I thought that was Washington, D.C.
He is not calling Chicago the Chocolate City. He is referring to Perugia.
Methinks he refers to Turin
*Sigh*
https://insidetravelexperiences.com/perugia-chocolate-city-in-the-heart-of-italy/
And here I thought New Orleans was the Chocolate City!
Mayor Ray Nagin said that after Katrina.
The PMC types that are still on speaking terms with me are claiming that nothing essential will be in short supply for quite a while, that it’s the cheap plastic crap purchases that fill the empty souls of the lumpen proletariat that will see empty shelves. Of course, these were the same people that thought Harris was “obviously” going to win the election, so that makes we wonder if NPR and CNN are downplaying this to them now. I assume most of my more prosperous acquaintances’ information comes from those echo chambers. So much of what our government (including Congress) does now seems to be primarily for short-term PR “wins” and then secondarily for some hidden motives that involve illegal private monetary gain–maybe a very small percentage of what’s left is actually a reasoned longer-term strategy to benefit the country as a whole. It’s like we took Debord’s Society of the Spectacle (along with Brave New World and 1984) as a blueprint for the future, much like the mythical tech bro takes the mythical science fiction writer’s “torment nexus” novel (intended as a dire warning) as an instruction manual.
Based on the photography channels I follow, especially the comments, all photographers from amateurs to professionals are stockpiling and already complaining of shortages.
Thank you for this thorough analysis. So many moving parts it’s hard to keep track of where things are and what potential risks look on the horizon. The banking/loan aspect is one that has worried me due to how slim margins are for most businesses and how many rely on loans for day-to-day functions. As well as the issues already existing in commercial real estate being exasperated by more layoffs and business closures.
Really feels like they’ve diagnosed a real illness that is long overdue for treatment but are using gunshots to remedy it.
>The banking/loan aspect is one that has worried me due to how slim margins are for most businesses and how many rely on loans for day-to-day functions. As well as the issues already existing in commercial real estate being exasperated by more layoffs and business closures.
When we are at the point of Buy now, pay later for food…
https://www.cnbc.com/2025/04/26/americans-groceries-buy-now-pay-later-loans.html
re: “but also small businesses and/or intermediate goods producers taking the biggest hits…”
Absolutely! It is quite challenging to quote on a construction job these days. Who knows what the materials bill will be in three months, or if materials will be available.
Absolutely 2!
Storefront plate glass for my East SF Bay retail blew up while we were discussing business closure and encroachment issues. I didn’t know it was coming from Canada! Saw some relief in the eyes of the Ice Cream Shop as business is booming with local suppliers.
Hofbrau food costs skyrocketing while gross revenue growing nicely. Owner says we are making good money and giving it away to paper goods manufacturers and meat suppliers.
True Value hardware store stressing over inventory uncertainty. “What did we get this week?”
Rents are current but stagflation looms!
My son being an electrician we’re wondering about the cost of copper of course. It’s not currently subject to tariffs but pending an investigation it may be in the future. What is more concerning is what will befall his customer base. His crew specializes in upgrading the wiring in the many older buildings in our area, which still have knob and tube. While some upgrading is mandatory, a good portion of their work is a safety measure taken at the owner’s discretion.
These tariffs are like rolling a boulder down a hill. Many manufacturers source parts from China (including my company) and you’ve cut our supply chain without providing an alternative, because a lot of these components are not made anywhere else. Now we are in a holding pattern, depleting our existing stocks without replenishment, hoping things get resolved soon.
If this gets resolved, there will be a rush of orders going out that will clog up the transportation network that is in the process of being downsized, for example UPS is firing 20K employees. So we’ll have massive transportation bottlenecks, leading to inflation at the same time that US economy will be struggling through a tariff-induced recession. Stagflation will be a best case outcome here.
It’s utterly nuts that this kind of power over war as well as the economy has been given and yielded to the whims of one addled old man. There was a time one might have assumed he had a plan–even a bad plan–but it is increasingly obvious that this is not the case.
Clearly the 2008 bailout had the predicted result of producing complacency among TPTB. And the advent of the seemingly ridiculous Trump produced political complacency among Dems like Hillary and Pelosi who fail to admit, from their safe perches, how unpopular they are. So it was they who gave Trump the path to power, not the other way around.
Then the final straw is this mindless attack on the flyovers who thought he would at least leave them alone.
Trump will forever live in infamy for his part in the Gaza pogrom so history’s judgment is not even in play other than to judge whether the competitve Trump can beat Biden as worst president ever. As Michelle would say he’s a “presidential,” right up there with the character deficient Lyndon and Dubya.
It is terribly unfair and extremely cruel to refer to the President of the United States as, “one addled old man”, when it is obvious that he is a deep strategic thinker with a grasp of complex tactical manouevres which are the sign of a highly humane politician seeking to change the existing international order which has long ceased to work for the benefit developing economies in order to emphasise the advantages available to all of us if we were to join BRICS and whose recent activities have further confirmed me in the view that he is Morrisey’s highly motivated Manchunian candidate. May many others follow in his wake.
Pretty sure the 2008 crisis wasn’t allowed to happen until the big players were sufficiently positioned to profit from it and I doubt much at all has changed since.
That is false. The big players did not profit. It was a very small group of totally non-mainstream hedgies.
I followed the crisis as it was unfolding and wrote a book afterwards, which including getting to the bottom of the CDO trading strategy that concentrated the worst risks in them and how those CDOs too often wound up on the balance sheets of systemically important and highly leveraged financial institutions.
After the 2008 events vaporized about 1/3 of my investments, I started reading and listening to various gurus to try to understand what had happened. None of it really made sense until I found your book “Econned”. I suddenly had an explanation of what happened that, if complicated, made sense. Also it gave insights into many problems with our broader systems.
After reading the book I found my way to this blog. Another great and diverse source for things that make sense.
Thanks for the book and for continuing the blog all these years.
One reason for the complacency is a common assumption that serious problems have linear mechanisms, that they can be reversed as simply as they are created, as soon as they are recognized.
It’s like driving a front-drive car into a snowbank and trying the solve the problem by selecting to reverse the transmission. Maybe there is also a ditch under the snowbank.
This financial economic problem is complex, but so is the slowing of the Atlantic Meridional Overturning Circulation (AMOC), of ocean currents off Greenland, a likely affect of Global Warming. Too many economists and other leaders assume everything behaves as a simple linear function that is easy to reverse.
Given the history of overblown and alarmist declarations that the Trumpocalypse is upon us since he first took power in 2016, count me among the skeptics. You can call me “denialist” or “complacent” if you like, but all I’ve been hearing about since 2016 is the Trumpocalypse that never comes. Not to mention each new putative Trumpocalypse comes with the obligatory, “but it’s different this time, really.” i no longer have the desire to sort any Cassandras from the Chicken Littles. It’s been nothing but a consistent screaming by Chicken Littles and it has gotten grating.
As for the legacy news sources like the AP, they shot their credibility with two solid years of Russiagate nonsense and never owned up to their failure. Matt Taibbi has a hilarious piece up on Racket News about the Russiagate denialism going on.
Naked Capitalism has not been immune from this. This story from last month freaked me out. It especially freaked me out because NC is very level headed in what it publishes. But no, just another false alarm and not even an update to note that.
Maybe that was the point all along, to sew skepticism so that people would be complacent when the fecal matter hit the fan. If that is so, then I admit in my case that it worked.
What does “Russia-gate” have to do with this?
Cassandras and Chicken Littles? I guess everything is great where you sit. Material conditions and living standards for US folk have improved greatly eh, nothing to fret about.
You really believe in “US democracy”? After all we have the best that money can buy
“What does “Russia-gate” have to do with this?” It goes to the credibility and lack thereof of the AP which is cited by the article as evidence.
Some of us have defended Trump but only in comparison to the Dems. That doesn’t make him a defensible choice for president if we had a system that could provide other alternatives. Please defend Trump if that’s what you are doing by pointing out some good and useful action he has taken in either term. I can’t think of any.
And if his only function is as the un-Democrat then that doesn’t entitle him to go around wrecking everything according to some scheme he was told by one of his rich cronies. He is exercising far more power than he was given. Even Lyndon got a genuine landslide.
I am not defending Trump (and I am tired of having to point that out). The catastrophism surrounding him is off the chart. It is getting impossible to know what is true and false at this point unless you were in the room when it happened.
“”I am not defending Trump”” !!!!!!!!!!!
I have said that more than I would have thought after T1.
The ED pill is just as unpredictible and ends suddenly as sure as it comes on before the patient is ready. Blow off top meet Capitulation! If we can survive til the midterms…..
If the goal here is to ferret out the truth then that includes recognizing the catastrophe when it finally does happen. After all the point of the Chicken Little story is that eventually disaster did strike.
And I’d say the disaster to worry about would be the growing evidence of Trump’s personal instability. This was true on 1/6 as well even if the Dems tried to exaggerate it into some kind of coup attempt. Any person with judgment would have walked away rather than tried to reverse the election result. Trump doesn’t know how much is too much.
And no I’m not in the room with him (thank goodness) or some kind of psychiatrist and the above could be wrong. But it’s certainly not implausible. It’s the sense of instability that has so many of us worried.
That’s precisely the problem (although I think that it’s clear that decisions made “in the room” are in no way final).
The rate of change of the rate of change is so chaotic that planning is effectively impossible right now due to political instability.
It’s wild to see you take swipes at Yves when you refuse to see that Trump really is destroying US pretenses of democracy, as in aggressively pursuing his theory of the unitary executive (as in Congress and the courts don’t count). She should probably thank you for validating her warning about complacency and denialism.
And BTW she did give caveats about Murphy being overwrought but not necessarily directionally wrong. But it looks like you are indicting her for the Murphy headline.
I take issue with “taking swipes.” Each time some threatened “end of democracy/the world/the economy” proves to be a dud, it makes the next warning all the less urgent. Call it the Chicken Little effect – you say the sky is falling enough without the sky actually falling everyone tunes out. I’m already there and most people I know are either there or getting there.
But yes, the article was better than the headline. On the other hand, leading with ‘Trumpocalypse’ in the headline put me in a skeptical mood for what followed.
You don’t think armed, masked, unidentified officers of the state abducting legal residents and citizens off the street for speech crime, or for no reason at all, and sending them to prisons in client states is qualitatively different from anything Trump did in his first term? You don’t think it qualifies as a condition of distress and emergency?
If it doesn’t, please tell us what you think would.
The #McResistance did us irreparable harm with Russiagate and stupidly planned Lawfare, inoculating Trump against even valid accusations, but that doesn’t mean he and the people close to him vying to manipulate his passions and appetites aren’t scary dangerous, and that that their assaults upon the social state aren’t of grave long term consequence
As with, sadly, so much else, the US government abducting innocent people and shipping them off to some hellhole somewhere is not new for the US government nor is it an innovation of the Trump administration. Though I suppose shipping them off to South America instead of a EuroPoodle vassal like Poland to be tortured is new.
Maher Arar:
Extraordinary rendition:
Trump today is why it was so important to oppose these measures in the first place back then (and oppose with actual prison sentences for breaking so many laws), because they were the building blocks of a ‘turnkey totalitarianism’. But we know how that story has turned out…
Additionally, it’s only been two weeks since that story. The title wasn’t “Will Trump end democracy in the next fortnight.”
One good thing trump1 did do (aside from destroying the TPP) was ban Huawei from the US. Thanks to that move, they had to create their own systems, apps, chips, etc. Now I have a phone that uses no google (CIA) services whatsoever! It was also much cheaper than any of the offers from the provider.
> not even an update to note that.
τ is the symbol used in ecology for time-lags. When the number of rabbits goes up, the number of foxes will as well, but it takes some time. The pups have to mature.
There’s no data for an update until November 3 2026; the new elects aren’t legal until they’re sworn in; and it’s possible the President only cares about the Presidential election in 2028. The prediction has to mature.
However, we’ve had a set of economic predictions, and they are not dire enough in their proposed lag times. Hudson and Wolff estimated August for a breakdown of European order and its impact on the global economy. That was before the tariffs and empty ports. Last month Apollo Global indicated a recession starting during the summer, but didn’t have trucker layoffs until late May, and they’ve already started. This post has May 10 as a benchmark. We’ll know more in a week.
This τemporal acceleration occurred during Covid. I called the Library in the morning to make sure our meeting room was reserved, and it was. After lunch I got the call saying it wasn’t. And the line at the grocery was a half a block long.
‘during Covid’ = March 12 2020. Sorry for the ambiguity.
“And the line at the grocery was a half a block long.”
I went grocery shopping this morning just before noon and it was the quietest I have seen that store since we moved here 8 years ago. Very few shoppers. I don’t know what is happening in the megalopolis nearby, but here it is 1914.
So you were freaked out by the post on Trump ending democracy – natch. In case you were unaware, so called representative democracy in a republic has been under attack since neoliberalism became dominate. Milton Friedman long ago was quoted as saying democracy had to be diminished otherwise all those not at the top would just vote for more free stuff – paraphrasing here.
Enough so that now days the quip a share holder democracy could be better described as a Corporatist share holder Democracy, hence why the financial elites got bailed out post GFC and not the masses. Maintaining this social construct is the priority and not anything else, not even political identity for the wealthy.
Trump is just window dressing …
For me, watching the stock market go full-throttle FOMO mode, tells me that something changed behind closed doors. It’s like there is a secret memo telling Wall Street: don’t worry, we’ll mitigate your losses, but as for Main Street …
At the depths of the post-liberation day crash, Rubio said something striking. I’m paraphrasing, but it was to the effect of “Some big corporations have business models that hurt America, and that has to change.”
I can guess that he was referring to Pharma and Big Tech, but he never really clarified it and it was never walked back, to my knowledge.
To the extent that corporate America was going to have to take lower profit margins due to the end of the globalization bezzle, a much lower Dow Jones made sense. The rocket ride upwards tells me somebody took Rubio aside and gave him a beating.
The upcoming struggle between the Federal Reserve and the Treasury is going to be one for the ages. Who is going to get the bailout ? How to do a $ 10 trillion bailout if interest rates can’t go to zero because a loss of 15% GDP in a flow economy means at least that much ? Will they be able to force that many Treasuries onto the ROW or the Fed or will the Treasury have to take them on ? Will Congress panic ?
Really at the moment the US is uninvestable for me.
Spring of 1914 … or winter of 1860?
Thanks for all your hard work, analysis, and writing, Yves!
A good friend in a nearby small city owns the last independent men’s clothing in the 250 miles between Atlanta and Savannah. To my knowledge, and I get around due to my day job, there are only two such establishments left south of the Fall Line through the middle of Georgia from Columbus to Augusta. I get my “professional” clothes from him. Shirts (China) at ~$90. Wool trousers (Canada) at ~$180. Ridiculously expensive but high quality and they withstand wear very well. The tariffs are likely to put his 50-year-old business at serious risk. Naturally, he is “Republican” to the core, because MAGA GOPers are good for business. Always. If things play out as predicted here and everywhere else people are paying attention to the berserkers, his business will fail. I expect he will have more than enough time to play the golf he loves. As long as he can afford it…Anyway, I kept my last dress shirt with an Amalgamated Clothing and Textile Workers of America union label until if fell apart. That was more than 25 years ago. Tariffs will not bring anything back on the MAGA timescale but they will lead to much destruction.
And then there is my good friend dating back to first grade who is absolutely certain immigrants are destroying our “culture,” based on the little bit of lurking I do when I get a FB notification. His mother’s parents were from Portugal and that side of his family were stalwart Catholics and fishermen when we were growing up, leaders of the local economy and community. I wonder if this ever occurs to him? No, it certainly doesn’t…
Thank you Yves, for this thoroughly sobering and detailed analysis of what looks to be a pretty inevitable tsunami of financial devastation coming real soon. Hoo boy (h/t You). As a faithful “Skunk”, I gotta say, Something really Stinks. Big time. Thankfully it’s a good time of year to plant a big-ass Victory Garden or pitch in and help others do the same. Maybe not a bad time to invest in a useful pitchfork or two as well…..
Stay safe and courageous, dear friends!
Q3: Why are rare earths significant to U.S. national security?
More on this:
China is killing Boeing, Part II: As a major Pentagon contractor
https://kdwalmsley.substack.com/p/china-is-killing-boeing-part-ii-as
Time to short the market?
(Dow Jones U.S. Aerospace & Defense Index)
https://www.marketwatch.com/investing/index/djusae?countrycode=xx
Referring to that FRED graph, why did federal tax receipts increase so much ($2T to $3.2T) starting in 2020?
I imagine it must be related to all the federal COVID relief money that was injected into the economy, but where did that tax revenue increase come from? income taxes, corporate profit, cap gains?
It seems like a lot.
Commentariat, what’s on your mind for things to stock up on? Besides the inputs necessary for running one’s own business or income stream, and a few months of dry food.
Somehow I don’t see toilet paper running out again, but nobody did last time either.
Toilet paper is usually produced domestically.
What does the US import from China?
https://www.supplychaindive.com/news/what-does-us-import-from-china/746291/
But in my opinion, it’s not the lack of goods that will hammer us so much as it is inflation.
That said, food items with a long shelf-life that you actually use and eat are a wise investment, though it’s probably too late for imported items: there’s an Indian brown Basmati rice that I purchase in bulk but it’s price has recently doubled, and the wines I prefer now cost 50% more than pre-Trump II. With the farmer’s markets reopening I expect to fill the freezer to the max, and I’ll probably invest in a food-dehydrator as well.
I’ll probably replace the rice with barley and the wine with local homegrown, maybe some rot-gut to nip at on occasion.
Went to local bike shop today (working class area, sales floor is about 50-50 used and new bikes), one reason to get extra inner tubes (they did come from China) and another to repair a bike. Shop has staff of three, including the hands-on owner. They did seem too concerned, they have only one supplier mentioning raising prices but moderately, and not concerned about shortages – I think they are waiting for more definite news from suppliers. They thought if one was in the market for a new bike in the next 2 years, now would be good time to buy. Also noted, repair orders were down from normal, but they were not concerned.
Note to DJG: if the 3rd falls on weekend or holiday, the check comes early.
Just this AM I talked to my spouse about this issue generally and said we need to go through the pantry and see what is imported and see what we can stock up on. By my thinking (and in no particular order): Coffee, tea, spices, nuts, coconut oil, olive oil, ghee, dried fruit, and a variety of other food items and other things as well. I’m pretty well stocked for hard goods, but maybe a Home Depot run for screws and other commonly used hardware (e.g. drywall screws are handy to have around and are imported from Asia), maybe some dimensional lumber, a sheet or two of plywood. Maybe batteries and lightbulbs as well. More generally – anything that you use regularly and that will tolerate sitting on a shelf for an extended period. Even if you can get it in the future, I’d expect the prices to increase.
The real challenge is that you will not know what you should have purchased until you need something unusual and can’t get it (e.g. an inner tube for a wheelbarrow tire). Beyond food, the vast majority of goods most consumers use are imported or “made in the US with globally sourced inputs”. Going to be tough sledding ahead.
Green coffee contracts are likely renewing soon and there’s been a massive increase in costs there due to shortages already. None of the local roasters have increased their prices yet and the minimum bulk green coffee prices I’m finding would mean very slim margins at current roasted prices
Depends what you need really, but certain tools and cheaper measurement devices, the kind of things that you might buy at Harbor Freight or Home Depot, would be something I would specifically look into buying now in case you need it before they run out. So things like digital multimeters, calipers, all sorts of cheap automotive tools, those small cheap portable gas generators if you need it, lots of different hand tools. The small cheap gas generators and the cheap electronic measurement tools are all made in China; they all have much more expensive analogues built in other countries but you will pay through the nose for those (eg a Honda generator, or a Fluke multimeter vs whatever cheap and cheerful Chinese one you can find at any auto parts store).
Power tools is another big category, China dominates cheap power tools through companies like TTI (Techtronic Industries). TTI is a huge conglomerate that makes Ryobi, AEG/Ridgid power tools (although not the non-battery powered tools and vacuums), Milwaukee, and Hart. They also make/own the vacuum cleaner brands Hoover, Oreck, and Dirt Devil. A Chinese company called Chervon (NOT Chevron! lol) makes Kobalt, EGO, Flex, and Skil power tools. Most of the other companies in this space like Makita (Japanese) make a huge portion of their stuff in China. DeWalt makes a lot of power tools in the USA still surprisingly, but the nuance is “assembled with global components” and how many of those are China sourced. Anything with a rare earth magnet motor is almost certainly touched by a China supplier at some point.
I’d also say blanket anything you buy regularly at a Dollar store or equivalent. You know, those cheapo disposable things we all use regularly like brushes, can openers, gloves, mops, whatever. The Dollar Store type products are practically all made in China.
I have to believe that somewhere a number of billionaires are thinking of reenacting the Day of the Jackal, and they have started casting for the lead role. Where’s the Mafia when you need them?
Yes, that’s been my thought from jump: Other affected countries have had their best and brightest studying the tariffs and their effects night and day, for months. (China had a year and more to plan for Trump.) Now, Trump says he’s negotiating with 75 countries? Himself? This is a joke. Does he have a smart and dedicated group of economists and master negotiators to call on? Of course not. They’re not in his admin, he’s fired them from government, and the people who might actually help him think they’re disastrous. The prospects are not good.