What Trump Just Cost America

There is some speculation that the Felon's rollercoaster, on again of again tariff circus is actually about stock market manipulation and the use of insider trading to allow the super wealthy to further enrich themselves.  Candidly, suggesting there is a plan behind the madness is likely too generous for a clown squad that simply doesn't know what it is doing and which has never had any careful thought out plan. The reality is that the tariff policy - if one can even call it that - is being driven by an impulsive, malignant narcissist who enjoys dominating the news cycle and who gets off by playing the tough guy and seeking to push others, both individuals and nations to grovel and to quote the Felon "kiss his ass." In the process of this shit show, incalculable damage has been done to America's economy and rather than weakening China, the Felon has unwittingly strengthened China's hand while convincing former friends and allies that America cannot be trusted and that investments in America need to be rethought. As pieces in both The New Yorker, The Atlantic and New York Times lay out what likely pushed the Felon to suddenly announce his 90 day pause in tariffs except against China were signs that the bond market, especially U.S. Treasury securities, was about to collapse, sending America into a severe financial crisis that would be blamed on one orange madman.   First, this from the Times on the damage done to America:

I have many reactions to President Trump’s largely caving on his harebrained plan to tariff the world, but overall, one reaction just keeps coming back to me: If you hire clowns, you should expect a circus. And my fellow Americans, we have hired a group of clowns.

Think of what Trump; his chief knucklehead, Howard Lutnick (the commerce secretary); his assistant chief knucklehead, Scott Bessent (the Treasury secretary); and his deputy assistant chief knucklehead, Peter Navarro (the top trade adviser), have told us repeatedly for the past weeks: Trump won’t back off on these tariffs because — take your choice — he needs them to keep fentanyl from killing our kids, he needs them to raise revenue to pay for future tax cuts, and he needs them to pressure the world to buy more stuff from us. And he couldn’t care less what his rich pals on Wall Street say about their stock market losses.

After creating havoc in the markets standing on these steadfast “principles” — undoubtedly prompting many Americans to sell low out of fear — Trump reversed much of it on Wednesday, announcing a 90-day pause on certain tariffs to most countries, excluding China.

Message to the world — and to the Chinese: “I couldn’t take the heat.” If it were a book it would be called “The Art of the Squeal.”

But don’t think for a second that all that’s been lost is money. A whole pile of invaluable trust just went up in smoke as well. In the last few weeks, we have told our closest friends in the world — countries that stood shoulder to shoulder with us after Sept. 11, in Iraq and in Afghanistan — that none of them were any different from China or Russia. They were all going to get tariffed under the same formula — no friends-and-family discounts allowed.

Do you think these former close U.S. allies are ever going to trust getting into a trench with this administration again?

This was the trade equivalent of the Biden administration’s botched exit from Afghanistan, from which it never quite recovered. But at least Joe Biden got us out of a costly no-win war for which America, in my opinion, is now much better off.

Trump just put us into a no-win war.

How so? We do have a trade imbalance with China that does need to be addressed. Trump is right about that. China now controls one-third of global manufacturing and has the industrial engines to pretty much make everything for everyone one day if it is allowed to. That is not good for us, for Europe or for many developing countries.

But when you have a country as big as China — 1.4 billion people — with the talent, infrastructure and savings it has, the only way to negotiate is with leverage on our side of the table. And the best way to get leverage would have been for Trump to enlist our allies in the European Union, Japan, South Korea, Singapore, Brazil, Vietnam, Canada, Mexico, India, Australia and Indonesia into a united front. Make it a negotiation of the whole world versus China.

But instead of making it the whole industrial world against China, Trump made it America against the whole industrial world and China.

Now, Beijing knows that Trump not only blinked, but he so alienated our allies, so demonstrated that his word cannot be trusted for a second, that many of them may never align with us against China in the same way. They may, instead, see China as a better, more stable long-term partner than us.

What a pathetic, shameful performance. Happy Liberation Day.

As for the pending financial crisis that prompted the Felon to blink, The Atlantic has this (the New Yorker largely echoes the same storyline):

Only yesterday, President Donald Trump was mocking Republicans nervous about his global trade war as “Panicans.” In a defiant speech to the National Republican Congressional Committee, he insisted, “This time I’m doing what I want to do with respect to the tariffs,” and that only he had the courage to defy “the globalists.”

But the globalists turn out to have had enough power to bring Trump to heel after all. This afternoon, the president announced a 90-day pause on what he has called his “reciprocal tariffs” against every country other than China.

According to Charlie Gasparino of Fox News, Trump retreated in the face of troubling developments in the bond market. Asked by reporters, Trump didn’t deny this, noting that, even with a “beautiful” bond market, “I saw last night where people were getting a little queasy.” This was a completely new layer of danger that appeared overnight. Before yesterday evening, the interest rate on Treasury bonds had fallen slightly, a sign of increased demand as nervous investors retreated to the historically safe strategy of lending their savings to the U.S. government. Then, suddenly, investors began pulling money out, sensing that the U.S. government was no longer safe, a prospect that created the risk of everything from higher interest payments on the debt to a full-scale financial crisis.

All of this is to suggest that if a stock-market swoon, or even a recession, does not frighten Trump, the prospect of a 2008-style meltdown apparently still does. And so the gargantuan trade war is back off, for now.

Where does this leave the economy? The new 10 percent tariff on almost every good imported from every country not controlled by Vladimir Putin remains in place.

That policy is, to be clear, quite harmful. Despite Trump’s rhetoric about reindustrialization, the universal tariff applies indiscriminately to almost every country and product. Some of those products, like coffee and bananas, cannot be practically grown in the United States, and will just get more expensive. Others, like metals and other industrial inputs, will make American manufacturing less competitive, not more.

The stock market surged after Trump’s “pause” announcement, but once the relief wears off, reality is likely to dull investors’ enthusiasm. Goldman Sachs, absorbing the news, has returned to its previous economic forecast, which calls for meager 0.5 percent economic growth this year and a 45 percent chance of recession. That is not the blinking-light disaster that the economy was facing before the pause, but it is still terrible, and much worse than the situation Trump inherited when he took office.

Nobody has made a new trade agreement with Trump. To the contrary, other countries have found the administration unable to even articulate its goals or objectives, because Trump’s “reciprocal” tariffs are the product of a nonsensical formula putatively serving a grab bag of mutually exclusive goals.

To the extent that the reciprocal tariffs created any leverage, it rests on the side of Trump’s counterparties, who now know that he may be a madman, but is not mad enough to risk a full-blown global economic meltdown. The gun on the table is pointed at Trump’s own foot.

Trump could very well restore the gigantic tariffs, especially if he feels humiliated by today’s events. The likelier outcome is that he will muddle through with policies that push prices up and growth down, but don’t directly precipitate an economic collapse. Trump’s allies will tolerate an enormous amount of damage to the country, especially damage that takes place over an extended period of time or primarily hurts people who aren’t rich. Immediate, massive harm to his wealthiest supporters appears to be one of the few red lines that Trump still won’t cross.

The end result of all the insanity?  America is weaker and more isolated than ever in recent memory while its enemies smile as they gleefully watch the self-inflicted harm the Felon has wrought.