Well the great tariff war has begun of yesterday with the “reciprocal” tariff rollout by Trump and his crack economic team. As of noon April 4, the market has lost between 6 to 9% of its value, depending on which index you’re looking at. Trillions of dollars with of value wiped out, not just company asset values, but individual 401K or Rollover IRAs have gotten clobbered. Good luck to those of you that actually rely on those to provide income.
Are there legitimate reasons or rationales to use tariffs? Sure there are. Are any of those in play here? No. Is there an overall strategy behind it? The contradictions in why and wherefore are so staggering that the obvious answer is no. Let’s explore a couple of examples. We’re going to raise so much revenue (from American taxpayers so yes it is a tax) that we can eliminate federal income taxes. Oh wait, they are a negotiating tool to work out “big, beautiful deals”, and we’ll lower or remove them when we get those deals. Won’t that make the revenue go away? They are in retaliation for lax immigration enforcement and fentanyl trafficking. Except virtually no fentanyl comes in from Canada and we felt the need to slap them first. They are to compensate for nations putting up unfair trade barriers to American products coming into their country, of which China is the biggest culprit by an order of magnitude. Except, we’re going to consider giving China tariff relief if they let us buy TikTok. Having trouble grasping that one? So is the rest of the planet duhuh. I personally like putting tariffs on seals living on an uninhabited ocean island. Guess the seals weren’t buying enough soybeans and bourbon. Or is it really about a tyrant wielding power? Look at me, I can put tariffs on you just like that. Poof. Especially if I don’t like you, like Trudeau (he’s not the Prime Minister anymore but aren’t Canada and Trudeau the same thing?). Or the Europeans. We really hate them. Vance just told us that on a stupid app. That’s why we saved them in two world wars.
Things I particularly like are putting tariffs on things we not only don’t make, but can’t even grow. Like coffee. Brilliant. who needs that in the morning? Even better, we’ve seen fit to put tariffs on French wine, Mexican tequila, etc so while the world burns we can’t drink anything other than bourbon to drown our sorrows.
My favorite though was the incredibly elaborate algorithm used to calculate the “reciprocal” tariffs. Something like “take the exports from a given country, multiply by 3, carry the two, add the time of day in that country’s time zone and divide by their head of state’s shoe size”. But that is only on Thursdays.
So now we sit back and wait for the retaliations to continue rolling in (China already pounced). I’m sure the EU will take a strong position as well. Then we all get to sit back and watch the impacts roll in. Let the layoffs begin. Sure employment numbers were good in March (but adjusted down in January-February). See where they are over the next three months. Meanwhile, Mr. Clueless says “it’s going great!” Factories are going up as we speak. As if. The economy is going to “boom”. Or was that go “boom” like implode? How much pain, confusion and just plain insanity does the public have to witness before we start to ask why Trump and his entire economic team are disconnected from reality. You thought Biden was out of it?
Here’s a far-out conspiracy theory for all you social media idiots that like that kind of crap. We are crashing the economy because that is the only way to stop inflation from taking off. Want to bring down the price of housing? Have a recession. Well demonstrated technique for lowering house prices, just try to look back at 2008 if you don’t believe me. Besides, everyone has told him tariffs are inflationary and the way to beat that? Crash the economy so nothing inflates (except his ego). Interest rates will come down and the gas price will crash, just like during Covid. Then when we inevitably come out of said recession, jobs will come roaring back, GDP will rise quickly from nowhere and we’ll claim victory. No matter how many “little people” were crushed along the way.
America will never be the manufacturing powerhouse of the world again and do we want to be? Don’t we really just want good high paying jobs with health benefits to allow the working class to advance? Do we really care what kind of jobs those are? Sure, there are clear places where we need to vastly increase domestic production capacity and address National Security issues. Like chip manufacturing. Oops, we’re trying to kill off that bill and its funding of US chip capacity. Why? Because it was Biden’s idea and therefore it must be bad. Do you really think companies are going to rush in to spend tens of billions of dollars building car plants under this level of uncertainty? When they are going to absorb billions in costs due to tariffs along with significant demand (profit) destruction because Americans don’t want to pay $5000-$15,000 more for a new car. They are borderline affordable now. Democrats should get some experts from the auto industry and publish a one page summary of the economics of that investment. My guess is between tariff costs, lost sales profits and adverse fixed cost absorption due to lost volumes that it will be 10 years before anyone breaks even on those new plants. Oh, and one last question? What are they going to build a plant to make? Ten years from now the car market will be headed toward EV’s as the exclusive choice for passenger vehicles, as evidenced by China driving towards that now. But Trump hates EV’s so how do you announce a plant to make those? He’ll force you to build IC engine vehicles that will be obsolete in ten years. Even better for the investment economics. Good luck auto business. Say hello to the layoff line auto workers. Be sure to remind your stupid union leadership how being laid off sucks. Wave all those pictures of them standing with Trump praising the tariffs. They will make great posters for picket line signs while you protest being laid off.