"I realise that Trump true believers are unpersuadable; this outcome is assured by their blind faith in Trump. But for those of you who still listen to reason and facts, all you need do is to reflect on the fact that Trump believes that U.S. trade deficits in goods with individual countries - such as the U.S. trade deficit with Switzerland - is an economically meaningful concept that reveals that we Americans are 'losing' in our trade with Switzerland. This belief is the equivalent of a belief in witches or a belief that the earth is a flat disc balanced atop a tower of turtles."
"Every one of the tariff letters ends by noting 'These Tariffs may be modified, upward or downward, depending on our relationship with your Country.' No American company is going to open a new factory based on the protection offered by a tariff [that] could disappear before the concrete sets."
"They're not even letters. They're posts on the President's social media platform. .... So far: Japan 25% South Korea: 25% Malaysia: 25% Kazakhstan: 25% (very niiice) South Africa: 30% Laos: 40% Myanmar: 40% ... PLUS the sectoral tariffs"
"Reminder: the US has a FREE TRADE AGREEMENT with South Korea, signed by the President (GWB) & implemented into LAW by Congress, and TRUMP HIMSELF signed a mini-deal w/ SK in 2018. Now ALL South Korean imports get a 25% tariff — for now. NO incentive for South Korea (or anyone else) to negotiate with him."
"Unlike most of the countries Trump is shaking down with tariffs, South Korea has a free trade agreement with the U.S. (KORUS) that was ratified by Congress. The Constitution gives control of trade policy entirely to Congress, the president has no legal authority to do this."
"Trump punishes nice allies while he has not imposed any tariff on Russia or Belarus & no new sanctions either. Trump is transparently for our enemies & against our friends."
"[T]he logic is not just wrong - it’s economically backwards. Here's why:
"First, tariffs are not paid by foreign countries. A 40% tariff as an example goods means U.S. importers pay 40% more. Those importers pass the cost to consumers. Tariffs are taxes — and they hurt Americans, not the governments being 'punished.
"Second, the letter treats the trade deficit as a threat. But a trade deficit isn’t inherently bad — it’s a reflection of dollar dominance. The U.S. dollar is the world’s reserve currency. Foreign nations want to hold dollars and invest in American assets — like U.S. Treasury bonds, real estate, and equities. This demand for dollars keeps the currency strong and allows Americans to buy more goods from abroad. That’s what creates a trade deficit — not weakness, but strength and global trust. So while countries exports goods to the U.S., the U.S. exports financial assets to the world. That’s not losing - that’s global balance.
"Third, the idea of retaliatory tariffs — 'if you raise yours, we’ll raise ours higher' — is not a strategy. It’s a threat that damages diplomacy, disrupts supply chains, and raises costs for American companies and consumers alike. Trade is not a zero-sum game. This kind of mercantilist thinking — where every deficit is seen as a loss and every surplus as a win — belongs in the 1700s. In a modern, interconnected global economy, it’s outdated and harmful. Bottom line:
Tariffs are taxes on Americans
Trade deficits reflect dollar strength, not weakness
Retaliatory trade policy only hurts U.S. businesses
"Economic nationalism may sound tough, but it’s American wallets that take the hit."
"Trump: What people don’t understand is... the country eats the tariff, the company eats the tariff and it’s not passed along at all… China is eating the tariffs.
"Fact-check: False. Costs associated with tariffs are almost universally passed to consumers."
UPDATE: David Stockman, Reagan's former Budget Director: "During his first term in the Oval Office, Trump added nearly $8T to government debt. That was more than 43 presidents had combined to accumulate during the first 216 years of the Republic."
"There is only one explanation [now] as to how the so-called conservative party looked 10-year baseline deficits of $22 trillion straight in the eye, yet then genuflected to the King of Debt and voted to add $5 trillion more red ink on top.
"Or even more egregiously, GOP policy-makers were was told by CBO that the current fiscal path of 17% of GDP in revenues and 24% of GDP in spending will generate a catastrophic public debt of $130 trillion by mid-century. But that apparently made no never mind at all as they voted to pile on another $50 trillion, anyway—thereby insuring an eventual end-of-days financial conflagration. "To wit, these GOP pols sure as hell knew better, but were simply buffaloed and monkey-hammered into an act of fiscal insanity by the bellicose economic ignoramus who occupies the Oval Office. And while we are at it, let’s leave nothing to doubt: The four main planks of Trump-O-Nomics amount to a recipe for an economic Demolition Derby. "We are referring to catastrophic public debts, a renewed print-a-thon at the Fed, an insane Tariffpalooza and gutting America’s immigrant dependent labor market. Never before has an ill-educated buffoon come up with a more destructive policy mix and yet out of sheer bully-boy aggression single-handedly forced it upon an entire political party that should know better and which historically stood against every one of the four pillars of Trump-O-Nomics." [MORE HERE]
* * *
"The congressional budget bill [which was passed in the US Senate today] has become the most bloated bill to ever waddle and slide through congress.
"[Trump's ill-named] 'Big Beautiful Bill' just can’t stop growing. This pile of pork that required two pallet boards and a forklift in order to move him from the House side of the Capitol building to the Senate, is getting fatter with each passing day. It may not even be possible, at this point, to move him from congress to the President’s desk for signing.
"It seems Trumpublicans, who once masqueraded as budget hawks, just cannot spend enough money these days. Having already packed in more pork than the entire nation of China could eat in a decade at a time when the US is drowning in its own debt according to every credit agency that typically matters, Senate Republicans saw the need to fit a lot more fat into the flesh folds of this cut-taxes-and-spend-more, fantasy monster.
"Having loaded Bill’s crevices up with lard, we read today that this big butt-full of bills is now sprinting like a morbidly obese walrus for the finish line, but is likely to die of a heart attack before it arrives ...
"Meanwhile, the bill’s tab [has] ballooned like a post-tax-cut deficit, possibly adding trillions more than the already eye-popping $3.3 trillion House version. But hey, what’s a few trillion among friends? ...
"Despite the outrage, insiders predict the holdouts will do what they always do—complain loudly, wave a flag of fiscal doom, then wither like spineless tarts. After all, nothing unites Republicans like a giant tax cut and a promise from Trump that “this time, it’s gonna be beautiful. Really.” ...
"According to the Congressional Budget Office (CBO), 'Big Beautiful Blob' has gone up from adding $3.3-trillion to the budget ... to adding $3.9-trillion. ...
"Even the CBO notes,
… these numbers understate the potential costs of the bill, since the legislation relies on a number of arbitrary expirations. Borrowing could rise by another $1 trillion – to $5 trillion or more – if temporary provisions were made permanent.
"Not only that: The CBO’s numbers also likely underestimate where interest costs will be after 'Big Beautiful Blob' throws its monstrous weight behind the damage tariffs will do to the dollar and simultaneously to the Treasury market because right now investors are still, as I wrote in my last Deeper Dive, hanging onto fantasies that more time for negotiation means more chance of tariffs coming down. That includes bond investors who have bought the bull. ...
"[T]ariffs will drive interest rates on the government debt up by diminishing the need for central banks all around the world to hold Treasuries as their primary vehicle for reconciling their member banks’ foreign exchanges on trade with the US. Less trade equals less utility for those Treasury holdings, which means less demand, so higher interest. A falling dollar also means less foreign demand for Treasuries because foreign investors lose money on the exchange rate when they sell the treasuries and go back to their own currency.
"That will all happen because Treasuries are effectively the money bags that exchange currency typically travels in via the click of a computer key reassigning ownership. There is still no one that I read who is paying attention to that likely trigger for the United States’ ultimate debt death spiral. Because no one is seeing it, there is all the more likelihood it will take us down.
"And, of course, the rise in Treasury interest means a rise in all commercial interest that is pegged off of benchmark Treasuries. 'Big Beautiful Blob,' throwing its weight onto the Treasury heap, only makes the problem worse. It also increases the risk that no one sees tariffs as causing the spike in interest rates because they have the Blob to blame as a scapegoat. ...
"This budget bomb is likely to be more obliterating to the US future than those bombs the US just dropped in Iran, which multiple reports are now saying were not all that Trump boasted them up to be."
"[O]ver recent decades, the world trading system has drifted into a distorted, sub-optimal equilibrium, shaped by regulatory and political asymmetry, integration clubs and rule-based inertia. ...
"So, while tariffs fell, supply chains over-concentrated. The post-1990s decline in tariffs between different economic structures enabled deep global supply chains. This increased efficiency — but also vulnerability, dependency, and strategic exposure.
"In turn, non-tariff barriers [in the form of excessive internal regulation] rose, especially in the European Union. It seemed like a good idea at the time – for some people – but the reduction in market access for outsiders and entrenching of the local status quo was less transparent. ... the expansion of the European Union from 9 members in the 1980s to today’s 27 ... has privileged trade for insiders, whilst diminishing the relative position of external players. ... amounting to a reversal of the principle of mutual recognition [and] the foundation of liberal trade ... [along with] a deeper recalibration of the global trade order towards more explicit trading blocs (which crucially will need to deregulate internally to grow) ...
"This will not be painless. The transition out of a long-standing but sub-optimal equilibrium rarely is."
"On Thursday, the press pool was summoned at 10:48 A.M. for what Trump had billed as a “very big and exciting” announcement of a new trade deal between the U.S. and the U.K. …
“The deal, it turned out, was somewhat less than advertised—an agreement in principle, after years of talks, and with many details to be finalised. …
“Still, it was something, and Trump, with all the zeal of a used-car salesman, plumped for the agreement, though he admitted it wasn’t quite done yet. “In the coming weeks, we’ll have it all very conclusive,” he vowed. ….
“There are many words that come from Trump’s mouth, and few that he will not renounce when they are no longer convenient.“
"Trump's "big" trade deal is with the UK:- It's a framework not a deal - They're our 11th largest trading partner - They're only 3% of US trade (97% to go) - They *already* charge average tariffs of only 1% (limited upside) "It's a photo op, with little macroeconomic significance. ...
"Overwhelmingly the most important news here -- in terms of macroeconomic impacts -- is that the US is retaining 10 percent tariffs on nearly everything. Do the numbers and it's obvious that any industry-specific tweaks are second order."
"Free trade consists simply in letting people buy and sell as they want to buy and sell. It is protection that requires force, for it consists in preventing people from doing what they want to do. Protective tariffs are as much applications of force as are blockading squadrons, and their object is the same—to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war."
"Trump’s tariff mayhem has crashed stock markets across the globe. ... Doing nothing would have been far better than doing what he did. ... [When the stated policy risked a sovereign downgrade from Moody’s and probably kicked off a small recession, reversing course is indeed a win for all Americans, much in the same way that surviving a self-inflicted gunshot wound is a win.]
"[But consider.] Are there any pre-2025 policies that have already done damage on the scale that Trump is now inflicting on the global economy?
"While you might object, 'If any such policies existed, we would have noticed,' you shouldn’t. Imagine Trump imposed his current tariffsgradually over the course of the year, while constantly reassuring the world that he had no intention of raising overall tariffs. The total damage of this would ultimately be about the same as what we’ve seen. The visibility of the damage, however, would be far lower. ...
"Once you accept the possibility of pre-existing massive wealth-destroying policies, plausible candidates are easy to find. Here are [two]:
"1. The near-ban on international trade in labour. Raising tariffs from around 3% to around 30% crashed the market. But the effective tariff on foreign labor ranges from about 250% to 1500%. Indeed, that understates the damage, because arbitrary non-tariff barriers are a greater burden than precisely-defined tariffs.
"2. Draconian regulation of construction. Existing regulations roughly double the price of housing, imposing a massive burden on not only consumers, but any business requiring offices, factory space, and so on. ...
"We recently got to watch a horrific spectacle of policy dysfunction unfold before our eyes. Tariffs spiked; markets crashed. But after seeing this crash with your own eyes, you shouldn’t merely acknowledge that ... one mistake. You should open your mind to the possibility that ... for every major market crash heralded on the news, there could easily be a dozen invisible crashes — policies that wantonly but stealthily destroy trillions of dollars of value. Immigration, housing, and nuclear power are only my top candidates.
"A further deep lesson: ... We’re habituated to their harm ... to the point that few of us realise how much wealth we’ve lost, how much wealth we’re losing, and how much wealth we and our descendants will continue to lose for decades or centuries to come.
"[P]opulists [like Trump] do immense harm blatantly. Traditional politicians, in contrast, favour stealth. When they inflict immense harm, they do it gradually. And in the face of blatant opportunities to to make the world dramatically better, they yawn. ... But once you learn to see the invisible crashes, you won’t be able to unsee the ugly truth ... "
"Donald Trump decided [last week] to lift, temporarily, most of his arbitrary tariffs* ... his personal decision ... his whim ... And his whim could bring the tariffs back again.
“The Republicans who lead Congress have refused to use the power of the legislative branch to stop him or moderate him, in this or almost any other matter. ... No one, apparently, is willing to prevent a single man from destroying the world economy, wrecking financial markets, forcing this country and other countries into recession if that’s what he feels like doing when he gets up tomorrow morning. ... "After arguing about how to limit the powers of the American executive, the writers of the Constitution decided to divide power between different branches of government. More than two centuries later, the system created by that first Constitutional Congress has comprehensively failed. ... The people and institutions that are supposed to check executive power are refusing to restrain this president. We now have a de facto tyrant who thinks he can bend reality to his will.
"In recent years, many people who live in democracies have become frustrated by their political systems, by the endless wrangling, the difficulty of creating compromise, the slow pace of decisions. Just as in the first half of the 20th century, would-be authoritarians have begun arguing that we would all be better off without these institutions. ... In the United States, a brand-new school of techno-authoritarian thinkers find our political system inefficient and want to replace it with a ‘national CEO,’ a dictator by a different name. “But in the past 48 hours, Donald Trump has just given us a pitch-perfect demonstration of why legislatures are necessary, why checks and balances are useful, and why most one-man dictatorships become poor and corrupt. ... If the Republican Party does not return Congress to the role it is meant to play and the courts don’t constrain the president, this cycle of destruction will continue and everyone on the planet will pay the price.”
* Rob Tracinski, today: "After the markets crashed for a few days, and the bond market made some particularly ominous noises, Trump suddenly pulled back his disastrous tariffs to mere Smoot-Hawley levels, and apparently just today, his people figured out it would be unpopular to put massive tariffs on laptops and iPhones from China, so they exempted those products."
"If, now, it was possible to devise a scheme of legislation which should, according to protectionist ideas, be just the right jacket of taxation to fit this country to-day, how long would it fit? Not a week. Here are 55 millions of people on 3½ million square miles of land. Every day new lines of communication are opened, new discoveries made, new inventions produced, new processes applied, and the consequence is that the industrial system is in constant flux and change. How, if a correct system of protective taxes was a practicable thing at any given moment, could Congress keep up with the changes and readaptations which would be required. The notion is preposterous, and it is a monstrous thing."
"Suddenly, the brazen man who told the world that everyone was begging for a deal runs from his own war with no deals in hand ... AND takes the financial world down on his roller coaster from hell.... "Why the stock market’s enormous surge yesterday? It turns out it was because Trump caved. The global fight he alone picked was just too much for him. He was destroying the nation and he knew it, and the evidence of how intensely the destruction flared up is all over the news this morning. Trump burst into flames and crumbled into dust, and that is why the stock market experienced an enormous sigh-of-relief rally. I didn’t get the news of his caving in until after the stock market closed, but now here it is:
“I have authorised a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately,” Trump posted on his Truth Social.
And, SHABANG!
About 30 billion shares traded hands, making it the heaviest volume day on Wall Street in history, according to records that go back 18 years.
"How badly did he cave? The big talker crumbled into the dust in flames that he had lit by sucking back most of what he’d done. Some try to say that was always the negotiating plan, including Treasury Secretary Scott Bessent, but plenty of evidence and even admissions by Trump insiders say otherwise. The Admin. just put a good face on it. ...
"What may be permanent [however] is the damage already done...."
You don't need to wait to see what will happen. Trump's tariffs have already had a chance, and they've failed, explains Timothy Taylor.
President Trump set off a wave of protectionist trade policies about seven years ago, back in 2018, and those policies were mostly extended and followed during President Biden’s term of office as well.
So we can already measure the results from Trump 1.0. And, who would have thought ...
[U]nsurprisingly to most economists, trade restrictions have done a poor job of producing the desired results. ..
Those "desired results" being those desired (or claimed to be desired) by Trump 1.0 and his protectionist advisors and cronies.
Apart from making tariff threats for geopolitical ends ("Give us Greenland or feel our trade wrath") America First's protectionists claimed there to be three specific economic benefits from their economic protectionism:
more US jobs in manufacturing;
reducing US economic ties with China; and
reducing the trade deficit.
Studying the results since Trump 1.0, it's clear that all three are dead on arrival.
Taking them one at a time.
1. American manufacturing employment has been declining ever since WWII. If anything however, it accelerated under Trump's tariffs. Why?
As [one economist] points out, there are several effects of trade barriers on US manufacturing jobs: a certain domestic industry is protected against competition, but higher prices in that industry can lead to problems for other domestic industries, and foreign countries may retaliate by shutting out US-produced exports. Put these together, and [this] suggests that the Trump tariffs of 2018 may even have led to a reduction in US manufacturing jobs.
2. Even while Americans were taxed to trade with China (which is what a tariff does) US trade with China has remained steady for more than a decade. "[S]even years of protectionism has not led to any meaningful drop in China’s value-added share." But it has led to Americans paying more for their goods.
3. The 'current account deficit' is the broadest measure of the trade deficit, explains Taylor. And was thus reduced by Trump's tariffs? Answer:
This measure also doesn’t change much in the years after the Great Recession, and then gets much worse [sic] during the pandemic. In short, seven years of protectionism hasn’t “fixed” the trade deficit, either.
Oops!
[T]he main point is simply that judged in terms of its own main justifications, the surge of protectionism since 2018 has not been achieving its goals. One can of course offer reasons for this failure. A common pattern in politics–and not just in trade issues–is that the failure of past policies to achieve their stated goals then becomes a new justification for more of the same. In this case, the failures of past protectionism become a reason for additional protectionism. As one example. after Trump renegotiated the North American Free Trade Agreement (NAFTA) back in 2018, transforming it into US-Mexico-Canada Agreement (USMCA), he said in his press conference: “Once approved by Congress, this new deal will be the most modern, up-to-date, and balanced trade agreement in the history of our country, with the most advanced protections for workers ever developed.” Seven years later, Trump now apparently views the agreement that he renegotiated and lauded as a failure, and promises to dial up tariffs against Mexico and Canada–along with the rest of the world–to new heights.
Who would have thought it. Trump's not playing 4-d chess. He's playing 2-d Go-Fish. And losing.
UPDATE: Some more great links here curated by Don Boudreaux, to help you put this calamity on context.
Since it's the topic of the day a historic turning point in human affairs, the least I can do is offer readers a ramble around the topic of tariffs and the destruction of tariff wars — basically, around the many writers reciting the multiplicity of ways in which the Trump Administration has fucked us.
"“Liberation Day”: That is what US President Donald Trump has called Wednesday, April 2, the day he announced huge swaths of taxes on imports worldwide. Despite the label, it was far from a day of liberation. By making imports to the US more expensive, the government is actively increasing the cost of living for American consumers. "The Trump administration has fallen for one of the most common misconceptions about trade—that it only benefits a country when it is the exporter. This could not be further from the truth. One of the greatest benefits of free trade lies with the importing country, where consumers gain access to a huge range of goods, crucially, at lower prices. "Whether it’s clothes, food, medical supplies, or mobile phones, access to the global market reduces the cost of living and increases consumer choice, often alleviating poverty in the process. "It comes down to a very simple principle. No one person could produce everything he or she consumes. No family or household could do so either. No city, town, or province could produce absolutely everything they consume. Equally, no country can produce everything it consumes, nor should it. Attempts to achieve autarky are acts of economic self-harm. Freedom to exchange across borders is win-win: it allows consumers to access a plethora of goods and services, improving welfare overall."
"Tariffs are irrational both morally and practically. "Morally, tariffs are rights violations - they restrain or prohibit individuals from trading freely and voluntarily in their own self-interest with whomever - no matter where they reside geographically. ... "Practically, tariffs punish the individuals in the country which implements them. Trump even acknowledges the pain. But he mystically thinks this pain will be good and lead us to prosperity. "Tariffs raise prices, cause shortages, and decrease productivity. They destroy wealth, businesses, income, and jobs. This is well known in theory and practice. See the Smoot-Hawley Act and its role in making the Great Depression even worse. "Trump’s foreign policy is morally and practically irrational. "What is the moral and practical foreign policy solution? "Free trade."
"The essence of capitalism's foreign policy is free trade—i.e., the abolition of trade barriers, of protective tariffs, of special privileges—the opening of the world's trade routes to free international exchange and competition among the private citizens of all countries dealing directly with one another."
"Fundamental to the argument for high tariffs has been the argument that trade deficits reflect America being "exploited" or "taken advantage of." In this article of mine on, "Why Trade Deficits Don't Matter -- Unless Caused by Government," I explain the misguided economic reasoning behind this claim, and why the far better policy is free trade." Trade Deficits Don’t Matter – Unless Caused by Government - Richard Ebeling, FUTURE OF FREEEDOM FOUNDATION
"Donald Trump is fond of saying that trade wars are easy to win. Among the litany of patently false Trumpisms, this may well prove one of the most disastrous. ... "Protective tariffs risk triggering a cycle of escalation that ends well for no one."
"America can’t be outcompeted because America does not produce or trade anything. "Nations do not compete with nations. Individual firms compete with individual firms abroad. Ford competes with Toyota. America does not compete with Japan. Nations are trading partners, not competitors."
"“We are seeing a combination of true-believing mercantilism, shocking ignorance about how the global economy works, and shocking incompetence in the planning and execution of economic policy,” says Michael Strain." Trump's aggressive push to roll back globalisation -FINANCIAL TIMES (paywall0
"Like the post-1945 British Labour governments, he wants to shelter domestic manufacturing and the working class behind tariffs while reducing overseas commitments. But the net result will be both economically damaging and geopolitically weakening. Americans will come to miss globalism and policing the world. They will belatedly realise that there is no portal through which the United States can return to the 1950s, much less the 1900s. And the principal beneficiary of Project Minecraft will not be Russia, but China. Call it Project Manchuria. ...
"The president stands as much chance of reindustrialising the U.S. as you do of getting your frozen laptop to work by smashing the motherboard with a Minecraft hammer."
"So think of it as a world wide Brexit like the U.S. leaving the global economy. "A trade lawyer at a global law firm here in London told me their clients see Trump’s tariffs as “worse than Brexit” as they’re dealing with rapidly changing trade rules on a massive scale. It’s not just the tariffs that Trump has imposed, but the retaliation it will provoke."
"It sounds so sensible: why not use protection and industrial policy to preserve manufacturing capacity “just in case” of, say, a war or a pandemic? And, to be sure, this is a better argument for some limited government intervention on trade and investment flows than wanting to tax imported bananas or revive manufacturing. "But even then it’s not the slam dunk some people imagine. Below is my chapter on this issue from Economics In One Virus, published in 2021. It’s just as true and relevant today."
"The populist story of the death of U.S. manufacturing is nonsense. Mr. Vance and his cohort maintain that increased free trade with countries such as China in 2000 or Mexico in 1994 killed American jobs. It’s true that the number of manufacturing jobs is lower than it was in 1970. But that’s because we can make so much more with fewer people. Blame technology, not trade. "Real hourly output per manufacturing employee has been on an upward trend since 1959. Real U.S. manufacturing value-added—the sector’s contribution to gross domestic product—reached its highest recorded level in 2022. Manufacturing output was close to its all-time high in 2022, and the U.S. remained the global leader in manufacturing value-added per worker. "Steel is one example. In 1980, one steelworker could produce 0.083 tons of steel in one hour. By 2018, one steelworker could produce 1.67 tons in an hour. This is a good thing. Wage and income data in the U.S. show the rising tide is lifting all boats—especially the smallest. "Americans don’t want their children to have to work punishing jobs in a steel mill, and it’s evident they don’t have to. Manufacturing jobs, as a share of total employment, have been on a downward trend since 1943—falling from 39% to under 25% by the end of 1970 and hitting 20% in 1980. This decline started long before Ronald Reagan ran for office, before China received Most Favored Nation status for outsourcing manufacturing, before Bill Clinton signed the North American Free Trade Agreement and before the World Trade Organization was created. The trends even started five years before the U.S. joined the General Agreement on Tariffs and Trade." Free Trade Didn’t Kill the Middle Class - Norbert J. Michel, WALL STREET JOURNAL
“The philosophy of protectionism is a philosophy of war.” ~ Ludwig von Mises
"“When it comes to steel, it’s fantastic for our industry,” said Jack Maskil [president of the United Steelworkers Local 2227 in Pittsburgh’s Mon Valley], “but what about everything else?” ...
"On the one hand, they are thrilled that their industry will be a key beneficiary of the 25 percent tariff imposed on steel imports to the U.S. ... "But while the steelworkers are also hoping that tariffs will bring about a revival of manufacturing jobs, they also worry about their effect on the economy, and on their own purchasing power."
"The proponents of protectionism say, “Free trade is fine in theory but it must be reciprocal. We cannot open our markets to foreign products if foreigners close their markets to us.” China, they argue, to use their favorite whipping boy, “keeps her vast internal market for the private domain of Chinese industry but then pushes her products into the U.S. market and complains when we try to prevent this unfair tactic.” "The argument sounds reasonable. It is, in fact, utter nonsense. Exports are the cost of trade, imports the return from trade, not the other way around."
"This idea that Donald Trump is just playing hardball to negotiate tariff rates down on US exports is absolutely ridiculous. The % of tariffs applied to US-produced goods has declined consistently since WW2 and was nearly nothing... "UNTIL! Donald's first term, and now his second. "And yet I keep seeing so many MAGA supporters saying: 'We're already seeing countries backing down from their tariffs!' "You're literally winning a battle and losing the war at the same time ..."
"Then there’s Trump’s fascination with tariffs. The damage Trump has caused Ukraine and Nato pales by comparison to what his tariffs will do to America’s economy and the entire international economic system. If Trump had acted on April 1 instead of 2, he could quickly have said it was all an April Fool’s Day joke, thereby saving the global economy trillions of dollars of damage when markets started heading south. Unfortunately however, Trump is totally serious, a fact evident long before “Liberation Day.” "Here too, “experts” and anxious businesspeople steadfastly ignored Trump labelling “tariff” the dictionary’s most beautiful word. Tariffs, they said, will be targeted, carefully calibrated, and he’ll do deals quickly. It’s all a bargaining tactic, Treasury Secretary Bessent said in October, 2024: “escalate to de-escalate”. Even as global stock markets drop like rocks, experts are still rationalising what his “strategy” is. "Wrong again. Trump is more likely to win the Nobel Prize for literature than for peace."
"Reminder: This policy was spearheaded and implemented by a man who thinks nobody says the word “groceries” these days because “it’s an old-fashioned word” and he somehow brought it back into the limelight. "Donald Trump is a motherfucking moron. Those who knew this and voted for him anyway because he gave them explicit license to be assholes deserve every last bit of pain his policies will cause them."
"In times of upheaval, those closest to power often find ways to turn disruption into wealth. Trump’s erratic tariff wars, billed as economic nationalism, upended markets, collapsed sectors, and triggered retaliatory shocks. But while farmers went bankrupt and consumers paid more, the market opened space for those with foresight—or insider access—to buy low and consolidate. "Geographer David Harvey calls this accumulation by dispossession: crisis used not to correct the system, but to extract from it. Devalue public assets. Destabilise protections. Create just enough chaos to buy cheap what others are forced to abandon. It’s not just policy failure—it’s extraction dressed as populism. "The con isn’t just psychological. It’s material. It’s not just about being lied to—it’s about being looted. "And that’s what makes this moment different—and more dangerous. The scam isn’t happening outside the system. It’s running through it."
"The latest rumor, when I started drafting this column, was that President Trump will suspend the tariffs for a 90-day period, with the exception of those on China. Markets started going back up again. "But “the very latest information” doesn’t stay current for long these days. The new report—but don’t count on it—is that the 90-day pause is not real after all. That revision came out before this draft was finished. And markets again whipsawed. "The Trump administration has created a new monster—one of unpredictability and erratic behavior. We simply cannot predict with any degree of accuracy what will happen next. By the time you are reading this article, there will probably be some newer report about the tariffs or threat of tariffs, and then another report after that. "Even if the White House winds up instituting a pause on the proposed tariffs—or ultimately adopts much better economic policies—this seesawing may plunge the American and perhaps also the global economy into recession."
[WATCH] Singapore must be clear-eyed about dangers ahead: Singapore's Prime Minister Wong on implications of US tariffs:
"Donald Trump has demonstrated his profound misunderstanding of the basic economic principles of international trade for several years now, and perhaps reached a pinnacle when he told the New York Daily News in an interview last August that “we’re getting hosed by the Chinese — and that we’ve done it with our eyes wide shut.” ... "[Trump adviser] Peter Navarro, in his Wall Street Journalopinion piece earlier this week (see related post here) demonstrated his fundamental misunderstanding of international trade when he opened his op-ed with the following question: “Do trade deficits matter?” Just to ask the question is to admit one’s ignorance of trade theory, which has been pretty settled on this topic since Adam Smith taught us in 1776 that “Nothing…can be more absurd than this whole doctrine of the balance of trade. ..."
Trump's team said they based their "reciprocal tariff" calculation for each country based on the tariffs and impediments put on American imports by those countries. But no. It's even more irrational: "[Trump's chart] features an estimate of 'Tariffs Charged to the USA' by other countries that nobody could figure out, until a financial journalist realised it was just how much we export to that country, minus how much we import, divided by how much we import."
"Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by regarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically: while, by increasing the general mass of productions, it diffuses general benefit, and binds together by one common tie of interest and intercourse, the universal society of nations throughout the civilised world." ~ David Ricardo (1817)
"Why is today’s Trump so different from the Trump of his first term? .. ". Turns out, the answer is very simple" Back then he had people, and a Congress who would say "No." But now the yes men are in power.
Trump's tariffs policy came from his economic advisor Peter Navarro, who invented a fake expert in his books to justify it. "Peter Navarro liked to quote a guy named Ron Vara in his books. Those books are largely what led to Navarro becoming a top adviser to President Trump and helping to shape U.S. policy on China. Here’s the thing about Ron Vara, though: He doesn’t exist. ...
Second-term Trump is who Trump always was. This is Trump without many adults in the room stopping him getting his way. This is Trump surronded by Yes Men in a cult. This is Trump. A freedom-hating, dictator-loving, trade-despising child who wants the power of a tryant. Someone who has no regard for facts and who will utter any lie he wishes - no matter how ridicolous it is. And his believers are expected to believe it. Under fear of discommunication from the cult. This is what you asked for when you voted for Trump. This is what you got. I hope you are happy....
"An often forgotten truth is that it is not just military warfare that can cause injury to innocent bystanders, the same inescapably happens in economic warfare initiated by governments, as well. But in the latter case the human “collateral damage” is a targetted victim. ... "Tariffs and counter-tariffs are tools of economic warfare that are said to be targeting the “aggressor” country. But the very nature of how tariffs and counter-tariffs work, results in the main targets being innocent bystanders in the countries concerned. "Once we disaggregate “nations” into their, respective, individual buyers and sellers, producers and consumers, we see that the most damage falls on the economic “non-combatants,” of whatever the original “dispute” may be about ..."
"TikTok is a major bargaining chip in a grave geopolitical struggle. Given the data users have always sent to Beijing, it’s been a bargaining chip ever since it arrived on America’s digital shores. For Trump, though, it’s not exactly his chip to bargain with: Congress already determined the American course of action. The mystery is why nobody seems to mind Trump delaying its execution — or at least, why nobody is complaining publicly....
"Trump’s motives here are not difficult to parse, and the bill in question is legitimately problematic. He’s popular on TikTok, and close to one of the company’s major investors. ... "As fallout continued from his tariff bombshell — including the legitimacy of his emergency authority to implement the new rates — barely anyone batted an eye at TikTok getting another dubious bailout."
"Since my last essay on the crisis of democracy, the assaults on democratic checks and balances have escalated. Without agreement from Congress, Trump’s DOGE shut down the U.S. Agency for International Development with stunning speed. Although a federal court blocked further implementation, ruling that the action “likely violated the Constitution,” by then the agency had already been gutted and largely dismantled along with many other agenices. Then, in an alarming politicisation of the military high command, Trump fired the Chairman of the Joint Chiefs of Staff, the Chief of Naval Operations, the Air Force Vice Chief of Staff, and the judge advocates general (the highest-ranking legal authorities) for the Army, Navy, and Air Force. "Pressing his claim to imperial power, Trump has moved to assert absolute control over all federal regulatory bodies, including the Securities and Exchange Commission, the Federal Trade Commission, and the Federal Communications Commission. This not only hobbles their capacity to act independently in the public interest but opens the door to massive corruption. As DOGE seizes control of more and more of the government’s most sensitive and highly centralised stores of data, the conflicts of interest proliferate for its chief 'overseer,' Elon Musk, who over the years has received 'at least $38 billion in government contracts, loans, subsidies and tax credits.' And Just Security has documented an 'alarming' pattern of 'politicisation and weaponisation of the Department of Justice since Trump has retaken office. "The United States now faces the grave and imminent danger of its democracy decaying into a 'competitive authoritarianism'.”
"We have to realise that Trump is not joking about any of this. He’s not joking about invading Greenland, and he’s not joking about running for a third term. He’s as serious about all of this as he was about the tariffs. The evidence indicates that he will do it all, whatever he can get away with. ... "While we prepare a mass movement—and Donald Trump crashing the economy with the world’s stupidest tariffs will help us a great deal—we need to fight everything. What that will specifically mean is that we have to fight a lot of losing battles. ... "There are five reasons to fight early and often, no matter the odds of winning any one fight. 1. It lays down a marker. .... 2. It mobilises others to fight. .... 3. It delays and exhausts the strongman. ... 4. Sometimes you win. ... 5. You find out what works and who fights. ...."
THERE IS ONE SINGLE lesson in economics everyone needs to learn, says Henry Hazlitt — the one lesson that might allow them to best understand the field and avoid the errors of bad economists. It is this, below:
Today is already the tomorrow which the bad economist yesterday urged us to ignore. The long-run consequences of some economic policies may become evident in a few months. Others may not become evident for several years. Still others may not become evident for decades. But in every case those long-run consequences are contained in the policy as surely as the hen was in the egg, the flower in the seed. From this aspect, therefore, the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.
Take that fully on board and you'll already know more than most bad economists — and certainly more than any of the alleged economists kissing Trump's ring. [For the whole lesson, you can download and read pages 3 to 7 of Hazlitt's seminal book Economics in One Lesson. It's that simple.]
HAZLITT NATURALLY APPLIES THAT lesson over several policy areas. Including tariffs. An excerpt:
And this brings us to the real effect of a[n American] tariff wall. It is not merely that all its visible gains are offset by less obvious but no less real losses. It results, in fact, in a net loss to the country. For contrary to centuries of interested propaganda and disinterested confusion, the tariff reduces the American level of wages. Let us observe more clearly how it does this. We have seen that the added amount which consumers pay for a tariff-protected article leaves them just that much less with which to buy all other articles. There is here no net gain to industry as a whole. But as a result of the artificial barrier erected against foreign goods, American labour, capital and land are deflected from what they can do more efficiently to what they do less efficiently. Therefore, as a result of the tariff wall, the average productivity of American labor and capital is reduced. If we look at it now from the consumer’s point of view, we find that he can buy less with his money. Because he has to pay more for sweaters and other protected goods, he can buy less of everything else. The general purchasing power of his income has therefore been reduced. Whether the net effect of the tariff is to lower money wages or to raise money prices will depend upon the monetary policies that are followed. But what is clear is that the tariff—though it may increase wages above what they would have been in the protected industries—must on net balance, when all occupations are considered, reduce real wages. Only minds corrupted by generations of misleading propaganda [and presidential baloney] can regard this conclusion as paradoxical. What other result could we expect from a policy of deliberately using our resources of capital and manpower in less efficient ways than we know how to use them? What other result could we expect from deliberately erecting artificial obstacles to trade and transportation?
"There’s a fundamental problem with Donald Trump’s new trade policy: it fails a test that actual 5th graders can pass. I know this because I tried explaining his 'Liberation Day' trade plan to one last night. Here’s how that conversation went:
“Imagine you want to buy a toy at a store which costs $50. You pay for the toy and walk away with it. The President looks at that transaction and says ‘wait, you paid the store $50 and the store paid you nothing, therefore the store is stealing from you. To 'fix' this, I’m going to tax the store $25. From now on that same toy costs $75.”
"The 5th grader looked at me like I was crazy. 'Whaaaaaaat? None of that makes sense. If I pay for something, it’s not stealing. And taxing the store seems stupid, and then everything is more expensive. Why would anyone do that? That can’t be how it works.' "This is the core problem with Trump’s 'Liberation Day' trade policy: it fundamentally misunderstands what trade deficits are. And if you think that’s bad, just wait until we get to the part where this policy declares economic war on penguins and our own military base. ...
"The policy, unveiled yesterday afternoon, is called a 'reciprocal tariff plan,' which is a bit like calling a hammer a 'reciprocal pillow.' The premise is that since other countries have high tariffs on us (they don’t), we should have high tariffs on them (we shouldn’t). But that’s not even the weird part. "At the heart of this policy is a chart. Not just any chart, but what might be the most creative work of economic fiction since, well, Donald Trump launched his memecoin. Trump proudly displayed these numbers at a White House event, explaining that they showed the tariffs other countries impose on the US. He emphasized repeatedly that the US was being more than 'fair' because our reciprocal tariffs would be less than what other countries were charging us. "There was just one small problem: none of the numbers were real tariff rates. Not even close. "At first, observers assumed the administration was simply inventing numbers, which would have been bad enough. But the reality turned out to be far more stupid. ...
"All of this glosses over the fact that 'reciprocal tariffs' are not reciprocal at all. Trump’s team is making up fake tariff numbers for foreign countries based not on anything having to do with tariffs, but on trade deficits, which is just an accounting of inflows vs. outflows between two countries. It’s only reciprocal because the Trump team faked the numbers. "On top of that, Trump can only impose tariffs (normally a power of Congress) based on the International Emergency Economic Powers Act and the National Emergencies Act. Both laws require there to be an actual 'emergency.' The only emergency here is that nobody in the administration understands what trade deficits are....
"So to sum up where we are:The administration invented an economic emergency
To justify a policy based on made-up numbers
Generated by an AI formula that came with explicit warnings not to use it
Which they’re now using to launch trade wars
against:
Penguins
Our own military
And presumably Santa’s Workshop (someone check for a North Pole entry)
"And while the penguins and military base make for amusing examples of this policy’s incompetence, the real damage will come from applying this same backwards logic to basically all of our actual trading partners — countries whose goods and services make American lives better and whose economic relationships we’ve spent decades building. And who, historically, welcomed back American goods and services as well. All of that is now at risk because someone couldn’t be bothered to learn what a trade deficit actually is. And the American electorate deciding that’s who we wanted to govern the country. "When your trade policy is so fundamentally misguided that you’re declaring economic war on flightless birds and your own armed forces, perhaps it’s time to admit that the 5th grader from the beginning of this story wasn’t just smarter than the administration — they were dramatically overqualified for Trump’s Council of Economic Advisers."
