I think a lot of people assume the economic consequences like these have not been understood by the WH. Although I don't like this administration I beg to differ: they know what's going to happen, and they expect the coming storm because they seek what follows.
They want to repudiate foreign held debt, or devalue it, by revaluation of the USD and they will wear what they think of as a one time economic shock to get their reset in a belief they can make it less like the Smoot-Hawley great depression because so many other economic levers exist now, including floating currency, MMT, and massive fintech.
Personally I think it's a mistake but hot takes "they have no idea what's coming" are I believe naive. They know. They just don't care. Some amount of foreign trade will absorb the cost. Not all, not most. Not all prices in the US will rise and some substitution will happen although spinning up cheap labor factories again isn't going to happen in 2025. Maybe by 2027? Rust belt sewing shops and Walmart grade cheap goods production lines?
What amazes me is the timing: the midterms will hit while the bottom is still chugging along. I would think it unlikely they can secure an updraft from this to keep the house. What's the plan for that?
The weighted average of the new U.S. tariffs will be 29% it seems.
Maybe they know the consequences, but to give you a idea... it was 1.5% before. The new ones will be equivalent to Brazilian tariffs in 1989 before opening the economy (31%, data from World Bank).
Now, Brazilian tariffs, which have one if the most closed economies, by weighted average, is 7%.
China, have 2.2%.
The United States will be an autarchy, similar to how LaTam was in the 70's, when tried this exact idea. The tariffs being as high instantly, will impact the economy, later, the country will probably grow, which is what they expect, but this is not a productive grow. Because your new factories now are not competing with external products, so your productivity go down, this means real income will also go down.
So yeah, some people at best (if is not a robot doing the job) will have a job in a factory, but on what he will be able to spend with his wage won't make it worth even for this person.
>Import substitution is a policy by which the state aims to increase the consumption of goods that are made domestically by levying high tariffs on foreign goods. This gives an advantage to the domestic manufacturers as their goods will be cheaper and preferable in the market compared to foreign products. India adopted this model post-independence, and it continued till the 1991 reforms. Due to import substitution, the domestic producers captured the entire Indian market, but there was slow progress in technological advancements, and the quality of Indian products was inferior to the foreign manufactured ones. But after the reforms, the Indian market was opened to everyone, and the consumer got the best value for the price he paid. The Make in India policy of the present government is reminiscent of the pre-1991 inward-looking Indian state.
In the US it will be even worse. The US is already high-tech economy outsourcing low value-adding manufacturing to foreign countries while industries move towards higher value-adding products. After the tariffs, US manufacturing sector will sift to lower value-added, lower complexity products.
Yeah. Specially because the U.S economy is service-focused (and consumption as well).
Like, imagine now that all your computers will be more expensive/worse. This will affect services from like, a law firm - to a tech company. Will make harder for young buy good computers and start to code, etc.
I say this as a Brazilian, to us Brazilians watching, this is like: Why are the U.S repeating the same mistake?
I don't think Americans know this, but here in Brazil, we also have phone, tablet and PC national brands (Positivo¹, Multi², Philco³). National TV brands like Semp, AOC, Mondial. A ton of home appliances brands like Mondial, Philco, Britânia.
But why Americans don't know them? Because they only exists because of the tariffs. So they only exists in Brazil internal market. They are worse than foreign brands, but they exists because it's cheaper to buy a Mondial Kitchen Stand mixer than a Kitchen Aid!
And worse that most of these products are only white-label Chinese products, sold way more expensive than the real chinese ones.
This also create a whole gray market. A lot of people start smuggling products without import tax.
And this only with a 7% average tariff. Not the U.S 29% lol. Brazil with 31%~ prior to the 90's was WAY worse than this. A lot of brands just died when we opened a little the market (Consul, Brastemp, were Brazilian big fridge, Washing machine etc makers, they got bought by Whirlpool in the 90's)
American Brands then will now look for the U.S gov to ask for exceptions too, and this create a lot of corruption. And after you put these tariffs and there's a whole new companies made to internal market, it's almost impossible to remove because of the lobby from these companies (and corruption).
In Brazil, the Philco operation was bought by Gradiente (The company that sued Apple over the use of the iPhone trademark) in 2005. Before that, Philco was from Itau (a Brazilian bank).
Stop. Hold on. You just heard a solid set of examples and logic on why the tariffs were bad for Brazil's consumers and your takeaway was that one brand that couldn't compete in the US moved to the sheltered manufacturing environment and that is good?
The policy is good for uncompetitive manufacturing - and so you are in support of it? Why is that less-competitive manufacturer from Philly who couldn't compete anywhere but Brazil more important than the people of that country?
Not at all - I'm not really taking a solid stance one way or another because I'm not an economist.
My only point was that Philco was being used as an unknown crappy Brazilian brand example. It used to be an American company that actually made quality things, and through outsourcing and general 'physical and financial enshittification' is pretty much an unknown to Americans now.
If you're in favor of quality things being made in the US, it's an argument for said policy.
But the examples _just_ given show that the same kind of tariff policy in Brazil caused shitty local options that could never compete with the outside world and cited example after example. The whole "grey" market for un-tariffef foreign goods.
There is nothing that says tariffs cause quality things to be built locally and the examples are counter to that.
Yes I understood the post but the difference is that Brazil didn't have a burgeoning or top tier electronics industry at any point I can remember. The US did and slowly gave it away to cheaper producers. Further, the average American has more disposable income and won't necessarily just grab what's cheapest.
So it's not easy to conclude they are the same in any fashion.
The question is what would happen today if the US ends up in the same situation. Will we go back to producing top tier electronics, or get stuck with crappy brands taking advantage of the situation? It's hard to say. I'd guess a mix of both. Top tier stuff would probably in house what they can, but the low end would get much, much worse. But that's just me guessing.
Yeah, but the U.S. govt funds a lot of important research so it may not fall behind technologically unlike India…
Wait, what did you just say? The U.S. government has decimated its research funding?
Oh, well, at least the U.S. has a lot of high quality colleges churning out highly educated Americans, so that still may not be as much of a problem…wait, did you say Americans are increasingly turning away from college due to the high costs and the resultant loans that cannot be terminated even in bankruptcy, because the government has been cutting back significantly on funding education for years now?
Oh well, at least the U.S. is welcoming to immigrants who have founded over 50% of unicorns and usually tend to be the most dynamic and brightest slice of their country’s populations, so it may maintain its technological edge…
> The Make in India policy of the present government is reminiscent of the pre-1991 inward-looking Indian state.
Have you seen the 70s or the 80s? I was a child during the 1980s when India was a socialist state. There were very few private enterprises, because there was absolutely zero government support. Taxation peaked at 90% during the early 1970s under Indira Gandhi, who also nationalized many of the largest private companies - because private enterprise was seen as a bad thing. It was also impossible to bring in foreign investment, because that would come with profit motives.
Basically, the comparison you're drawing is not really accurate. The current Make in India plan is very similar to the US bringing in strategic manufacturing back into the US; a plan which has had bipartisan support (for example, the CHIPS Act). It incentivizes businesses (including foreign companies) to set up manufacturing units in India. And is quite the opposite of what was happening during India's socialist era.
> Even though Make in India is not a classic import substitution case, it aimed to reach that end.
So it's not really import substitution. But let's ignore that article, it's not a serious piece anyway.
A key idea of Make in India is to make and export - which means that unlike socialist-era import substitution (via tariffs and permissions), the ones which aren't good enough will fail fast and cheap. It won't lead to people driving HM Ambassador cars for 40 years.
Whether Make in India will succeed or fail is a very different matter, of course.
>It incentivizes businesses (including foreign companies) to set up manufacturing units in India.
That type of protective policy works for India in incentivizing manufacturers to come build locally because Indian labor is still dirt cheap and the government will work with you to give you what you need without the pesky nimbyism, environmentalism, etc getting in the way of factories. US is not in the same case.
Quite a coincidence, I was reading this LRB essay [1] this morning by British political philosopher and historian Perry Anderson, analysing the last decade of political and economic (lack of) change in the West. He ended with this paragraph, I had to look up "import substitution" and then in this thread about the tariffs I see it mentioned again, there might be similarities with Trump and Getúlio Vargas. Any people more knowledgable in Brazilian economics want to chime in?
>Does that mean that until a coherent set of economic and political ideas, comparable to Keynesian or Hayekian paradigms of old, has taken shape as an alternative way of running contemporary societies, no serious change in the existing mode of production can be expected? Not necessarily. Outside the core zones of capitalism, at least two alterations of great moment occurred without any systematic doctrine imagining or proposing them in advance. One was the transformation of Brazil with the revolution that brought Getúlio Vargas to power in 1930, when the coffee exports on which its economy relied collapsed in the Slump and recovery was pragmatically stumbled on by import substitution, without the benefit of any advocacy in advance.
Honestly wouldn't compare Vargas with Trump here. Trump policies for me seems similar to what the military regime did (1964-1985)
Before Vargas rule (around the 30-40's), Brazil was an agrarian state, basically commanded by coffee barons and so on.
Brazil got the independence in 1822, and abolished the slavery in 1888. During this time, it was reigned by Dom Pedro I and Dom Pedro II. When the empire ended the slavery (one of the latest countries to end), the military and the agrarian folks, did a republic coup. In Brazil we call this republic "Coffee with Milk republic", because it was not a democracy yet (only 4% could vote), and the power was divided by São Paulo (Coffee state) and Minas Gerais (Milk state).
It's a long and complex story, but in short, in 1930, Vargas did what we call "1930 Revolution". It was a dictatorship, he persecuted the Brazilian integralists (fascists) and communists (and banned foreign languages aimed at banning italian/german/japanese speakers etc). The dictatorship ended, he got removed, and later he comes by election, in the first Brazilian proper democracy, with huge people support.
Anyway, besides all that, he basically industrialized the country. Moved the country from an agrarian state to modern industrialized state. But not only because of import substitution, he created like Ministry of Health, Education, all the modern BR state that we know. Penal code, and everything is still from 1940.The industrialization was mainly led by state-owned companies. He created a state owned oil company (Petrobras), created a state owned car company (FNM), steel company (CSN), mining company (Vale), etc.
The development during this time, was basically making the state to be the one that would industrialize the country.
The military dictatorship goal was different, after all, it was a coup against "the communists", with the U.S support at the time. So the industrialization was also led by the private sector, protected by the state with the huge tariffs, and some areas they just banned imports.
Instead of the FNM car company for example, we had then Gurgel, a private company making cars.
Of course, a lot of these companies died when Brazil opened the economy in the 1990s, exactly bcause they were not competitive and wasn't exporting anything anyway.
But one thing that people need to keep in mind always, it's how all of that makes the product expensive. A car in Brazil it's way more expensive than in the U.S and so on.
I think to nurture developing industries, it can be fine, but at some point you have to expose them to competition if you want to exceed what the domestic market can do.
Domestic industries DO compete - both with each other AND with foreign companies which are levied with tariffs.
One of the reason why China's import substitution was almost unreasonably effective was because domestic companies were driven to compete fiercely with each other.
(In America there is a drive to do the opposition- wall street likes consolidation and oligopolies)
And yeah, once your national industrial ecosystem is sufficiently powerful most countries suddenly get religion about removing all tarriffs everywhere. This is what America was like in the 90s - and they were just as obnoxious about that as they are about this - the exact opposite.
The US outsourced to China because of cheap labor, not because Chinese products are good--precisely because US companies were competing with each other and needed ways to reduce prices and improve margins.
That this ultimately had the effect of diminishing the manufacturing base in the US doesn't speak to the ability of US or Chinese companies to compete.
China is a centrally planned economy. To argue it's more competitive than the US is again not tenable.
>The US outsourced to China because of cheap labor
Yeah, in 2003. The US offshores to Bangladesh or vietnam for cheap labor now and has for a long time.
Manufacturing is offshored to China simply because it cant be done in the US at anything resembling a reasonable cost, not because labor is cheaper. That is because the Chinese industrial ecosystem is unparalleled.
>China is a centrally planned economy. To argue it's more competitive than the US is again not tenable.
The economic dogma of the late 90s is getting a little long in the tooth now. Not least because it was completely blindsided by the rise of China.
It turned out that the most effectively run economies were a hybrid of distributed and centrally planned (China has open internal markets while credit allocation is largely centrally planned).
By the way, what I find most baffling in these discussions is that these calculations are always based only on physical goods, ignoring services, where the US usually has a positive balance - eg, with the EU, the US has a 109B positive balance. In our economies, which are more and more service based, why are services ignored?
Services are ignored by Trump for precisely the reason you mention. The big question is: What will other countries do, like Germany, who tend to export goods to the U.S. but import services. Right now, those are the countries who would rather prevent this thing from escalating, but if escalation it must be and they run out of ammunition within the scope of tariffs on goods, where will they go next?
Tariffs on services may also be less popular with the citizens. It's not obvious that the locally produced fridge is only cheaper because of tariffs. It will be more obvious that everyone non-EU based pays more. It will also be harder to control (how will EU extract tariffs for payments I do to companies with no EU presence?)
But I don't how much about it, maybe these are already solved problems. After all VAT already exists and faces similar challenges.
There are two kinds of "services". You have jobs that are in finance and software, which make good money, and you have jobs in cosmetology and fast food, which have terrible pay. The services that we export are the former.
Your high school grad (or high school dropout) isn't going to get one of those finance or software jobs. But they could get a factory job, if we can get those back.
So the best spin I could put on this is that the emphasis is on physical goods because that's where the people who are hurting in the current economy could find real work.
(Of course, if that were the case, the reasonable thing to do would be to explain that, instead of just acting like services didn't exist as something that is traded.)
I was reading an interesting article about tariffs put on foreign garlic or mushrooms can't remember which, rather than buying American companies just paid more for the foreign product and charged higher prices. The American makers of the product didn't sell more the company's just didn't care. Prices will go up Americans will buy less deflation will occur because they have to sell the product.
Likely will result in worse products as well (which is what happens when you remove competition).
LaTam is perfect example on how bad this "wide" protectionism is. There's a ton of economic papers about it.
If you really want protectionism, you could do something more similar to how South Korea did, by choosing specific sectors of economy you want to "protect", to create a "national industry".
Most protectionist industrial policies also exempt imports of machines and other supplies used in factories.
e.g. It makes no sense to put tariffs on machines used in a factory in the USA. AS that would make it more expensive for a factory to operate if they have to import a more expensive machine from Germany. "Buy a machine from the U.S", that would mean a more expensive machine likely, as it only exists because of tariffs.
That basically means you'll have factories on best case scenario, but your cars, your computers, phones, won't be exported.
It's great if you want to be self-sufficient pending a great war. The way things are going, it may be the only thing to justify such blatant self-sabotage, and hence necessary to start one.
If you make everyone rely on each other, war hurts everyone more and is more likely to be avoided. If going to war doesn't cost you a supplier, war is more palatable.
Well if you do all you can to stirr some 'great war', you will eventually get it. Its only US saying there will be one though, rest of the world is in WTF mode. China doesn't care about anything global but Taiwan and its own security. They are probably more capitalist than US at this point and prefer having stable trade cash flows rather than expanding.
So, if thats the real underlying reason for all these steps then US is the warmonger here attacking literally everybody preemptively. 5D chess at least.
Short term consequences are probably different then long term.
In the short term you can't just create a new garlic farm in a day.
In the long term it will still be more expensive (if american garlic was the cheap option they would have used it from the get-go) but there will probably be more adjustments then in the short term
That's part of the reason why these tarrifs are so stupid. There is no warning on the specifics so there isnt time for companies to come up with alternative plans. Given how inconsistent trump is, there is also limited incentive to seek alternative supply chains, because who knows if he will just change his mind again.
>The United States will be an autarchy, similar to how LaTam was in the 70's, when tried this exact idea. The tariffs being as high instantly, will impact the economy, later, the country will probably grow, which is what they expect, but this is not a productive grow. Because your new factories now are not competing with external products, so your productivity go down, this means real income will also go down.
If what you say is true, tarrifs should not exist in any country. And yet, most countries are using tarrifs.
What if a particular country is using dumping and sell at prices so low, it will kill a particular industry? And after they kill it, they start jacking prices at unseen levels and you will have to pay because you don't have a choice?
Most countries do specific tariffs on areas of the economy they want to develop/protect them.
If a country is doing price dumping, there's even legal ways of protecting these sectors, by applying to WTO (but the U.S basically killed the WTO). But even if the U.S don't trust the WTO, they could apply antidumping tariffs to these specific sectors (like the 100% tariffs Biden administration did to EVs).
U.S is not doing this right now, it's protecting "all sectors" of the economy. There's no other reasonable developed country with a 29% tariff.
Domestic producers can redeem part of their VAT, which foreign producers can't, effectively making it a tariff. Also European countries apply their own bona-fide tariffs to foreign imports, which anybody who has imported into the EU has experienced. It is stated "tariff" on the bill you receive from customs and in the law that regulates said tariff, and in your accounting for expenses if you are a business. But now we have to pretend these tariffs do not exist? What kind of game is this? Has everybody became psychopaths?
China has many tariffs and non-tariffs restrictions. They are targeted as tariffs tend to be (well...).
For instance, tariffs on cars vary from 25% to 47%. It is quite the status symbol to drive an imported car.
Their policy has always been to develop their own car industry, so foreign manufacturers had to set up factories in the country but even that could not be fully foreign-owned and had to be through a joint-venture with a local manufacturer. I believe Tesla's Gigafactory in Shanghai (opened in 2019) was the first fully foreign-owned car factory they allowed.
It's hard to imagine that there's a way they thought this through in several redundant dimensions.
I understand rationally that there was an economy before the US plunged the world into neoliberalist global free trade in order to build its trade empire, and there will probably be an economy after... but likely not a US trade empire.
But another thing is investment uncertainty. The mechanism by which protectionist tariffs are supposed to work functions over a timespan of a decade or two - foreign imported goods are made more expensive, and so when investors believe they're confident in future tariff conditions, they spend money on domestic factories to produce goods, which have a large setup cost and gradually pay back the difference relative to their good-importer competitors that are paying high tariffs.
If investors can't form a confident prediction on future tariff conditions, investors can't invest; The sheer uncertainty of having a lunatic making up random numbers for every country over lunch and then rolling them out at close of market is instead going to scare them off. Trump has gone back and forth over tariffs with Canada and Mexico over the past couple months, and this doesn't just demonstrate that tariffs can be set extraordinarily high for arbitrary reasons, but that they can be set back to zero for arbitrary reasons. Both of these transitions cause economic ruin for one investor or other; If it's going to happen every few months then nobody is going to build factories or launch import supplychains, at least not for competitive prices. The risk of going bankrupt tomorrow (or in four years when the next administration takes over and abruptly cancels every tariff) on what is basically a coinflip then gets priced into consumer goods for both producers and importers.
The most frustrating of Trump's projects are not just when he shreds your rights or shreds precedent or tries to topple the government, but when he looks favorably at a policy you think is a good idea (like having a manufacturing sector) and chooses to pursue it by running around with a flamethrower setting everything ablaze because on some lever somebody's taught him about the Broken Windows Fallacy wrong, as a joke, and he's upgraded it. During his administration, we circle the wagons and declare that the policy is a terrible idea. Post-Trump, the absolute ruin that the execution of that policy predictably brought will discredit it for the rest of your adult life.
People are also getting way too caught up in the math and numbers. They think WH calculated the percentages through incompetence but the 25% tariffs weren't based on anything very real either. The entire goal is not carefully calculated trade equality, it's mafia style intimidation to get some easy concessions as quickly as possible from everybody... before the economy crashes too hard. Spamming tariffs to see what sticks. The math is just a plausible justification for something they would have done anyway.
It's bully tactics.
For ex see Canada's fentynal importation issue, which was something invented to justify a natsec emergency legally. The numbers don't have to be real, just plausibly deniable.
>They want to repudiate foreign held debt, or devalue it, by revaluation of the USD
Devaluing dollar does not reduce debt measured in dollars. It only makes US debt less valuable to forefingers.
Devaluing dollar can work well only if foreign investments into US stop or reverse. "foreign investors at the end of last year owned 18% of U.S. stocks, according to Goldman Sachs" The trend has already reversed https://www.reuters.com/markets/us/foreign-demand-us-assets-... Killing foreign demand for US assets more permanently is possible but it means financial market crash.
I certainly don't understand enough of economics, but:
- If everything overnight costs 20% more for the American consumer, it equals 20% less disposable income and less purchasing power.
- US companies, even the few ones not directly affected by tariffs, are going to be hit by less demand, and that in the aggregate is going to affect the performance of all American companies.
- So, it makes sense to dump as much American stock (and perhaps other instruments) as rationally possible.
The rest of the world is also going to feel the shock, though at this point is unknowable to what extent, and it also depends on the policies governments outside USA enact. In Sweden for example, we react to imported USA inflation by increasing central bank rates and catapulting the country into recession, and I totally see that happening in the next few weeks. Even it does not, it is what the public expects, and already many may be reigning in on consumption and investment. And dumping American stocks like crazy.
Yes. That's what I said "Devaluing dollar does not reduce debt measured in dollar"
The US would still have to pay the debt in Dollars. Devaluation affects currency exchange rates. Debt would be less valuable in Yen and Renminbi but just as expensive for the US government.
Doesn't Europe and Japan have dollar swap lines with US? So ultimately it is US buying its own bonds through Japan to create an illusion that there exists enough external demand.
That's a crazy showertought. WH might actually consider it.
After hypothetical successful debt relinquish negotiations, any new US debt would have similar interest rate to Argentinian debt, 30% or so. Wall Street would shrink and London (or Frankfurt) would become new global financial center.
In reality, countries do just as what they do now. They raise counter-tariffs. The US faces coutertariffs from everyone. Other countries only from the US. Trade between countries other increase and they gradually adjust. Europeans start buying less iPhones and buy more Androids made in South Korea. Less Fords more Nissan.
I wonder... they're all made in China anyway. And shipped from there directly, not through the US. I'm sure that either the US tariffs won't apply to them, or Apple will shuffle some subsidiaries so they don't.
Yes and no. As a headline "I reduced $7t of foreign debt" is pretty good. The plan appears to be to invite people to Mar a Lago and offer to trade the existing debt for new instruments out in the never-never.
Domestic debt might not be such a big deal? Who is coming to collect?
Wasn't that the plan all along, people always said "Ballooning Government debt is fine since unlike normal debt Governments can just print money and never really pay back the real value".
Someone has to get screwed over when you do that, who do you suggest get screwed over?
That was a rainy day argument for not caring too much about debt. But what's happening now is we're raiding our savings account to pay for bath salts. No, it was not "the plan all along".
YES. About ~30% of people appear willing to experience a loss as long as they believe they're inflicting a greater loss upon other people, and this personality type is baked in young. In my vier it's not a coincidence that polled support for Trump consistently hovers around 30%.
So the full faith and credit of the US Treasury is thrown away just like that?
No one collects the debt. It’s just redeeming treasury bonds. If they are no longer good then the sub prime crisis is going to look like a minor economic wrinkle.
> Domestic debt might not be such a big deal? Who is coming to collect?
Old people with retirement needs. A lot of that debt is borrowed from SS surpluses in the past, and now the system is actually in deficit (so needs what it lent out back and then some). I’m all for screwing over boomers, psychologically I’ve convinced myself they are responsible for Trump and this mess (not entirely true, but the boomers as a generation messed things up for us before Trump was president, anyways).
Still fits within a populist agenda. Not a lot of sympathy for mutual funds and the wealthy holding treasury notes that get inflated away.
I'm not excited that 20% of federal revenue goes pay debt interest to some investors and stockholders. Especially when much of the original debt spending also went into the pockets of stockholders, sometimes the same ones.
Of course, the actual problem is lack of control and debt spending, not the fact that investors exist.
People say that public debt doesn't matter because it domestic, but the recipients and payers are different. It doesn't cancel out when I'm responsible for paying taxes and Vanguard or JPMorgan get the debt interest.
Yeah, national debt is splattered all around the US economy, but that doesn't mean it is uniform, or the payers and recipients are the same in terms of participation, returns, or even time.
Foundationally, national debt is about passing costs into the future, which also creates another huge dichotomy in payers and beneficiaries. Minimal federal spending is on growth, so isn't really about investment as how much value can be extracted from one group to another, largely, but not entirely overlapping group.
> but that doesn't mean it is uniform, or the payers and recipients are the same in terms of participation, returns, or even time.
I’m not sure if I’m following, but a (let’s say) 20% cut to the value of an average retiree’s pension account will hurt much _more_ than the same cut to a diversified wealthy person. This is simply because poorer people are affected more by fixed costs. I don’t see where the populist angle comes in. Shouldn’t the populist angle be about targeting the “elite” specifically?
Given everything recent I’d say competence in the WH is a stretch
The prez is literally holding up placards where half the numbers on it are mislabelled and they rest of the numbers are that mislabelled/misunderstood number divided by half
That sounds like garden variety incompetence to me not 5D chess
There is a low cunning at work though - Trump now runs the largest military in the world and the largest economy and if the only way he can impress other people is to use that power he will use it to try to beat them into submission. Chaos at this point is his friend as he attempts to stay in power as long as possible, so expect trade wars, war, domestic chaos and forcing others to show loyalty to him personally and pay him off as the biggest bully in the room. He sees this in very simple terms. So no there is not a high intelligence at work but he is not without agency and cunning. He has operated this way all his life due to inherited money and got away with it.
And damn the consequences for everyone else, including the people who elected him, he doesn’t consider that in his calculations, which is what makes them so confusing for those who think he is playing by normal rules of politics or business.
The bring manufacturing back to the US never made sense to be numbers wise.
Thing A is currently manufactured in China | Vietnam | whatever lower cost country and sold for $x today. Slap on 50% tariffs so now it costs $1.5x. That provides an incentive to produce thing A locally sure.
But if you can already produce thing A locally for $x, you wouldn't have offshored the production in the first place. Maybe producing thing A locally will cost less than $1.5x, but it'll still be more than $x. So cost still end up increasing.
They see a way with china by the end of the decade so they are trying to remove dependence on their manufacturing and flip Russia to our side.
Except there isn’t any guarantee of a war with china, it’s just an idea they have. For all we can tell they have no intention of that. Taiwan is tricky though
Whether one umbrella factory moves from China to the US within this election cycle doesn't really make a dent. The moving of industry from the US happened over decades, and was hand-in-hand with the US making fewer umbrellas and more computer programs, satellites, and microchips. Moving basic manufacturing of low value goods to the US would cannibalize the capacity of producing higher value goods. And none of it will be noticeable while Trump is still alive.
Hard to say re: labor cannibalization - if you are sociopathic about the labor force like Trump is, all these fentanyl deaths are just spare capacity that didn’t have an input interface and should have been in a factory.
The missing piece is not all costs are passed on to consumers.
Company absorb costs all the time. If you think cutting your price by 10% will boost sales by 20%, you do it because total profit is higher even though per unit profit is lower.
And the reverse is true - companies might increase prices and accept lower volume.
Not to mention not all items are interchangeable. Is a car made in Mexico worth the same as the same model made in Germany?
Low cost items, of the type the vast majority of the population are quite sensitive to the price of, have almost no margin on them to start with. There isn't 10% to cut.
Two typical scenarios that we know from the past in industries like cars for example.
Corp one has two factories one smaller one in the us one bigger one in the eu. They will now shift more of the production to the us from eu to avoid tariffs.
Corp two only has a factory in the eu. They will now build another factory in the us to be able to avoid tariffs and keep selling their goods at competitive prices.
Forgive me my ignorance, but: parts from which cars are assembled (or raw materials from which parts are manufactured), are also subject to tariffs, aren't they? So the only shift that would happen is that of the labour (and US labour is not the cheapest, IIRC).
They would in the current scenario, yes, but the OP said “Two typical scenarios that we know from the past in industries like cars for example”
In the past, countries would put tariffs on importing cars, but not on importing car parts (with some complex definition of what constitutes a car and a car part. IIRC, there once was a loophole where one imported a car and converted it into a van by removing back seats to avoid a tax on importing vans)
For manufacturing physical goods, labour cost is a small percentage of the total cost of the good. Why is this? Because modern labourers are extremely productive: they are highly skilled at their jobs and use very efficient tools and machines to do their jobs.
The problem with this theory is the tariffs will both have to remain in place for a decade and businesses will have to believe that they'll remain in place for a decade for that to pan out.
Nobody is building a new factory, based on tariffs that they expect to be gone in three years time.
They will only shift if it's predictable that the tariff policy will stay for long enough to recoup the high capital investments of building a whole new factory just to serve the internal market.
For many industries it might not make sense unless it's a 5-10 years long plan, the risk of investing a lot to build a new factory, bringing it online over the next 2-3 years, to then have tariffs removed and making your new shiny factory more expensive to run than one outside of the country, will also be factored into the total cost.
The tariffs are so broadly applied that the risk factor is much more massive than anything the USA experienced before (like during the Japanese cars era of the 70s/80s), it's wishful thinking the domino effect will happen in the short/medium-term.
> They will now build another factory in the us to be able to avoid tariffs and keep selling their goods at competitive prices
They won't be competitive prices though; they'll have to charge more because of the capital costs in setting up a whole new factory and supply chains, increased labour costs, and having to pay tariffs on importing parts.
I imagine that not being able to export cars from this factory due to reciprocal tarrifs will also drive up prices, due to things like lost flexibility, redundancy, and economies of scale.
And it isn't like we have especially high unemployment right now. There isn't a labor force available to suddenly staff a bunch of factories even if they took zero time and capital to set up.
That's the entire point of it all. I think you are the only person in this thread who gets it. When there isn't a labour force available, you have to increase salaries to get workers. This means other industries and businesses have to increase salaries to keep their workers, giving a domino effect – meaning higher salaries for workers across the board. It might even mean that shit industries can't find any workers and have to close shop. For example the restaurant industry.
This also means higher prices across the board for consumer goods, but the worker still net benefits greatly.
Who does not benefit: The people who do not work. And that's fine. But it's also this class of people who make the entire political and media class, and hacker class apparently, so that's why we have this enormous resistance.
"Domestic production will replace imports" is conditioned on the cost of domestic production being lower than the cost of imports with the tariffs added. "Just spin up new factories with capital investment, raise wages substantially to get people to change careers from service industries, and train all these new people" isn't going to be a cheaper approach to building furniture than continuing to import it from Vietnam with a high tariff.
The effect will be minimal new domestic manufacturing and higher prices for large numbers of goods.
I think you fail to account for just how little a salary needs to be increased for it to be interesting to switch jobs for the people who are making the lowest wages. In Europe, people compare wages with single digit differences per hour when deciding for switches in jobs and careers.
And low paid workers in the service sector aren't low skilled and costly to get going. They're intelligent and honest, and would be fine workers in manufacturing if given the opportunity. They're working in the service sector because those jobs couldn't be off-shored.
If corp two could have factories in the US and still sell them at competitive prices they would've done that already no? The fact that they haven't indicates it didn't make economic sense. So then doing so would mean their costs would go up, which would either mean they have to eat the extra cost and reduce profit or pass the extra cost to consumers.
They can only pass the extra costs if there is no competition and they can only eat the costs if their margin is big enough to absorb the cost and still remain profitable. If their us market share is important they will shift their production around to the us or somewhere that has a favorable trade agreement with the us.
The stated goal of tariffs is to force companies to shift production back to the US. But US production costs more, hence the outsourcing in the first place, so shifting production back to the US increases cost.
If costs goes up then either prices go up too or margins go down or a mix of both.
In the first scenario the investment isn't astronomical, and if there is surplus capacity you can definitely shift around to avoid tariffs. I think Volvo already announced this wrt. to their US plants. They can take some production from the EU or China and use capacity in the US to build cars. The parts are still imported from China and the EU so will be more expensive, but they still seem to think this can help.
But the second scenario is a massive investment. It not only requires the economics of it to work today, it requires knowing what the situation is 1 or 2 decades down the line. You can't build a car factory in two years. Barely in four. And even if you do, it doesn't matter if it's likely to operate at a loss in 8 years!
The most important thing for that type of investment is stability and predictability, not just "the costs will be lower for at least 2 years now! or maybe 2weeks we don't know since the tariffs seem to come and go depending on which side of bed the local czar wakes up on".
You just made me think of another scenario, Corp three has mostly idle factories at important locations around the world but designs their factory lines to be packable and shippable around the world to hedge against tariffs. The carrying-cost of buildings is considered insurance.
3-4 years is a LONG time in business. I do not know how long the tariffs will last. Maybe they will come to a deal next week maybe not. but if they stick around businesses will move stuff to the us. I'm saying this as an EU citizen.
3-4 years is not long at all in this context. Most places take that long to get permits, and additional years to build the factories, and additional years to even become profitable and self sustainable in ideal circumstances.
It's not a long time if you're talking making massive capital investments into things like new factories or capacity.
Your second sentence indicates the more significant problem though, because that uncertainty on timelines makes even the 3-4 year time horizon questionable. Nobody is going to invest anything based on tariffs that may go away or change next week and the only way you can tell if they're sticking around is waiting so long you don't have time to make the investment any more.
It might be different if Trump came in with a clear, transparent tariff plan on day one. But they're already all over the place and being implemented in extremely unpredictable ways. Some people might argue his unpredictability is an asset in general, but it's absolutely not in this case.
3-4 years is a very short time for developing land in the US, anywhere near population centers. You’re looking at that much time just to get permitting done, optimistically.
That’s may be true. But why does Vietnam have such high tariffs? They should be competitive based on their lower costs right? So it’s simple: Vietnam can eliminate tariffs on imports and the U.S. would eliminate tariffs as well.
The one thing I hope Americans think about is to believe in democracy, and discuss with others on the other side of the aisle. Really, most have voted the way they did for real, valid reasons. And recognizing them is the path to heal your country. Only through understanding will democracy prevail.
Do not spiral into dividing your own country. That is the real goal of authoritarian regimes.
I don't know how many billionaires support which party, so you may be right. I would be interested in a source. However, I believe there is a difference between donating money to a party and outright buying a vote. Let's see how we all think about it when the Dems start doing it, too.
The answer to this is pretty simple, although American Exceptionalism makes it hard to see for many Americans. For every other country, most could see pretty clearly that they'll not plan on holding free elections going forward.
Except those islands are Australian territories. And they've given Australia higher tariffs, so in theory they could reduce these tariffs (which will be paid at least in part by US citizens) by exporting through there?
There's nothing strategic about a 4 column excel spreadsheet and one formula.
I said they expect the outcomes people are complaining about. They've workshopped this, and are aware how this is playing out. I would be very surprised if there is a significant leak of "we didn't expect this" anytime soon.
> they know what's going to happen, and they expect the coming storm because they seek what follows
If they do they’re lying. The mechanism by which tariffs restore production is by raising prices. That makes it more lucrative to invest in serving that market. If producers have to absorb the tariff, they won’t boost production and the tariff is just a corporate tax increase.
> to repudiate foreign held debt, or devalue it, by revaluation of the USD
My personal opinion is less complicated: they're pulling the economic levers they have in a way that they can use to enrich the top 0.1% even more. The richest of the rich got very wealthy during COVID (economic fallout, buying up lots of stocks at a discount then the biggest stock market bull run we've ever seen) and they want to make it happen again.
I am amazed at how many people are still imputing intelligence to Donald Trump. Him winning the presidency again after everything is less about him being some deep mastermind and more an exposure of the issues with America that have been there building for decades now.
The difference between Trump 1 and Trump 2 is that all the "establishment" R politicians who were "corrupt" or "deep state" but willing to work with him could at least steer the ship in the first term. Those people are gone and all who remain are ideologues and yes-men. Trying to find logic in the madness strikes me as someone going through the stages of grief near death, trying to find sense in a senseless, uncaring world. Take occam's razor, no one is steering the ship at the white house right now.
> a lot of people assume the economic consequences like these have not been understood by the WH
I think you're making the same mistake a lot of observers are making: you're looking at this from an economic perspective, and think those decisions were taken on an economic basis. But that is likely not the case.
The Trumpist movement is entirely focused on political aims: re-establishing old hierarchies of power inside the country, and entrenching them for good. The important work is the slashing and burning of welfare and safeguards for lower and middle classes, putting minorities "back in their place", and entrenching the wealthy into positions of absolute dominance. Everything else is a distraction, to keep newspeople busy and the population focused on recreating an idealized, "Happy Days" 1950 society. Enemies will be created to make you hate, this or that policy will be picked up or dropped just to keep you arguing, and meanwhile the important work is made irreversible. Once you destroy what was built over a century, it will take decades to rebuild them, and meanwhile the New Normal will take root and become impossibly hard to remove.
Fascism and nazism did not move from economic principles - they picked up what they needed as they went, opportunistically, because their main aims were fundamentally political. The Trump II administration works in the same way: the priority is political dominance to achieve political aims at societal level, everything else is tangential and opportunistic.
> hot takes "they have no idea what's coming" are I believe naive. They know. They just don't care
I think they know, they care and decided that it is a reasonable way forward given very limited (trade and budget deficit) options. Otherwise I think you are spot on.
To spitball some ideas on your midterm comment (again, agree to it). One possibility is they see it as an unavoidable loss, plan on using veto to maintain course set during the first 2 years (which is why they rush) and hope to be in the updraft phase by the November 2028 elections. Maybe.
This seems likely, but I cannot figure out why they are not trying to pass more legislation in the first 2 years if they're fairly sure they're going to lose the midterms.
The only conclusion that can be drawn from their public actions is that they believe they can more or less enforce all their policies by executive order and that they're very sure they will be keeping the executive in 2028.
I don't think its about devaluing the currency to pay back debt at all. I believe it's about a fundamental vision of an autark USA, decoupled from any international obligations, whether its NATO, WHO or WTO and focused purely on producing and selling domestically whilst having a "beautiful ocean on each side".
I believe that's an unrealistic vision, not least since America's debt means it cannot afford significant shrinkage of its global market or a loss of its status as reserve currency, but I believe autarkie is the goal none the less.
> and they expect the coming storm because they seek what follows.
Well, a lot of economists, including one Nobel Prize winner (Paul Krugman) have commented on this being a bad idea for the economy...
On the off chance that those people who are supposed to know what they are talking about are all wrong and haven't thought about it being some genius diversion tactics -- it's generally still a pretty bad idea for a government to effectively ask everyone to "tough it out" and "just trust me bro".
It's really disappointing that people are actually trying to theorize this as some kind of genius plan. It doesn't take a genius to figure out the amount of irreparable damage they have already done to regular folks is unacceptable (uh... I'm sure some nutters out there think that DOGE is keeping track of all the damages they have done and will pay everyone once their genius plans have worked out).
paul krugman isnt useful example because he is a liberal democrat and people will try to say thats why he said its stupid. even though hes right and it is stupid. plenty of conservative economists are basically saying wtf Bro to these tarrifs. Sadly that will also probably not help but it has more of a chance to do something
> they know what's going to happen, and they expect the coming storm because they seek what follows.
I agree that that's their understanding. I'd argue that in reality they don't, they can't. International relations are a very complex system. And there is no precedent of an empire wilfully dismantling its periphery.
I really don't enjoy the whole "may you live in interesting times" thingy
> They want to repudiate foreign held debt, or devalue it, by revaluation of the USD
Given how dependent usa is on foreign debt, that sounds crazy to me.
If they accomplish that sort of thing, they wont be able to borrow at favourable rates anymore. That seems incredibly bad for usa. Am i missing something on how severe that would be?
> They want to repudiate foreign held debt, or devalue it, by revaluation of the USD
I don't understand, who's holding that "foreign held debt"? foreign countries I suppose, so which countries do you have in mind?
For one, it's not China, which holds a large amount of US treasury bonds (so basically, China is a lender of USD). So the revaluation of USD would work great for China: one, the value of the China-held USD bonds increases, and second, the price of Chinese exports decreases in USD terms.
So help me understand, what's the plan with the revaluation of USD?
That runs against basic financial reality. The treasuries are the basis of all U.S. liquidity. Owning commercial papers or stocks doesn't help as companies own treasuries. Putting deposits in banks won't help either because banks hold treasuries.
You've read up on the purported "Mar a lago" accord model? The idea is to threaten a repudiated debt, or agree to convert to long term non interest earning debt alternatives which can't be traded.
That's supposedly done with the agreement of the creditors. There's never paying down of national debt over an extended period of time. That's not how modern finances work. Why they feel the need of cramming down friendly creditors is beyond me.
Of course there are people who know. But not the decision maker. I notice the use of collective pronouns, but there is only one person driving this. Everyone else is riding the tiger.
Not sure why, despite long and consistent experience, that people keep thinking he’s anyone but exactly who he appears to be. There’s no grand plan, calculated risk, or 4D-chess. The clown is just putting on a performance, based on his immediate feelings, and the immediate reaction of the crowd. There’s nothing else there.
Foreign held debt is less than 30% of outstanding, and less than that is sovereign-owned, so I don't think devaluing or attempting to restructure foreign debt via "century bonds" will have much effect on US debt obligations.
I seriously doubt this administration understands any of this. I agree that they don't care, but I don't think they know what's going to happen. No one does.
In my opinion you are giving the US government far too much credit. Trump has through his usage of social media created a weapon that he can strike at anyone that stands in his way. With all branches under Republican control there's simply no one left who can stand up to him without having his political career destroyed. We've seen this story unfold so many times in countries around the world - Turkey would be one recent example where the misguided policies of Erdogan have left the country with record inflation rates for years.
> I would think it unlikely they can secure an updraft from this to keep the house. What's the plan for that?
They tried to steal an election already - it's pretty easy to understand why they are making decisions as if they don't have to worry about elections anymore
If it didn't hit midterms it would hit the next presidential race. You gotta pick your poison. I guess they decided it's better to just get it over with.
As a professional armchair economist, I would call it a power off rather than a reset.
It took over a hundred years for countries to once again have economic trust with France again when they went hard on tariffs in the 1600s causing war.
Who in their right mind would negotiate with a man known to rip up existing agreements on a whim?!
I have a feeling that this will knock the United States down a peg economically to the point where we look back on Liberation Day as America’s Brexit
This was a macro argument assuming a benevolent intention. However if we look purely at self interests the main thrust is to increase revenue on paper to cut taxes. At the same time raise debt ceiling. And when the tarifs proof unsustainable then well, we are in happy deficit spending land with no fault on the drivers side.
> Rust belt sewing shops and Walmart grade cheap goods production lines?
Are we really going to see this happening in 2 years? I'm not sure about this. The cost of Mexican/South Asian factories are still a lot lower than US.
The plan may be that there are no more elections, or that the only people who are allowed to vote are identified MAGA supporters. Does this seem impossible? Everything Trump has done would have been considered impossible only a couple of months ago.
What Trump reveals is the utter apathy of Americans. They're sheep in lions' clothing, not the other way around.
> "they have no idea what's coming" are I believe naive.
There could be someone who understands this. But this someone never shows their face in public, or provides any rationale for the policies beyond the nonsense like "reciprocal tariffs" or similar nonsense. I mean the literal board with tariff percentages that was held up had numbers that made NO sense, to anyone! Yet there are no critical questions?
It's beginning to feel like a conspiracy theory. That behind the obvious idiots who are the faces of the policies, are some other, less inept people who are pulling the strings. But who would this be?
> they expect the coming storm because they seek what follows.
If there are elections in 2026 and 2030 then what follows is a blue wave in the midterms and millions of disappointed voters who had their 401k's gutted, saw prices of most goods increase 10%+ in 2 years, saw little to no tax cuts, lost their jobs if they worked for the government, and lost their social security.
So I asked this question back when the wiki page for exorbitant privilege[0], the term used to refer to the US’ status, was posted. I was provided with a few links of people who do seem to understand[1]. The Hudson Bay capital piece was probably the most interesting[2].
Why on earth would you spend millions and billions of dollars on investing into a ROI-10-year factory, when a cheeseburger overdose or, heaven forbid, the Dems winning another election will take that investment and turn it straight into the toilet?
Not to mention that you'll be locked out of the world's markets, thanks to reciprocal tariffs.
they understand first order effects, but second or higher orders are seldom predictable in this matters. So the risk is huge. This massive shock will reveal hidden frailties.
Trump ran on a campaign that voting is a pain and you won't have to do it again if he wins. Since then he's maintained that third term is the plan. Doesn't really matter how upset the voting population is if you're going to ignore their votes.
Foreign debt is held in US treasuries, surely they know that? Trump can decide that treasuries can no longer be redeemed, but foreigners only hold 20% of them, so…he would have to somehow make them selectively redeemable, and anyways, there would go the USA’s credit, unless you mean other countries can bribe Trump with treasuries to bring down their tariff? They could also depreciate the USD reducing its debt in real terms but that will most definitely cause hyper inflation along with tariffs.
They have no plan, not even a concept of a plan. Trump is just hoping that he can get lucky with a good outcome, but that is really improbable. This is a huge opportunity for China though if they make deals with everyone else to the exclusion of the USA.
Even the idea of moving production back the USA is misguided, we are already at low unemployment, and haven’t made enough investments in automation like the Chinese are doing ATM. I doubt China will let us import that tech to setup our own factories quickly without worrying about who will work them.
They might be smart about it like you said, but they might also just be stupid. And the theory that they are smart about it is based on a whole bunch more assumptions...
This sounds like typical NYT sane-washing. After the Signal fiasco I've lost all confidence this administration is secretly super competent but just refuses to let any of us see it. There is no big plan here. This is just an old man surrounded by too many yes-men.
There is also a camp of ideologues that don’t care if they implode the economy if they get to LARP the TV version of the 1950s. Imploding the economy might even make it easier to sell traditionalist politics.
This is, as they say, “sanewashing”. Trump is doing this out of a mix of spite and a view of trade as a zero sum game. He may be advised into a path to try to pivot this into a “win” by large scale debt restructuring, but that is not the overarching motive.
Fully agreed. Tariffs are one thing that Trump has always been clear about. He likes them, he sees them as beneficial and now that he has no brakes in this administration he is finally going to try and put them in place.
I mean it's also clear he doesn't understand them. The poster he posed with today has a column labelled "tarrifs charged to the USA".
The main feature of them was he discovered in his first term he could do them unilaterally without Congress, and his audience would just go along with it anyway.
I had hoped that this kind of "Trump is actually playing 4d chess, you just don't understand" argument would be dismissed after seeing him through the first term, but apparently not.
This is a good take, but I think I can answer your question about the midterms. This is timed specifically for them. The drop we're seeing in markets right now isn't a pricing in of the tariffs, per se (at least, not yet), it's a pricing in of policy uncertainty that is going to lead to a near-term drop in investment.
However, because they are doing it so early, they will have time to recalibrate and bake in exemptions until the market / inflation is happy. Up to and including backing off of the policy entirely, if that ends up being necessary. As a political strategy, it is perfectly timed to allow Trump to "save the economy" from his own policies. This is true imo independently of what you may think about the policy as policy.
When it comes to the policy as such, recipirocal tariffs, conceptually, are designed to incentivize the overall global reduction in tariffs. So, as a headline, implementing "reciprocal tariffs" is actually favorable to free trade. However, there are some important details that they have fucked up, such as identifying tariffs with trade deficits in general, and in particular identifying them with trade deficits in goods only. That is really the component of the policy that doesn't make sense, and it is important.
Most likely, they will recalibrate and/or provide a lot of exemptions, particularly as the midterms approach. As a political tactic, I think it will work out fairly well, if they respond to the feedback appropriately - that's the big question though, and that uncertainty is the most significant reason for the market drop.
So my pessimism they can't "heal" this in time is the weak bit, if there are multiple levers they can tweak leading into the midterms to say "it's morning in america"
I say pessimism but in case it's not clear I'd prefer a democrat victory, both in the immediate past and in the coming midterms.
The reason for my "optimism" is that it's just as easy for him to undo this as doing it in the first place. If he keeps them in place as constructed for more than say, 3 months, without shooting them through with loopholes, then he might have a real unfixable problem on his hands, as businesses start to seriously reorient themselves. However, if over the next 3 months or so, he starts tactically peeling them back or being very "generous" with exemptions, the net economic impact could be relatively small, and maybe even moderately positive (depending on the details).
Fwiw I'd prefer the republicans win again, so my optimism is actual (not that I don't have substantial criticisms of the current admin's policies). However, it is refreshing to have a content-focused exchange on the internet about politics, so h/t to you :)
What I don't understand with your argument is, how do you account for the loss of trust of your trading partners? Even if the WH responds and tweaks the tariffs there is no hiding the fact that they have damaged trust in the US as a trading partner. I mean just look at what is happening in most western countries already, there a serious reorienting away from partnership with the US. Also consider that the US is primarily a service export economy and that it's generally much easier to divest from services than manufactured goods, I suspect the moves will have caused serious and long lasting damage to US companies.
The loss of trust issue is the one I worry about most. However, it's also true that the key players who we've implemented tariffs against have had them against us for years, and we've simply absorbed that.
I don't like the mechanism he chose to implement them, or the sharpness with which they were imposed, but I do think implementing actual proper reciprocal tariffs phased in over a reasonable period of time was a good idea. And I agree with you re: the service/goods issue. Them excluding services in their trade deficit calculation is by far the dumbest part of this plan.
Why are we talking reciprocal tariffs? It has been widely reported that the tariffs have been calculated based on trade deficit and not based on existing tariffs. That should alreadyy become clear by the fact that nobody in the western world has anywhere close to the same average tariffs, or that there are different rates for the EU and e.g. La Réunion (which is part of the EU and does not have the right to set their own tariffs).
Eh, this worries me less. I mean ideally yes trade signatures have value but we all know the reality here is that strong nations don't feel bound by international law.
I don't think "reputational harm" exists in international relations. I do think the terms of future bilateral negotiations may be less favourable to the US for a while but if they are too iniquitous they won't get ratified in Congress.
Maybe some significant 20+ year investment choices redirect. Some future 56th president will complain 47 laid the seed of this disadvantage. In every other respect after the noisy bit is over people do what they do.
> the midterms will hit while the bottom is still chugging along. I would think it unlikely they can secure an updraft from this to keep the house. What's the plan for that?
There won't be any elections. We will stick with Trumpism. We will be our own best friends, Morty. The outside world will be our enemy. We will do great things Morty, we will do the greatest things. A Trump administration for a 100 years. A Trump administration forever. Over and over. Running around, the Trump administration forever.
You have seen nothing yet. Next he will want a mineral deal with each country to pay back the money they stole from the USA in the past. "Primate Behavior Reference 21": https://youtu.be/GhxqIITtTtU
We even have aspiring leadership in Australia who see this as a win win and have proposed offering JV in uranium, lithium and rare earths. Murdoch press backs the idea, even when criticism of Trump is overt they always go to "we need him more than they need us" because of 50+ years of Defense posture which assumes we're insured by US forces.
What posture?
Contracts with either Russia, or the US are worthless.
E.g. the Budapest Memorandum?
"
According to the three memoranda, Russia, the U.S., and the U.K. confirmed their recognition of Belarus, Kazakhstan, and Ukraine becoming parties to the Treaty on the Non-Proliferation of Nuclear Weapons and effectively removing all Soviet nuclear weapons from their soil, and that they agreed to the following:
1. Respect the signatory's independence and sovereignty in the existing borders (in accordance with the principles of the CSCE Final Act).
2. Refrain from the threat or use of force against the territorial integrity or political independence of the signatories to the memorandum, and undertake that none of their weapons will ever be used against these countries, except in cases of self-defense or otherwise in accordance with the Charter of the United Nations.
3. Refrain from economic coercion designed to subordinate to their own interest the exercise by Ukraine, the Republic of Belarus, and Kazakhstan of the rights inherent in its sovereignty and thus to secure advantages of any kind.
4. Seek immediate Security Council action to provide assistance to the signatory if they "should become a victim of an act of aggression or an object of a threat of aggression in which nuclear weapons are used".
5. Not to use nuclear weapons against any non–nuclear-weapon state party to the Treaty on the Non-Proliferation of Nuclear Weapons, except in the case of an attack on themselves, their territories or dependent territories, their armed forces, or their allies, by such a state in association or alliance with a nuclear weapon state.
6. Consult with one another if questions arise regarding those commitments.
"
Always keep in mind that Blackrock manages the retirement/social insurance funds of a lot of countries. If the USD crashes, they will, too.
The aftermath will probably be complete isolation of the US, because no country will want to trade with them. And the administration is fine with that, because they're not interested in keeping the status quo of democracy alive.
More influence for them, less influence from outside. That's how oligarchs think and act.
Is this a thought held by any serious person? The only major country to indefinitely postpone an election recently has been Ukraine. This idea that the midterms wouldn’t be held is tin foil nonsense.
Ukraine hasn't postponed elections indefinitely. They have postponed them until they are no longer at war.
Other countries have effectively gone from moderately democratic elections to sham elections. Turkey is one major country that is going through this process at the moment.
That all sounds fine except that the admin have no intention of keeping these tariffs, rendering your point kind of moot. Trump will enact/retract these tariffs multiple times over just the next month, and few to none of them will still be this high in three months. Since we are just speculating here - what is probably going on is that Trump has some very bad ideas and no one is allowed to contradict him. I'm sure there are people around him that know better, but he really is this simple minded. To your point about midterms, I'm sure his Project 2025 handlers are beside themselves that he's doing this, but there is little they can do to stop him.
> What amazes me is the timing: the midterms will hit while the bottom is still chugging along.
I think Trump is getting unpopular actions out of the way quickly, perhaps planning to announce an income tax reduction later to save the midterm elections.
I have followed writings of the many in this administration, seen their interviews etc. Anyone who thinks there is a "5D chess", "the plan" etc. is purely drinking cope here.
> cheap labor factories again isn't going to happen in 2025
It is not going to happen ever unless we plan to move people from better paying jobs in McDonalds and WellsFargo to China styled factories or we allow much higher immigration levels from South America.
Trump admin and his advisors genuinely believe that tariffs are good, that they will create factories and jobs within USA and enable white families to raise families on a single income. They think rest of the world's existence is a mistake, they hate Europe, China, India and South America. They don't know much about Africa and admire Russia.
They didn't learn from the last time, when U.S. soybean farmers got screwed (the first time) and other countries established alternate supply chains that of course didn't involve the U.S. at all.
As the USA makes itself a trade pariah and other countries forge new relationships amongst themselves, we're permanently devalued. The world will (continue to) move on without a backward-looking, unreliable, sad, and obnoxious USA.
>They didn't learn from the last time, when U.S. soybean farmers got screwed
They absolutely learned. They learned those soybean farmers they screwed through outright incompetence or being too stupid to govern would still consume their propaganda and happily vote for them again.
Trump's inner circle like Navarro, Miller etc. do not give two hoots about Soybean farmers or anyone else. They think poverty is a good thing if helps their view of "nationalism".
I have never caught even the slightest whiff of Trump knowing what he's doing on any topic. I'm genuinely not trying to be glib either, this is a sincere observation. When has he publicly or privately intimated that he understands how tariffs or trade work? Or energy or immigration or infrastructure or technology? His public persona gives facile and misleading explanations that are ostensibly just politicking, but every tidbit of leaked insider accounts or hot mics or unguarded moments don't show anything more than the same persona.
> Despite the US president attesting to the fact that he finished “top of his class” at Wharton Business School at the University of Pennsylvania, his former college professor, William T. Kelley, had another view.
> After Kelley’s death, Frank DiPrima, a close friend of Kelley, revealed that the professor felt the president was a fool.
> It was, it can be said without fear of exaggeration, a day that will live in infamy. When President Donald Trump emerged from his mysterious one-on-one summit with Russian president Vladimir Putin in Helsinki in July of 2018, the respective visages and body language of the two world leaders could not have been further apart. The Russian president looked smug and sated, like a vampire with a bellyful of peasant blood; Trump looked like a man who’d just received a painful enema.
You are confusing the actual accounts with the surrounding article.
Look, Trump has been claiming that he graduated first in class, but never provided any evidence. In fact, he refuses to publish his college records. Why is that?
> You are confusing the actual accounts with the surrounding article.
The first one is hearsay from a dead guy and the other one is a creative writing project. If you had these accounts handy from reputable sources, you would have posted them from the reputable sources. This is not the standard of commentary expected of this forum.
> Look, Trump has been claiming that he graduated first in class, but never provided any evidence.
The articles I have read on the subject suggest that this claim is impossible because he would have been on the honor roll and does not appear there. This tells me that he’s either delusional, misinformed, or a liar. It doesn’t tell me he doesn’t understand economics.
Go back to my comment further up. When has he ever publicly or privately demonstrated that he understands economics? He repeatedly insists that exporters pay tariffs. He says a trade deficit means we're being robbed. His list of misapprehensions on basic ideas is very long. Absent evidence to the contrary, one can only conclude he knows nothing about economics. Maybe he studied it 50 years ago and maybe he didn't. He has not demonstrated an iota of fluency since entering politics.
Must have been worth as much as toilet paper considering his history of bankruptcies. I would be highly suspect of every person involved in letting him earn a degree in anything.
Trump's greatest talent is in lying with a straight face, then finding explanations for the lies:
>Why the discrepancy? Perhaps this will give us an idea: Trump told Washington Post reporters that he counted the first three bankruptcies as just one.
His failed businesses include money printing machines aka casinos.
It is Howard Lutnick's plan who is the Secretary of Commerce.
Has been widely reported that there was conflict amongst the inner circle about the extent of the tariffs and that it was Lutnick pushing for the most extreme version which is what we ended up with.
Is there a cite for that? I believe it just haven't seen it. Very worrying because Lutnick was Musk's guy and that puts him at least adjacent to Thiel and his cult of monarchy.
Probably the plan for that is to do massive gaslighting on social media and find someone to blame for the hardship. Leveraging emotions (especially the aggressive ones) may be an effective way to keep support of the base.
I really wish I was more optimistic and share your position that voters are driven by self-interest. I hope you're right though.
There may have been a hint of strategy at one time. But the sheer level of gross incompetence coming from every side of this administration does not really lead one to believe that "global 4d chess trade war" is within the actual abilities of this administration to grasp.
Trump wasted his inheritance and has been several times in bankruptcies - and not "I took risks" bankrupt, more "I f*cked up" and "I lied" bankruptcies.
>> hot takes "they have no idea what's coming" are I believe naive
While I agree they probably have some idea what will happen, don't forget that these same people added a journalist to a group chat where they planned a military attack. They fired a bunch of critical people and then didn't know how to get in touch with them to try and rehire them. Assuming they're total idiots isn't much of a stretch.
While we cannot predict the future, it's moving faster. The world system is under immense stress. Complexity at this scale increases the chance of black swans and unpredictable outcomes. Many powerful actors are reacting simultaneously in divergent directions, which can reshape the trajectory altogether. We are vulnerable to cascading surprises.
By the time the midterms come along I doubt there will be many people left who want the job of fixing up this mess. So they will likely get to keep it.
I tend to agree with you that they know. However the signal leeks showed me that they are not just playing stupid in public - it seems that they are like that for real.
Personally I think that their bet is - it will hurt US, but it will devastate EU and hurt China more than US. EU is fragile economically and political instability will follow if its economy crashes. Especially if US pushes OPEC to jack up the prices.
>What amazes me is the timing: the midterms will hit while the bottom is still chugging along. I would think it unlikely they can secure an updraft from this to keep the house. What's the plan for that?
tax cut financed by the tariffs? Will buy/mislead a lot of voters when those checks would get sent mid next year.
Especially those voters who couldn't notice that all those countries having tariffs (and VAT) are worse economically than US in major part because US didn't until now have much tariffs to speak of.
This explanation doesn’t make sense because dollar denominated debt doesn’t change with devaluation.
What is the more likely explanation is all the countries with trade surpluses will feel the pain long before the US and agree to much better terms than before.
The PM of Canada had already indicated progress is being made on their trade deal.
Does every country in the world maliciously connive to keep their currency low vs the dollar? Currency valuations are not tariffs and it is absurd to compare them to a tariff.
These tariffs are a huge mistake according to almost every mainstream economist, I hope instead of parroting the party line you’ll be able to admit their failure in a few years.
So does every country in the world, this is neither surprising nor reason to slap tariffs on imports (which will hurt US consumers).
> I have no idea if the tariffs will work
We have lots of examples from history of tariffs not working, so there is that. They lead to trade wars, and then sometimes to real wars, never to prosperity.
The unparalleled prosperity the US enjoyed in the last few decades before 2008 was driven by open global trade and being the currency of last resort and the centre of world markets. I think there is a lot of complacency in the US about that position, and we're seeing the beginning of the end.
Interest rates, taxes, subsidies and reserves also affect currency value.
The US uses selective tariffs already, which is fine though not actually that helpful IMO, what is new is absurdly high punitive and blanket tariffs on everything. This will tank the stock market, raise prices, cause a recession and perhaps most importantly ruin the reputation of the US as a safe haven.
The absurd tariffs on trading partners that don’t matter like Laos are a perfect illustration of how much thought went into this.
bit of an 11 dimensional chess answer. Senator Chris Murphy has a much better explanation, which is simply this is Trump's way of holding private industry hostage [1]. The tariffs will be incrementally removed as various private industries give him loyalty pledges just as he is doing with large law firms and universities. that's it! so simple.
Rich people are typically insulated from economic downturns, especially ones they cause, by their ability to shift investments and asset allocations to mitigate and/or profit from changing tides.
Furthermore, Trump has never bought his own groceries, pumped his own gas, or interviewed for a job so retail prices and layoffs are abstractions "for plebs". Plus, he's reaching the end of his life so he doesn't have very much proverbial skin in the game since his motivations revolve almost exclusively around himself.
I hold a more pessimistic view of the cause and I do agree with your argument that they do know the consequences. But they don't care for another reason.
The plutocracy has fully captured the government and now seeks its ultimate goal: complete transfer of all tax burden to the 99%. For this end they cut the government spending, wrecking the democracy and they impose tariffs to generate fake temporary revenues, so they can argue that the huge tax cut (dwarfing all that came before) is economically sound and fully justified.
This will wreck the global economy and with the coming bad times (wars, famine, extreme migration) nobody will have the presence or the governmental weight to rein in these few rich man.
It looks too complex, IMO. As someone living in Trump's beloved country (Russia), I'd say you should ask, "Cui prodest?" If some oligarchs (currently called billionaires, but we'll see) surrounding Trump benefit financially from these tariffs, then the plan isn't about state debt—it's about their personal wealth.
They want to repudiate foreign held debt, or devalue it, by revaluation of the USD and they will wear what they think of as a one time economic shock to get their reset in a belief they can make it less like the Smoot-Hawley great depression because so many other economic levers exist now, including floating currency, MMT, and massive fintech.
Personally I think it's a mistake but hot takes "they have no idea what's coming" are I believe naive. They know. They just don't care. Some amount of foreign trade will absorb the cost. Not all, not most. Not all prices in the US will rise and some substitution will happen although spinning up cheap labor factories again isn't going to happen in 2025. Maybe by 2027? Rust belt sewing shops and Walmart grade cheap goods production lines?
What amazes me is the timing: the midterms will hit while the bottom is still chugging along. I would think it unlikely they can secure an updraft from this to keep the house. What's the plan for that?