Doug Casey: "The goal is to remake the world’s monetary regime"

 

"Stephen Miran’s appointment to the Federal Reserve isn’t just another personnel move—it’s the placement of Trump’s Reset architect inside the very institution that will help carry out America’s most ambitious economic overhaul in generations.

"If you’re still unfamiliar with what Trump’s Reset entails, I strongly recommend checking out Matt Smith’s comprehensive analysis. He’s done the heavy lifting of connecting dots that were only hinted at in Miran’s original white paper. ...

"The goal is to remake the world’s monetary regime….

"But there are consequences to Trump’s plan - one of which is a guaranteed period of painful adjustment. ...

"Trump doesn’t just want a weaker dollar - he wants a dollar that is radically devalued against every other currency on earth. ... a dollar devaluation of 90%.

"That may sound horrific - but it’s only slightly less than the devaluation of the 1970s, when the dollar lost 75% of its purchasing power.

"Anyone not holding 'real stuff' - like gold, silver, natural resources, commodities, etc. - is going to see a dramatic drop in their standard of living.

"Team Trump will deal with US debt the way governments always deal with debt…

"By inflating it away - and with it, the purchasing power of your US dollar savings....

"But he wants more than just a weak currency.

"He wants to change the nature of the US economy by copying China['s] model of state-backed investment.. ... [and] industrial policy ... [demanding] large profitable corporations reinvest in China. ...

"Trump’s plan will [demand] the same of US companies. And the Trump plan is already in motion. Apple announced a $500 Billion investment in America in late February ... [Intel were forced to give a ten percent cut to the US Government.] ... Expect to see many announcements like these ....

"[Trump's advisor Stephen] Miran makes it clear that nothing good can happen until the burden [sic] of having the reserve currency is shared by our trading partners.

"Does that mean the dollar will lose its status? Probably."

~ composite quote from Doug Casey's 'The Mar-a-Lago Accord Confirmed: Miran Brings Trump’s Reset to the Fed' and Matt Smith's 'Get Ready for Trump's Monetary Reset'

"Let me get this straight: the Republican Party now favours concentrating power in one individual to impose protectionist tariffs, centrally plan the economy, nationalise stakes in private businesses, and use the Fed to create massive inflation to monetise soaring budget deficits."

~ Peter Schiff 

A tragic Trump tariff tale tweeted

"After failing to make trade deals, Trump is now just posting letters to world leaders announcing new tariff rates."

~ Meidas Touch

"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."

~ Justin Wolfers

"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"

~ Justin Wolfers

"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."

~ Scott Lincicome

"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."

~ Aaron Fritschner

"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."

~ Anders Aslund

"[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."

~ Jon Wiltshire

"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."

~ The Intellectualist

Bastiat on the stupid "balance of trade"

"The ship that carried them off sank on its departure. The customs officer, who had noted on this occasion an
export of 100 francs, never had any re-import to enter in this case. Hence, Monsieur Mauguin would say, France
 gained 100 francs; for it was, in fact, by this sum that the export, thanks to the shipwreck, exceeded the import."

Protectionists of all stripes often rail about trade deficits. An unfavourable balance of trade. One of the catch phrases of these people, because at some level even they realise the value of trade, is that they want “fair trade.” That’s just protectionism under the guise of being pro-free trade.

So what exactly is the stupid goddamn "balance of trade"? And how do bloody protectionists calculate their alleged profits and losses?

One of history's best economic story-tellers, the great Frenchman Frederic Bastiat, explained the fallacy way back in the nineteenth century with the help of a contemporary protectionist ...

ALLOW ME TO ASSESS THE validity of the rule according to which Monsieur Mauguin and all the protectionists calculate profits and losses. I shall do so by recounting two business transactions IN which I have had the occasion to engage.

I was at Bordeaux. I had a cask of wine which was worth 50 francs; I sent it to Liverpool, and the customhouse noted on its records an export of 50 francs.

At Liverpool the wine was sold for 70 francs. My representative converted the 70 francs into coal, which was found to be worth 90 francs on the market at Bordeaux. The customhouse hastened to record an import of 90 francs.

Balance of trade, or the excess of imports over exports: 40 francs.

These 40 francs, I have always believed, putting my trust in my books, I had gained. But Monsieur Mauguin tells me that I have lost them, and that France has lost them in my person.

And why does Monsieur Mauguin see a loss here? Because he supposes that any excess of imports over exports necessarily implies a balance that must be paid in cash. But where is there in the transaction that I speak of, which follows the pattern of all profitable commercial transactions, any balance to pay? Is it, then, so difficult to understand that a merchant compares the prices current in different markets and decides to trade only when he has the certainty, or at least the probability, of seeing the exported value return to him increased? Hence, what Monsieur Mauguin calls loss should be called profit.

A few days after my transaction I had the simplicity to experience regret; I was sorry I had not waited. In fact, the price of wine fell at Bordeaux and rose at Liverpool; so that if I had not been so hasty, I could have bought at 40 francs and sold at 100 francs. I truly believed that on such a basis my profit would have been greater. But I learn from Monsieur Mauguin that it is the loss that would have been more ruinous.

My second transaction had a very different result.

I had had some truffles shipped from Périgord which cost me 100 francs; they were destined for two distinguished English cabinet ministers for a very high price, which I proposed to turn into pounds sterling. Alas, I would have done better to eat them myself (I mean the truffles, not the English pounds or the Tories). All would not have been lost, as they were, for the ship that carried them off sank on its departure. The customs officer, who had noted on this occasion an export of 100 francs, never had any re-import to enter in this case.

Hence, Monsieur Mauguin would say, France gained 100 francs; for it was, in fact, by this sum that the export, thanks to the shipwreck, exceeded the import. If the affair had turned out otherwise, if I had received 200 or 300 francs’ worth of English pounds, then the balance of trade would have been unfavorable, and France would have been the loser.

From the point of view of science, it is sad to think that all the commercial transactions which end in loss according to the businessmen concerned show a profit according to that class of theorists who are always declaiming against theory.

But from the point of view of practical affairs, it is even sadder, for what is the result?

Suppose that Monsieur Mauguin had the power (and to a certain extent he has, by his votes) to substitute his calculations and desires for the calculations and desires of businessmen and to give, in his words, “a good commercial and industrial organisation to the country, a good impetus to domestic industry.” What would he do?

Monsieur Mauguin would suppress by law all transactions that consist in buying at a low domestic price in order to sell at a high price abroad and in converting the proceeds into commodities eagerly sought after at home; for it is precisely in these transactions that the imported value exceeds the exported value.

Conversely, he would tolerate, and, indeed, he would encourage, if necessary by subsidies (from taxes on the public), all enterprises based on the idea of buying dearly in France in order to sell cheaply abroad; in other words, exporting what is useful to us in order to import what is useless. Thus, he would leave us perfectly free, for example, to send off cheeses from Paris to Amsterdam, in order to bring back the latest fashions from Amsterdam to Paris; for in this traffic the balance of trade would always be in our favor.

Yet, it is sad and, I dare add, degrading that the legislator will not let the interested parties decide and act for themselves in these matters, at their peril and risk. At least then everyone bears the responsibility for his own acts; he who makes a mistake is punished and is set right. But when the legislator imposes and prohibits, should he make a monstrous error in judgment, that error must become the rule of conduct for the whole of a great nation. In France we love freedom very much, but we hardly understand it. Oh, let us try to understand it better! We shall not love it any the less.

Monsieur Mauguin has stated with imperturbable aplomb that there is not a statesman in England [in the nineteenth century at least] who does not accept the doctrine of the balance of trade. After having calculated the loss which, according to him, results from the excess of our imports, he cried out: “If a similar picture were to be presented to the English, they would shudder, and there is not a member in the House of Commons who would not feel that his seat was threatened.”

For my part, I affirm that if someone were to say to the House of Commons: “The total value of what is exported from the country exceeds the total value of what is imported,” it is then that they would feel threatened; and I doubt that a single speaker could be found who would dare to add: “The difference represents a profit.”

In England they are convinced that it is important for the nation to receive more than it gives. Moreover, they have observed that this is the attitude of all businessmen; and that is why they have taken the side of laissez faire and are committed to restoring free trade.

[Text by Frederic Bastiat from his masterpiece: Economic Sophisms; introduction excerpts by Marco den Ouden]

REPOST: Trump's tariffs have had a chance, and already failed

People are stunned, confused, concerned. at what the Toddler-in-Chief is doing to world trade. They're asking: 

What's the president's end-game here? 

What's he after? 

Is it just a child seeking attention? 

Or is there a point to all this? 

One clue would be what was gained from the similar game-playing in his first term ...

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:

1. more US jobs in manufacturing;
2. reducing US economic ties with China; and
3. 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.

"Ripped-off" by the pizzaman

Sorry, no, we can't avoid talking about bloody tariffs and trade deficits again. 

XKCD explains it all very simply ...

[Hat tip Duncan B.]

"Tariffs Aren’t Liberating": Your Tuesday Tariffs Ramble [UPDATED]

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 Aren’t Liberating - Reem Ibrahim, FOUNDATION FOR ECONOMIC EDUCATION

"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."

          ~ Andy Clarkson

"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."

The Roots of War - Ayn Rand, ARI CAMPUS

"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."

No One Wins a Trade War - William Bernstein, THE ATLANTIC

"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."

Why America can't be outcompeted - Harry Binswanger, HARRY'S SUBSTACK

"“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."

Trump’s Tariffs and the End of American Empire - Niall Ferguson, THE FREE PRESS

"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."

‘How Ugly Is This Going to Be?’ - Graham Lanktree, POLITICO

"You will go to work in a hot, noisy, dirty factory for low wages. And you will like it. 

The quality of life your grandfather had is more than good enough for you!"

"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."

Flaws in the "Just In Case," Self-Sufficiency Case for Protectionism - Ryan Bourne, WAR ON PRICES

"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."

What Do American Steelworkers Think About Trump’s Tariffs? - Ethan Dodd, THE FREE PRESS

"President Trump’s ‘Liberation Day’ tariffs risk domino effect across the globe as Chinese goods look for new markets."

The Rest of the World Is Bracing for a Flood of Cheap Chinese Goods - WALL STREET JOURNAL

"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."

In 1970, Milton Friedman Advocating Moving Unilaterally Toward Free Trade Rather Than Retaliating. We Still Haven’t Learned That Simple Lesson -Mark Perry, AEI

"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 ..."

~  Landon Walsh

"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."

I worked for Donald Trump. This is the key to understanding him: It’s not about America, and there’s no connection to the real world - John Bolton, TELEGRAPH (UK)

"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."

          ~ Stephen T. Stone

"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 Confidence Game: How Trump’s Con Threatens More Than the Truth - James Greenberg, JAMES'S SUBSTACK

"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."

A Contagion of Uncertainty - Tyler Cowen, THE FREE PRESS

[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 Journal opinion 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. ..."

Trade Deficits Don’t Matter; Understanding Deficits Do: Protectionists' idea of a trade balance is completely backward -Mark Perry, FOUNDATION FOR ECONOMIC EDUCATION

Tariffs are a suicide bomb":

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.

What happened to Trump? Why has be become so pro-Russian? - Roman Sheremata, UKRAINE TODAY

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. ...

"Ron Vara is an anagram of Navarro."

Trump's China Muse Has an Imaginary Friend - Tom Bartlett, CHRONICLE OF HIGHER EDUCATION

 

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....

          ~ Dwayne Davies

"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 ..."

Trump’s Economic Warfare Targets Innocent Bystanders - Richard Ebeling, FUTURE OF FREEDOM FOUNDATION

"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."

Why Trump keeps saving TikTok - Emily Jashinsky, UNHERD

"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'.”

How to Undo Trump’s Growing Dictatorship and the Damage it Is Inflicting - Larry Diamond, THE UNPOPULIST

"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. ...."

How to Fight Back - Robert Tracinski, TRACINSKI LETTER

"Trump's policy, unveiled yesterday afternoon, is called a 'reciprocal tariff plan,' which is a bit like calling a hammer a 'reciprocal pillow'."

"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."

~ Mike Masnick from his article 'Trump Declares A Trade War On Uninhabited Islands, US Military, And Economic Logic'

 

Trump's tariffs have had a chance, and already failed

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. ..

"The desired results" being those desired by Trump 1.0 and his protectionist advisors.

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:

1. more US jobs in manufacturing;
2. reducing US economic ties with China; and
3. 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 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.

"The prospective return of Trump's deplorable gang of trade advisers to the top trade policy positions in Washington ought to scare the living bejesus out of everyone."

"Donald Trump has had a lifelong adherence to the most primitive form of trade protectionism imaginable. That is, the utterly mistaken presumption that trade deficits are mainly a result of cheating by nefarious foreigners and/or stupid trade deals foisted on the economy by Washington Swamp creatures.
    "Thus, according to the Donald America will not start winning economically again until a tough businessman/negotiator like himself brings the hammer down on cheaters and slams the gates on imports by tariffs and any other means necessary ...
    "What is worse ... [his crackpot advisers] see trade is way too important to be left to the whims of the free market. ... Thus, if you are an exporter [adviser Peter] Navarro insists that you get state approval for what you may or may not sell to the Chinese. And if you are an importer, you might as well get ready to pay a stiff tariff upcharge for the audacity of sourcing the lowest cost of global supply rather than buying from red-blooded, albeit higher cost, American vendors. ....
    "To be sure, there is a giant problem with the $20 trillion of cumulative current account deficits (2024 $) the US has racked up continuously since the mid-1970s. But those massive, chronic trade shortfalls and the devastating off-shoring of domestic industry which had accompanied them are the result of bad money — not bad trade deals, bad actors abroad, or the free market at work. ...
    "Stated differently, when you look for the culprit behind the collapse of America’s trade account and industrial base ... its wasn’t the Chicoms over there or incompetent trade policy officials over here. It was the money printers domiciled ten blocks from the White House. ...
   
"[N]o more insidious notion is at loose in the beltway [in this context] than the Trade Nanny predicate which underlies the Donald’s revived attacks on China’s alleged technology theft and 'economic aggression.' ... [W]hat actually unfolded [under the Trump presidency] was the very opposite of a traditional trade skirmish. Instead, it was an unprecedented act of Washington-led economic aggression against another sovereign state that happens to have unfortunately saddled itself with a statist economic model that we call the Red Ponzi. ... [T]he attack of Navarro and the Donald on China was an attack on the entire warp and woof of its jerry-built $15 trillion red capitalist economy. ...

"[T]he prospective return of [Trump's deplorable gang of trade advisers] to the top trade policy positions in Washington ought to scare the living bejesus out of everyone. ... Navarro is the most dangerous economic ignoramus and fanatical nationalist ever to hold high office in the White House; and Lighthizer is a career swamp creature and the walking embodiment of Washington’s crony capitalist system. ...
    "[A] return to the Trumpian Trade Wars is [not] a secondary matter.

    "What is actually brewing is an epic upheaval of international commerce that will bury Washington even deeper in the Swamp and batter the living standards of Flyover America in trade-based inflation that will make the recent fly-up on Joe Biden’s watch look like a walk in the park."

~ David Stockman from his post 'The Folly Of The Trumpian Trade Wars'

 

"At some point the kind folks who are funding our lifestyle will discover that we are insolvent."

"The key data point here is that since the GFC, Wellington has been piling on debt like there is no tomorrow; because when you are running on a three-year electoral cycle, there really isn’t....
    "Because we can no longer afford to pay our own way we borrow heavily. Not just the government; all of us. Our trade deficit is 8% of our GDP and the crown accounts are a mess. At some point the kind folks who are funding our lifestyle will discover that we are insolvent."

~ Damien Grant, from his column 'Skycity had a nasty tumble, and Prefu could bring the same for NZ economy'

Why the Captain of the 'Ever Given' Should Get a Medal

Ship blocks trade. Why weren't protectionists celebrating?
(Pic by Wikimedia Commons)

For decades, protectionists have been arguing for greater barriers to trade. So, says Tom Palmer in this guest post, instead of bemoaning the recent blockage to the Suez Canal by the container ship 'Ever Given,' they should have been giving the captain medals.

Why the Captain of the Ever Given Should Get a Medal

by Tom Palmer

What a brilliant achievement! Supply chains repatriated. Trade deficits cut. Predatory trade reduced. A massive 1,312 foot-long container ship, the 'Ever Given,' did with its enormous bulk what mere laws had failed to do: it blocked the international flow of goods, something for which protectionists the world over have been calling for years! Where they've been passing laws to do the job (or calling for them) the ship did the job simply by running aground in the Suez Canal, through which roughly 30% of global shipping container volume passes every year -- running aground, and then staying there. Stuck like a cork in a bottle.

For any protectionist, it should be rated a truly heroic achievement.

By running their ship aground in the Suez Canal, the owners of the Ever Given, Japanese firm Shoei Kisen KK, unilaterally realised the dream of Winston Peters, of Peter Navarro, of his former boss Donald Trump, and of sundry other rabid protectionists going back to Edward III. 

For seven glorious days over $9 billion dollars worth of goods per day were stopped from flowing through the Suez Canal. Much of that was headed to the United States and according to the arguments of protectionists would only have added to their “trade deficit,” thus (allegedly) wrecking havoc on the United States. Many hundreds of ships loaded with hundreds of thousands of containers full of all kinds of exports were backed up. The impact on supply chains will continue to be felt long after the forces of free trade got the ship back on its way. According to Lars Jensen, chief executive of Denmark-based SeaIntelligence Consulting, “The effect is not only going to be the simple, immediate one with cargo being delayed over the next few weeks, but will actually have repercussions several months down the line for the supply chain.”

The protectionists should award the captain of the Ever Given a medal for – quite literally – blocking trade. Protectionists seek to block trade. And that’s what the Ever Given did for those seven days. (Free traders argue that protectionism isn’t a useful descriptive term, because blocking trade doesn’t protect a country, although it does protect special interests from competition.)

Of course, no serious person would propose an award to the captain of the Ever Given, but there’s really no economic difference between the bulk of a gigantic ship physically blocking trade and the armed police of the Customs and Border Patrol coercively blocking trade.

Some people see trade across borders as negative. They believe that when you buy something from foreigners, you lose. They should thus be happy when goods are blocked from entering their country. Former president Donald Trump famously stated, “China has been taking out 500 billion dollars a year out of our country and rebuilding China.” In his view, that wealth left the U.S. and went to China, a view that oddly overlooks all the things that producers in China send to Americans, including computers, furniture, integrated circuits, sports equipment, electrical machines and, yes, tea. And it leaves out all the things American producers send to China, from aircraft to soybeans, cars and trucks to optical and medical instruments. 

The protectionist thinks that if you send money abroad, you’re losing. By the same logic, when I send money to my local grocery store, wealth is leaving my house in order to build someone else’s. I “lose” every time I buy food from the grocery, or electricity from the power company, or medicine from the pharmacy. That view is known as the “balance of trade.”

Adam Smith in his 1776 masterpiece, noted that “Nothing … can be more absurd than this whole doctrine of the balance of trade, upon which, not only these restraints, but almost all the other regulations of commerce are founded. When two places trade with one another, this [absurd] doctrine supposes that, if the balance be even, neither of them either loses or gains; but if it leans in any degree to one side, that one of them loses and the other gains in proportion to its declension from the exact equilibrium.”

The doctrine of the balance of trade has been around for centuries. It has also been refuted for centuries, but, like the “gambler’s fallacy” (thinking that observing five coin tosses resulting in “heads” makes it more likely that the next one will be “tails”), it’s persistent. As with the gambler’s fallacy, the fallacy of the balance of trade has to be exploded over and over.

Frederic Bastiat satirised proponents of protectionism by arguing if they were consistent they would surely propose for Europe a system of Negative Railroads, one composed entirely of breaks in the tracks so that local industries and retailers might benefit from the business. And the economist Henry George once pointed out that to block trade is to impose an embargo on ourselves, and that, “What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war.”

We could add that it also teaches us to celebrate blocking goods-carrying ships from passing through canals. Of course, if we don’t celebrate physically blocking trade, we shouldn’t celebrate any other means of blocking it. Like the gambler’s fallacy, the fallacies of protectionism, can be exploded with just a bit of logical thinking.

* * * * 

Dr. Palmer is executive vice president for international programs at the Atlas Network and a senior fellow at the Cato Institute and director of the Institute's educational program, Cato University. A version of this post first appeared at FEE.