"Chaos"
by Bill Bonner
From Aboard the Queen Mary II - "Tariffs, tariffs everywhere…What a rollicking good time for the press. And for Trump critics. The wires: "Stocks slide around the world as investors recoil from Trump’s tariffs." We watched the tape yesterday. The Dow was down 1,000…then 1,200…then 1,500. Where would it come to rest, we wondered. It ended the day down 1,679.
In his first term, Trump committed one of the biggest blunders in US economic history - shutting down the economy and replacing real output with an extra $4 trillion in phony, printed-up stimmy checks . The result? The worst inflation in fifty years.
And now…here comes Big Blunder No. 2. Doubters overseas and skeptics at home - all are having a field day. Raw Story: “This might be the single stupidest thing any of us will ever see," [Ian] Dunt argued. "It is stupid in every way: presentationally, intellectually, politically, methodologically, morally and of course economically. The word stupid doesn’t really suffice for the full level of idiocy we’ve now reached."
Trump’s tariffs are so dumb they are uniting Democrats and Republicans… free traders and protectionists…comedians and historians. Alternet: "Shortly after President Donald Trump issued Wednesday’s announcement of new tariffs, four Senate Republicans joined Democrats to extend a lopsided bipartisan rebuke to his trade policy. The Senate adopted a resolution by a 51 to 48 vote to block his proposed tariffs on imports from Canada, a longtime US ally. Now, former Vice President Mike Pence is further infuriating Trump supporters by calling out his new tariffs as “a tax.”
The tariffs are even making economists look smart. Finally, here is something that Paul Krugman - famously wrong about most everything - can be right about. Raw Story: "Based on what he said, he’s gone full-on crazy," wrote Krugman, a frequent critic of the president. "It’s not just that he appears to be imposing much higher tariffs than almost anyone expected. He’s also making false claims about our trading partners - not sure in this case whether they’re lies, because he may be truly ignorant - that will both enrage them and make it very hard to back down. Basically, he’s claiming that the rest of the world is placing very high tariffs on U.S. products, and that he’s imposing 'reciprocal' tariffs that are only half what they impose on us."
"The EU, like the United States, has generally low tariffs; the average tariff it charges on US goods is less than 3 percent," wrote Krugman. "So where does this 39 percent number come from? I have no idea. Many people speculated that Trump would count value-added taxes as tariffs, even though they aren’t - European producers selling to the EU market pay the same VAT as US producers, so it doesn’t discriminate and therefore isn’t protectionist. But even if you get that wrong, EU VAT rates are in the vicinity of 20 percent, so you still can’t get anywhere close to 39 percent." Where do Trump’s numbers come from? Some are nonsense. Some are irrelevant. Some are pure WTF. The Donald, for example, says Taiwan should get a 64% tariff.
On a total of $134 billion of back-and-forth trade in 2023, tariffs on imports and exports averaged 2% - even steven, coming and going. So, why a penalty tariff on our supposed ally? Trump: “We are going to charge countries for doing business in our country and taking our jobs, taking our wealth, taking a lot of things that they have been taking over the years.”
Business Insider: "Commerce Secretary Howard Lutnick said on Wednesday that President Donald Trump's new reciprocal tariffs are just a response to how the US has been treated on trade." Laura Ingraham at Fox picks up the fight club angle. “Only Trump has the guts” to stop the foreigners from ripping us off, she says.
Get it? They’re Honor Tariffs… like honor killings, designed to reclaim America’s sense of fairness…justice…and honor. We’re going to teach them a lesson by imposing taxes – on ourselves! Because, the foreigners don’t pay the tariff penalties. US consumers do. Warren Buffett explains: “The Tooth Fairy doesn't pay 'em!”
And why are the feds’ getting involved at all? Donald Trump is the ultimate politician…always fighting for power, prestige, and money. That’s why he insists upon being a ‘winner.’ In politics, you are either a winner or a victim. Now, he thinks he can win by bludgeoning other nations with tariffs. But trade is not meant to be part of the political world. It’s part of the win-win world of commerce -- bargaining, negotiating, and trying to satisfy a customer. When an honest trade happens, both sides win. Each gets something he didn’t have before and gives up something he considers less valuable. Bringing in politics just queers the deal. And now that the politicians are on the case, you can expect them to make the same sort of mess of it that they made of Amtrak, Iraq, and the Covid hysteria. Expect lower growth, higher prices, and more chaos."
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