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Is Trump actually just cooked now? There is absolutely no way his tariffs don't cause major pain through huge inflation (the thing people voted for him to fix!), layoffs, and the return of stagflation. I mean these tariff numbers are absolutely eye-popping.
2 arguments I can steelman for the tariffs:
For 1, maybe true but almost certainly would take years if not decades. Meanwhile stock market is 50% of peak, boomers' retirement and everyone's 401k has evaporated in a puff of smoke, layoffs that ripple through almost every industry as consumers pull back on spending and the engine of America's economy (aforementioned consumer spending) grinds to a halt. In other words Trump is toast because nobody is willing to suffer through that for 4 years, let alone 4 months. Republicans get annihilated in midterms unless Congress takes back tariff powers from the executive. The one thing you can't do in America is fuck with the economy, it's the raison d'etre of the entire thing. And this can't be blamed on vague macro factors or credit default swaps, it's entirely traceable to Trump and his tariffs and everybody and their mother knows it. Even a child can understand what a tariff is conceptually.
For 2, also maybe true. But the uncertainty will lead to R&D pullbacks, depressed investment, and FUD all over the place as long as Trump is in power. This argument and scenario is the optimistic case. But even here you're again fucking with the American raison d'etre. Stability, certainty, relative lack of political shenanigans with the economy are a large part of the reason everybody and their mother wants to invest in America. If you take that away all of a sudden America doesn't seem so attractive anymore. Economy probably chugs along but either way it's nothing like Trump's first term and voters again have a very obvious catalyst for their economic malaise.
Honestly I don't see how Trump or Trumpism survive as a political force. DOGE was a farcical disaster which didn't even touch SS, medicare, or the military and consumed massive amounts of political capital, and now Trump is basically going full retard and strapping on his suicide vest as he wages jihad on the American economy. Trumpism's political capital is deep in the red now, and we haven't even begun to feel the tariff pain. If he actually keeps the tariffs and Congress doesn't wake up and take that power back, I'm not even sure the guy makes it to 2026.
Some of the current developments are increasingly pointing towards 2.
But we will have to see. If he really intended primarily for 2., his move was very ballsy. I'd have been much more careful, first negotiating and only considering targeted tariffs in case a country shows no willingness to change. In a one-on-one, America is always economically larger, so they can strong-arm almost anyone; By picking a fight with everyone simultaneously, they risk them banding together instead. But I'm also quite strongly generally opposed to tariffs, while Trump at the very least does not mind introducing them if he feels treated unfair (and he does so quite easily).
The bigger issue with point 2 is that the calculus for determining the tariff rates is unhinged from reality. Countries like Switzerland, Israel, and Singapore don't charge any tariffs to the US (and in the case of Switzerland and Singapore, to anyone else). Countries like Brazil do charge tariffs, but we have a trade surplus with them. Trump counts VAT as a trade barrier, which doesn't make sense to begin with and would require countries that have it to rejigger their entire systems of internal taxation, which isn't going to happen. He tariffed countries that already have free trade agreements with us. Services, for which we run a trade surplus and which employ the majority of workers, apparently don't count. If these were simply reciprocal tariffs with the goal being to get free trade agreements, Trump may have had a point, but these countries have nowhere to begin negotiations, and the manner in which the tariffs were implemented, combined with Trump's general schizophrenia, doesn't inspire much confidence that any deal will survive longer than a week. Given the overall environment, it's better for them to just hang in there and hope that domestic pressure puts an end to this nonsense sooner rather than later.
As far as I understand Trump, he considers the trade imbalance itself a problem and thus if a country doesn't buy enough american goods - even if it isn't the result of tariffs - that needs to be fixed. Negotiations can then still be done by the governments of the respective countries by deliberately buying american for large-scale infrastructure projects and pressuring their own larger companies to invest/buy more american. Taiwan, for example, has had no tariffs, but has declared their intention to invest more into american companies to start negotiations.
But yes, I agree overall. Achieving a perfect equal trade balance with all countries is the same kind of nonsense as the desire on the left for the perfect equality of all people - neither desirable nor realistic. I'd greatly prefer genuine reciprocal tariffs.
Presumably with free floating exchange rates, trade should end up roughly balanced between all currencies, right? So even if the country doesn't buy enough american goods, they would at least trade the USD back into their own currency, making theirs more valuable and therefore less competitive over time, until trade balances.
I think the only way to get persistent trade surpluses is when one country is saving in the other's currency (earning or buying their currency, and then just sitting on it). Some small amount of that will happen dynamically, particularly for desired stable currencies. But any country actually trying to pursue serious export-led growth will have to actually continually buy up foreign reserves and sit on them. That was definitely the case with Japan, and then China; I'm not sure about Switzerland/Israel/Singapore.
And thus, any kind of not letting the currency truly float (with a declared or de facto peg), is maybe what Trump had in fine print as 'or otherwise from currency manipulation', on his chart.
Meanwhile personally, I'm on the side that thinks other countries working hard to make stuff to send to us, in exchange for dollars that they can't spend, is on balance a strongly desirable position for us (as long as we can find jobs for people to do other than manufacturing). But yeah this has always been trump's ideology, that trade deficit = getting ripped off.
From what I understand, Import/Export is specifically goods and services exchanged for money, so it does not include many financial instruments, such as direct investment into a foreign country or leaving your money at a foreign bank. So a country can run a long-term trade deficit indefinitely as long as it can re-capture the difference this way. Which is especially easy if you just-so happen to be the financial headquarter of the world. But yes, many countries saving in US currency is also an option.
I agree that, if anything, this implies a trade deficit is good for you.
Yeah it's not that foreign governments / central banks buying the currency counts for imports/exports. It's just that that's the required action to counteract the natural sell-pressure on the net-importer currency and the buy-pressure on the net-exporter currency, which would otherwise cause the exchange rate to move and would eventually end up evening out the imports & exports, dynamically.
So I believe the agency is pretty much all on the side of the trade surplus nation/currency, because anyone can issue their own currency and buy foreign reserves (which will be called 'establishing/maintaining an exchange rate peg' if formally acknowledged). No one can really force themselves into the trade deficit side.
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