Government by Pyromania
Trump will keep destroying things until we stop him. It's his nature.
You don’t need to know anything about economics to grasp how harmful all of this has been. No Keynes, no MMT, no nothing. Common sense will get you there.
Imagine you’re an American business owner. Big or small, it doesn’t matter. One day, you learn that a product you sell—or a product you need to make a product you sell—has just been tariffed—taxed, that is—up the wazoo. The tariff is so high that your business is no longer viable. The President of the United States is telling you, simultaneously, that the tariffs are forever and that they’re temporary.
That’s very bad. What will you do?
Some believe this is happening because Trump thinks people like you will now start selling goods made in the US. Let’s explore that theory. Let’s say you decide to start a new business, one that doesn’t rely on foreign suppliers. You liquidate your collection of Asian Art and you buy a collection of American art. You rename your Asian Art Emporium the American Art Emporium. You order new signs, new business cards, new catalogues. You sign up for a night class in American art, which you don’t know anything about (so much for all the years you spent studying Asian art). This wipes out your savings, but you want to make America great, so you do it out of patriotism. You put “Made in America 👊🇺🇸🔥” on your new business cards.
But just as the new art from Maine is being delivered, in comes the news: The tariffs have been lifted for 90 days!
What do you do?
I’ll bet very few of you truly think you’d react to this by starting a new business in the US, especially because you’d have just spent all your savings on the remodel and no one is buying American art right now. (They’re putting all their money in Asian art while they can, since the tariffs might go back into effect. Or, like you, they no longer have any money to buy art at all.)1
Conservatively, you’d probably just wait. But after being dicked around like this, you might well decide to retire. Or move to another country. Or both. And if you can’t, you’ll have to go on welfare. Or fentanyl.
Now imagine that everyone in the US is doing the same thing. Is this good for the economy or bad?
But what about the Forgotten Men and Women? The ones this policy is supposed to help? Will this be good for them?
You would think these points would be pretty obvious to a country that was founded in opposition to tariffs, wouldn’t you? “No taxation without representation,” the Boston Tea Party, and all of that? It wasn’t the income tax or the VAT they were so worked up about. It was the import duties—otherwise known as tariffs.
But memories are short, I suppose. And I suppose that’s not relevant, because we’re being taxed with representation, so we haven’t cause to complain. We did this entirely to ourselves. No one can even complain that this was some kind of bait-and-switch. Trump campaigned on the promise to tariff us up the wazoo, and he’s a man of his word (on prime-numbered days—the rest, not so much).
Now imagine you’re the leader of one of the countries that was just tariffed up the yin-yang then given a reprieve, sort of—your tariffs are now only as high as they were during the Great Depression. Apparently, you’ve tried calling the Department of Commerce, Treasury, and the USTR, which suggests no one has the first clue who’s in charge. All you know about our policy is this:
What are you planning to do? Maybe you’ll change your trade policy to make the Americans happy, using that Tweet as a guide to our desires?
To state the obvious, it’s highly unlikely that you will change your trade policy, given you have no idea what we want and you’re pretty sure we don’t, either. And if you come from a country that still has the rule of law (lucky you!), you can’t just change it. You’ll have to get permission from your parliament, or whatever dreary body you have that prevents you from waking up in the morning and saying, “I declare war on water pressure! We have always been at war with water pressure! Round up the usual suspects!”2 Or telling your interior ministry to investigate someone who wrote a mean book about you. Or snatching someone off the street and sending them—well, you get the idea. You can’t just do that, because you have rule of law and you’re not a lunatic.
Nor will you be urging your industrialists to build new factories in the US (especially since we won’t let your citizens move to the US, and even if we did, your citizens have heard the stories about the way visitors to our country get snatched off the streets and sent to the Gulag, so they probably don’t want to). In fact, if you make any changes at all, they probably involve diminishing your exposure to the US in every way you possibly can. Backing away slowly. Making no sudden noises. But getting away from us—and taking your money somewhere safer, like Azerbaijan, maybe. Or Peru. Maybe you’ll open a new factory, yes—in China, with your new Chinese partners.
Most likely, you’ll just do nothing. You’ll wait and see what’s going to happen.
“What feels like a haphazard decision-making in the United States.” Fussy! What’s so haphazard about asking advice from all of the major think tanks, trade experts, captains of industry, and your most trusted advisors, then ignoring everything they say and making your decisions by throwing darts at the wall? You want he should use Paul the Octopus?
So what do you think happens to the American economy when the whole world decides to “sit tight”?
In all the giddiness over Trump deciding to sanction the American economy into oblivion and then, just as quickly, deciding to put his controlled demolition of the United States on pause—sort of—many are overlooking that he didn’t relent on sanctioning China, or vice-versa; in fact he raised the tariffs on China. So the markets’ momentary giddiness may be chalked up entirely to its animal spirits, and we’re talking about a really dumb animal. Like a lizard or something.3
US-China trade is by far the most important part of this story, and we’re certainly no less screwed because Trump relented—temporarily, maybe—on trade with Laos and threw down a challenge to Xi’s manhood. We’ve suddenly put a screeching halt on the largest bilateral economic relationship in the history of mankind and issued a pointless provocation to our only peer competitor (who was, until we did this, so busy screwing up its own economy while we raced ahead that it wasn’t really our peer competitor, but so much for that).
Why? A bargaining ploy? A bid to re-shore our lost manufacturing? So say the various Trumpverstehers, but they’re just imposing order on chaos because that’s what the human mind does. The truth is that Trump is doing this because he’s insane. There is no logic to it at all. And no one is stopping him is because those in a position to do so are craven, cowardly, or too stupid to pick their own noses without a manual.4 All of this happening for no reason.
It can’t even be explained as the biggest insider-trading ploy in history or a bid to turn Americans into the tech bros’ serfs. Trump’s insanity, I’m noticing, is almost impossible for people to accept. It seems to be more palatable to believe that Trump is infinitely evil than to grasp that he’s cuckoo-crazy—rats in the attic, un petit vélo dans la cafetière—and there is no plan at all. He’s doing this because he likes the chaos and the attention. It makes him feel alive. Also, he likes the word “tariff,” though he doesn’t understand what it means. Maybe it was something he heard from his father when he was a kid. (Count our blessings. At least he didn’t hear “collective farms.”)
Again, you don’t need to be an economist to understand why this means, among other things, that inflation in the US is about to skyrocket. China is the world’s factory. It can’t be replaced overnight: There aren’t enough factories in the world to do that. This means there will be too few goods. When there’s a shortage of good x, the price of good x goes up. That’s inflation: Too much money chasing too few goods.
But won’t people start building new factories in America to replace China’s? Well, maybe. But with whose raw materials? China’s the world’s biggest supplier of steel, aluminum, iron, cement, rare earth metals, and all the other stuff you need to make the goods we now have to replace. If you think it’s bad to be so dependent on China, you’re right. It’s bad—in theory, anyway—because China has the power to cut these materials off and destroy our economy. That’s the doomsday scenario. Except we’ve chosen to do this to ourselves. Usually, you’d want to de-risk your economy first before pulling a stunt like this.
China’s goods only cost twice as much for Americans, mind you, so if you want to build a new factory in Vietnam, that’s not so expensive—you’d import your Chinese raw materials to Vietnam, build your manufactured goods, then ship them to America, and if you believe that our policy as of today will be our policy next year and the years thereafter, that’s what you’ll do. It would mean the finished goods would be a bit more expensive, but not that much. How exactly that helps us is unclear, but at least we’d still have manufactured goods.
But in reality, no one has the first clue what our policy will be in ten minutes’ time, so no one is going to invest in anything. So we’ll have massive inflation, shortages of critical goods, and no economic growth. Even hyperinflation is on the menu, now. We’re so far in debt that it will be very, very hard to protect people from the worst of this. And we’ll be even more in debt once this passes:
What’s more, the interest on that debt is going to go up and up and up. The crazier we get, the more people will demand a high return for investing in us.
All of this will last until we do whatever it takes to persuade the world that we’ve regained our sanity. That could be a very long time—not least because countries experiencing the kind of economic hardship we’re about to experience do not tend to become sane. To the contrary, they tend to go nuts.
We’re seeing a fire sale on US treasuries—which you usually don’t see when markets are spooked; usually, you see the opposite—and the dollar is weakening against other major currencies (likewise). This will have serious consequences for the price of mortgages and business lending. (I don’t know who’s doing the selling: China?) Trade wars aren’t limited to trade. They quickly spread to credit markets and currency, too. And sometimes, to real war.
Fortunately, the President is hard at work thinking about ways to mitigate these risks:
How do you think all of this will affect the forgotten men and women? Will it be good for them, like the advanced medicine we’ll no longer be known for?
Now, this isn’t good for China, either. They’ve just lost their biggest customers—and their economy wasn’t in great shape to begin with.
So how are they handling this? As this video suggests, while we end the war on water pressure, they’re dulling the pain with hyper-nationalism:
That’s for domestic consumption. (Their foreign propaganda, on the other hand, sounds like the sweetest of sweet reason. It’s weird when the Global Times sounds about a thousand times more sane than our state media.)
Xi cannot relent, by the way. It’s completely incompatible with his cult of personality to do so. So unless Trump backs down—or Congress remembers that it is their job and their moral obligation to prevent this lunatic from burning the whole world down—we’re going to end up destroying our economy and handing the world to China for no reason whatsoever.
We could even wind up in a shooting war with China. That’s often the case, with trade wars. If we do, who do you think will be sent to fight and die first?
How do you imagine Apple is feeling after racing to charter flights to bring 600 tons of iPhones to the United States from India, bribing Indian airport authorities to cut down the time to get them through customs, and triumphantly getting them to US soil before the tariffs on goods from India went into effect, only to learn they weren’t going into effect and no one has any idea why or whether they’re going to go into effect tomorrow, three months from now, or never? Think they’re saying, “Today’s the day to open a new factory in the good old US of A?”
(Heck, how do you imagine writers of newsletters about global affairs feel? Yesterday, I scrambled to write a newsletter about the effect of the tariffs Trump put on the whole world—and just before I hit “send,” the news came that he’d changed his mind and I had to throw it out and spend another day trying to figure out what the hell this means. Now I’m writing this as fast as my little fingers can type, hoping he doesn’t change his mind before I hit “send.”)
It seems he’s declared war on trees, too. Just like Erdoğan. Let me tell you, you will miss them.
I just looked at the headlines—maybe the animal is a little smarter than that. A chimp, maybe:
I’ll get around to finishing what I planned to say about Marc Bloch very soon. I keep getting distracted by the latest news—precisely as Trump intends. Whenever I try even for a second to remove my attention from him, he sets something else on fire. Oh, God, I am so tired of thinking and writing about Trump. Please, God, please—Make the Asshole Go Away.