Trump’s Tariff Strategy Seeking a Safe Harbor

Long a proponent of the benefits of tariffs, Donald Trump claims they will fund his proposed tax cuts and revive American manufacturing.

There is near-unanimous consensus among economists that tariffs are self-defeating and have a negative effect on economic growth and economic welfare, while free trade and the reduction of trade barriers has a positive effect on economic growth. Source: Wikipedia.

Despite the consensus among economists that tariffs are a hidden tax on American consumers, if Donald Trump believes something, it must be so. Well, it can be deemed so if you’re the most powerful person on the globe.

Yet the implementation of his tariff strategy has been highly erratic — on and off, stair-stepping up and down, country to country, product to product. Heather Cox Richardson, in her Letters from an American, reports, “Trump has changed tariff policies at least 50 times” through May 30.

The voyage of the HMS Trump Tariffs, created by ChatGPT.

Trump’s consistently inconsistent behavior has birthed an investment strategy based on TACO, for “Trump always chickens out.” Buy an investment when the price falls after a tariff announcement, then sell at a profit when Trump backs down and the price recovers.

I’m hoping this arm of Trump’s octopus will be cut off after a ruling from the U.S. Court of International Trade earlier this week said a president does not have “unbounded authority” to impose such global tariffs. The U.S. Court of Appeals has granted a temporary stay to allow the judges time to review the ruling and the administration’s arguments in favor of broad, unilateral tariff policiies. May it only be temporary.

Meanwhile, the trade winds keep blowing.

Trump's Vulnerability Flows Downhill

In a recent Substack post, Timothy Snyder identifies a core weakness of President Trump that weakens America: his belief that everyone is ripping him off, or trying to unless he gets them first. It’s a zero-sum game.

This fueled his apparently long-held belief that a trade deficit is bad and tariffs are the solution, which led him to launch a trade war with virtually every country on the globe. Only the rising interest rate on 10-year Treasury notes prompted him to pause before we saw economic Armegadden.

Snyder’s article inspired me to write my Congressional representatives in Washington. I don’t expect to change their opinions, but I felt better hitting “send.”

Historian Timothy Snyder points to President Trump’s core vulnerability: He always thinks everyone is trying to rip him off. This deep-seated irrationality focused on the balance of trade caused the maelstrom around tariffs. Only the rising rates on 10-year Treasury notes prompted the president to largely retreat — except for tariffs on China, which won’t kiss the president’s ring.

Other than keeping reporters and cable and podcast pundits busy, the outcome of this insanity will be higher prices for consumers.

In a recent Substack article, Snyder writes, “We have thousands of years of political theory and indeed great literature to instruct us on this point: too much power brings out the worst in people — especially among the worst of people. As the founders understood, the purpose of the rule of law, of checks and balances, of regular elections, is to prevent precisely such a situation. Allowing our republic to be compromised has many costs, for example to our rights, and to our dignity. But it also has costs in a very basic economic sense. When you elevate the mad king, you elevate the madness.”

Are you willing to enable four years of madness?