‘The Economic Version of the Iraq War’
We are about to find out the degree to which trade wars are good and easy to win.
The Economist (“President Trump’s mindless tariffs will cause economic havoc“):
If you failed to spot America being “looted, pillaged, raped and plundered by nations near and far” or it being cruelly denied a “turn to prosper”, then congratulations: you have a firmer grip on reality than the president of the United States. It’s hard to know which is more unsettling: that the leader of the free world could spout complete drivel about its most successful and admired economy. Or the fact that on April 2nd, spurred on by his delusions, Donald Trump announced the biggest break in America’s trade policy in over a century—and committed the most profound, harmful and unnecessary economic error in the modern era.
Speaking in the Rose Garden of the White House, the president announced new “reciprocal” tariffs on almost all America’s trading partners. There will be levies of 34% on China, 27% on India, 24% on Japan and 20% on the European Union. Many small economies face swingeing rates; all targets face a tariff of at least 10%. Including existing duties, the total levy on China will now be 65%. Canada and Mexico were spared additional tariffs, and the new levies will not be added to industry-specific measures, such as a 25% tariff on cars, or a promised tariff on semiconductors. But America’s overall tariff rate will soar above its Depression-era level back to the 19th century.
Mr Trump called it one of the most important days in American history. He is almost right. His “Liberation Day” heralds America’s total abandonment of the world trading order and embrace of protectionism. The question for countries reeling from the president’s mindless vandalism is how to limit the damage.
Almost everything Mr Trump said this week—on history, economics and the technicalities of trade—was utterly deluded. His reading of history is upside down. He has long glorified the high-tariff, low-income-tax era of the late-19th century. In fact, the best scholarship shows that tariffs impeded the economy back then. He has now added the bizarre claim that lifting tariffs caused the Depression of the 1930s and that the Smoot-Hawley tariffs were too late to rescue the situation. The reality is that tariffs made the Depression much worse, just as they will harm all economies today. It was the painstaking rounds of trade talks in the subsequent 80 years that lowered tariffs and helped increase prosperity.
On economics Mr Trump’s assertions are flat-out nonsense. The president says tariffs are needed to close America’s trade deficit, which he sees as a transfer of wealth to foreigners. Yet as any of the president’s economists could have told him, this overall deficit arises because Americans choose to save less than their country invests—and, crucially, this long-running reality has not stopped its economy from outpacing the rest of the G7 for over three decades. There is no reason why his extra tariffs should eliminate the deficit. Insisting on balanced trade with every trading partner individually is bonkers—like suggesting that Texas would be richer if it insisted on balanced trade with each of the other 49 states, or asking a company to ensure that each of its suppliers is also a customer.
And Mr Trump’s grasp of the technicalities was pathetic. He suggested that the new tariffs were based on an assessment of a country’s tariffs against America, plus currency manipulation and other supposed distortions, such as value-added tax. But it looks as if officials set the tariffs using a formula that takes America’s bilateral trade deficit as a share of goods imported from each country and halves it—which is almost as random as taxing you on the number of vowels in your name.
This catalogue of foolishness will bring needless harm to America. Consumers will pay more and have less choice. Raising the price of parts for America’s manufacturers while relieving them of the discipline of foreign competition will make them flabby. As stockmarket futures tumbled, shares in Nike, which has factories in Vietnam (tariff: 46%) fell by 7%. Does Mr Trump really think Americans would be better off if only they sewed their own running shoes?
NYT (“‘It’s a Disaster’: Global Markets Slide After Trump Unveils Tariffs“):
Markets around the world tumbled on Thursday after President Trump announced across-the-board tariffs on America’s main trading partners, including the European Union and Japan.
Futures on the S&P 500, which allow investors to trade the index outside normal trading hours, slumped more than 3 percent. Asian and European stock markets fell sharply, with benchmark indexes dropping more than 3 percent in Japan, and nearly 2 percent in Hong Kong, South Korea, Germany and France.
The value of the U.S. dollar against a basket of other major currencies dropped more than 1 percent.
The slide came after Mr. Trump, speaking at a ceremony at the White House on Wednesday, announced a new 10 percent base line tariff on all imports as well as country-specific taxes on goods from a host of other countries. Those included an additional 34 percent tax on Chinese imports, on top of 20 percent in tariffs he recently put on China, and 20 percent on goods coming from the European Union and 24 percent on Japanese imports.
The market reaction suggested that the scale of the tariffs on Wednesday had come as a surprise, and there was confusion about how the figures had been derived.
“The numbers are shockingly high compared to what people were expecting and it is inexplicable in many ways,” said Peter Tchir, head of macro strategy at Academy Securities. “I think it’s a disaster.”
The Trump administration had modified its estimates of the tariffs imposed on the United States to include adjustments for what it deemed currency manipulation or even other taxes, with analysts questioning the analytical basis for doing so.
“Trump is going to war with countries on this,” said Andrew Brenner, head of international fixed income at National Alliance Securities. “It’s ridiculous. It shows no comprehension as to what he is doing to other countries. And it is going to hurt the U.S.”
Investors flocked to government debt as a haven. The yield on the 10-year U.S. Treasury bond, which moves inversely to prices, fell to 4.08 percent, the lowest since October.
POLITICO (“EU ‘prepared’ to retaliate against Trump’s 20 percent tariffs“):
European Commission President Ursula von der Leyen on Thursday slammed U.S. President Donald Trump’s imposition of a 20 percent tariff on EU goods and vowed to retaliate, saying the bloc was “prepared to respond.”
Trump dumped the European Union on Wednesday into a group of 60 countries subject to higher “reciprocal” tariffs, along with China, India, Japan and Korea, while subjecting the rest of the world to 10 percent tariffs. It’s the biggest lurch into protectionism by America since the Great Depression of the 1930s.
Von der Leyen said Trump’s tariffs would have dire consequences for consumers and businesses that have prospered through trade with the United States since World War Two. The European Union, the world’s largest single market, must also defend itself against profound disruptions to global commerce that would result from Trump’s isolation of the United States.
“There seems to be no order in the disorder. No clear path through the complexity and chaos that is being created, as all U.S. trading partners will be hit,” she said in a televised statement.
[…]
She warned of the impact Trump’s dismantling of the global trade order will have on consumers and on businesses. “Millions of citizens will face higher grocery bills. Medication will cost more, as well as transportation. Inflation will go up,” she said.
“The costs of doing business with the United States will drastically increase,” she stressed.
James Fallows believes we’re “Launching the Economic Version of the Iraq War.” His post is long and only partly available without a subscription. But the takeaway is succinct:
I think this is a historically reckless moment in US economic policy. And even by Trump-era standards it’s a historically shameful moment for the Republican Party. Its leaders know that their alpha-figure is launching a dollars-and-Euros version of the Iraq war. And they stand by, grinning and clapping.
It’s possible that all of the experts are wrong. They may not be aware that trade wars are good, and easy to win.
A handful of Congressional Republicans seem to be hedging their bets on that score.
NYT (“Senate Votes to Rescind Some Trump Tariffs, With G.O.P. Support“):
The Senate on Wednesday approved a measure that would block some of the tariffs President Trump has imposed on Canada, with a handful of Republicans joining Democrats to pass a resolution that would halt levies set to take effect this week.
The measure is all but certain to stall in the House, where G.O.P. leaders have moved preemptively to shut down any move to end Mr. Trump’s tariffs. But Senate passage of the measure on a vote of 51 to 48 — just hours after Mr. Trump unveiled sweeping tariffs on more than 100 trading partners, including the European Union, China, Britain and India — sent a signal of bipartisan congressional opposition to the president’s trade war.
The resolution targets the emergency powers Mr. Trump invoked in February to impose sweeping tariffs on Canada, a move that has rattled markets and drawn bipartisan criticism from lawmakers concerned about the economic impact on their states and districts.
Mr. Trump imposed the tariffs in an executive order that cited the International Economic Emergency Powers Act, a Cold War-era law that has most often been used to impose sanctions on rogue states and human rights violators. His administration argued that unchecked drug trafficking from Canada constituted a dire threat to American national security and used it as justification to unilaterally impose 25 percent tariffs on America’s closest trading partner.
“The president has justified the imposition of these tariffs on, in my view, a made-up emergency,” said Senator Tim Kaine, Democrat of Virginia and the lead sponsor of the resolution. “The fentanyl emergency is from Mexico and China. It’s not from Canada.”
The resolution, cosponsored by two fellow Democrats, Senators Mark Warner of Virginia and Amy Klobuchar of Minnesota, seeks to revoke the emergency declaration and, with it, Mr. Trump’s ability to enforce the tariffs set to go into effect on Wednesday.
Senator Rand Paul of Kentucky was the lone Republican sponsor of the resolution. But three other G.O.P. senators who have expressed unease about the potential economic consequences of Mr. Trump’s trade measures joined him in support: Susan Collins of Maine, Lisa Murkowski of Alaska and Mitch McConnell of Kentucky.
We shall see if economic calamity is enough to cause a handful of House Republicans to break ranks. I am not confident.
The market fell and will looks like it will go down another ~3%. Lord knows what the bottom will be. The layoff announcements will come soon, likely after our
erstwhileformer trading partners announce their retaliation.https://x.com/isaacstonefish/status/1907596911802200477
“Drezner”
“Krugman”
No, it’s worse than the Iraq War, at least in scope. This will hurt everyone in the US, and the world to varying degrees, except of course most of the rich and powerful.
And we’re on a fast track to exceeding the damage of the Iraq War in body counts, just 2 1/2months in. The destruction of USAID, along with other stupid and inhuman policies, will cause death in places invisible to Americans.
The carnage at HHS, the elevation of crackpot treatments over science, the hampering of disaster relief, and other insane development will kill Americans, too. Some will die more slowly, such as the needless victims of our current measles outbreak. Some will die faster, because of the next hurricane, fire, or earthquake. We’re one mutation away from bird flu becoming a pandemic. And the current regime is doing all it can to accelerate climate change.
The Iraq War is a very apt analogy, a self-own committed by ignorant, short-sighted, arrogant people, insulated from the consequences of their actions. But Trump and company are orders of magnitude worse.
James Fallows’ takeaway needs to be repeated for emphasis:
The story here is about the Republican Party allowing this – not Trump doing this.
Here may be the supreme example from yesterday of how stupid this cabal of cretinism is, Commerce Secretary Lutnick burbling about our beautiful beef:
https://www.mediaite.com/tv/howard-lutnick-insults-european-meat-in-bizarre-fox-news-rant-our-beef-is-beautiful-and-theirs-is-weak/#
Few people are willing or able to recognize how nuts Trump is, exacerbated by being farther along in his senile dementia progression than most people see.
From Noahpinion:
What’s the over under/on a tired “Cmon James, what about China and debt?! You’re not being evenhanded or intellectually honest? You have TDS!” reply to this post?
Or should we just take bets on how long it will take for that weak tea to be poured?
@charontwo: Drezner’s post caused coffee to come out of my nose this morning. So, at least there was something to chuckle about while the world economic system gets destroyed…………
@Kingdaddy: Cabal of cretinism….I like the sound of that
@mattbernius: The other refrains will be, “Let’s give it time!” and, “There’s going to have to be short-term pain to get long-term gain!” Much like saying, “Let’s give drinking bleach to stop COVID time to prove itself as an alternative remedy!” Or, “Let’s drink bleach because, I dunno, some unspecified good might happen! And as a bleach manufacturer, I should know!”
We are seeing is the equivalent of an 8 year old visiting the cockpit of a 747 being allowed to fly the plane. The Senate resolution offers some hope in that FINALLY some pols are pointing out that Trump’s invocation of the emergency power to levy tariffs (against Canada in specific) is based on a fantasy (vast amounts of fentanyl going through the border). His invocation of the Alien Enemies Act is also a hoax- we’re not at war with Venezuela, and another example of the Trump administration’s love of semantics (war plans v. attack plans; Elon isn’t the head of DOGE, etc.). It’s more than past the time for the Congress to point out that Trump’s justifications for his most destructive actions are based on false premises.
@Kingdaddy:
Judges would also accept:
“Can’t make an omelet without breaking some eggs.”
“I’m not saying we won’t get our hair mussed…”
JFC, these tariffs are the result of stupidity and AI.
https://bsky.app/profile/dansinker.com/post/3llunnyfeoj2v
I can’t recall where, but I saw one commentator say tariffs like these are basically a country imposing economic sanctions on itself.
The stock markets open in five minutes. There will be blood.
@Kingdaddy: In fairness, Fallows was limiting his evaluation to the tariffs, not the larger wrecking ball to our government. But, yes.
@charontwo: I’m under the weather today, or else I’d have definitely checked in on what Drezner had to say.
@charontwo:
I’m starting to have doubt about our whole ruling class. All those with too much money acting like delusional psychopaths. Have the last few decades of political activity just evolved into electing sociopaths? Are they the only ones who run now?
It seems our country is now engaged in forming a suicide pact. Countries that should be properous have done that in the past. Germany, Venezuela come immediately to mind.
@charontwo:
I’m starting to have doubts about our whole ruling class. All those with too much money acting like delusional psychopaths. Have the last few decades of political activity just evolved into electing sociopaths? Are they the only ones who run now?
It seems our country is now engaged in forming a suicide pact. Countries that should be prosperous have done that in the past. Germany, Venezuela come immediately to mind.
@Scott:
Me too.
You know what JD Vance is doing today? Studying up on the 25th Amendment.
We have a mad king. A mad king with almost four years left to extend his madness.
@Michael Reynolds:
That would be nice.
But my counter-assumption is that JD is firmly planting his lips on Trump’s posterior and looking forward to the day he can be the Mad King.
@Charley in Cleveland:
Something like this actually happened on an Aeroflot A-310 in the 90s. Though the child was 15, not 8. All 75 passengers and crew lost their lives.
Long long ago, Morton Kondracke suggested that the secret to American greatness was held because 2 contradictory conditions are simultaneously true:
1) Even Lyndon Laroushe can run for president
and
2) Americans will not elect Lyndon Laroushe.
Hell of a job, Murkie! You’ve elected someone even worse. Laissez les bons tariffes roullez!
@Michael Reynolds:
Dream on. He’s too witless to think of that and too buzzed on the koolaid.
@Steven L. Taylor:
Vance will throw Trump under the bus the instant he sees an opportunity, and if things go the way they seem to be going, the GOP will be in the toilet by 2028. On the infamous Signal call he was already signaling (heh?) that Trump is a bit clueless. Watch for small distancing moves. Watch for same from some bold (hah!) GOP Senator. When Il Duce stumbles, the knives come out.
@Scott:
I came across the idea that maybe the rich and/or powerful plain don’t need the government. Except, perhaps, to keep the rabble in line. If so, an authoritarian despot would suit them just fine.
I can’t believe they used top-level internet domains to assess these tariffs.
These are the dumbest. fecking. people. The very dumbest.
There seems to be a hope that JD Vance would be an improvement. The only thing that saved us last time is Trump’s incompetence. And it’s showing promise of saving us this time. Vance is as big a lying POS a-hole as Trump, but I don’t think he’s incompetent.
@Michael Reynolds:
Will not happen, luckily, would not be an improvement.
Here is more from the really long Noahpinion piece I quoted above:
“Noahpinion”
snip
snip
Lots more in the piece, charts and tables and words and stuff.
@charontwo:
We’re debating pure speculation, but actually I think it would be an improvement. Vance has no core, he’ll do whatever works for him. And if Trump is removed, by whatever means, he’ll roll back the tariffs because it would be his best move.
@Jen:
It’s the age we live in. You can’t have artificial intelligence without genuine stupidity to serve as a contrast.
@charontwo:
Trump doesn’t exhibit the breadth of knowledge or the attention span to “formulate” policy about anything, let alone unpack historical significances. Rather, his unfolding actions to piss-off-the-world while simultaneously taking a wrecking ball to our democracy, seems to be under the influence of Trump whisperers with treason and autocracy in mind.
We need to wake up and smell the coffee, that just went up 30% in price.
@Kingdaddy:
Oh, it gets worse.
It seems they not only took some dimwit staffer and/or AI working out a direct ratio of US goods trade deficit with a country or (group re EU) and divided it by the country’s goods exports to the US.
( exports – imports ) / imports
And then put a base rate of 10% on all countries even where the US has a goods trade surplus.
When asked for the basis of calculation, the White House puts up a fancy looking formula, with lots of cool Greek letters, which just happens to be what most AI’s spit out if asked to covert the thing into algebra!
Perhaps the worst thing of all: IT TOTALLY IGNORES SERVICES TRADE!
See EU where the goods deficit for the US is roughly €150 billion, while the US services surplus is about €105 billion.
So a net deficit of just €45 billion.
Which in the context of GDP’s of tens of trillions is utterly trivial.
It’s stupidity on an epic scale.
We’re all going to be impoverished by a bunch of f’in’ morons.
AAARRGH!
@Michael Reynolds:
In the abstract, Vance wouldn’t be an improvement, but in a practical sense would. Vance would want to be re-elected, that would cause him to moderate his positions to be closer to the consensus. For Vance that would be particularly true, as we will still be dealing with the fall out of the last (only!) 2 months. He’ll need the acknowledgement that his policies are at least within the range of logical policy choices. The crazy shit will need to be stifled.
In an interview this morning Lutnick said that Trump is running the economy and we should just trust Trump. Even the communists had committees to run their economies. Also, totally agree with the stupidity of their calculations.
Steve
@Sleeping Dog:
Yep, that’s my guess. All speculative, obviously, but Vance is a slimeball who’ll spout whatever lies serve him. He has no problem contradicting himself.
Trump’s global tariff war and GW Bush’s Iraq war — two Republican self-owns.
GW was looking (ostensibly) for Weapons of Mass Destruction.
Trump is deploying Weapons of Mass Consumption Destruction.
I would say that the Iraq War was an effort by the Bush Administration to not get booted out of office for allowing 9/11 to happen. On that basis, it succeeded.
The “WMD” rhetoric was designed to confuse the public and to conflate nuclear weapons with chemical/biological weapons. Lots of people, though, believed that Saddam had the latter, regardless of what some UN inspector saw and thought. Because what does he know?
So I’m not sure it counts as a “self-own”. For W anyway. He got reelected.
@Kingdaddy:
What he was tring to say was, ‘Our beef is with the entire world, except Russia.’
At the core of all this chaos, these multi-billionaire Beavis-and-Butthead-wannabe overlords care only about renewal of the 2017 Trump tax cuts. That’s it.
….. Disintegration of NATO and important strategic alliances, nope.
….. Financial integrity of Social Security, Medicare, and Medicaid, nope.
I know where the blame resides: with the 77 million Americans who showed up at the polls in orderv to vote for the Trump Idiocracy.
@Jay L Gischer: “I would say that the Iraq War was an effort by the Bush Administration to not get booted out of office for allowing 9/11 to happen”
I don’t see that. The entire country rallied around Bush after he let that disaster happen under his watch — sounds like a fairy tale now, doesn’t it? And he and Cheney used that population to drive us into the Iraq war.
I think that this war was a deliberate attempt to completely re-order the world. And it sure sounds like that’s what Trump’s tariffs are. Sheer megalomania on both counts.
@Jay L Gischer:
@wr:
I thought it was mostly remnants of Bush the elder’s cabinet who wanted to complete the job they started in 1991.
At the time, taking down Gaddafi would have made more sense in the matter of WMDs. He did have such programs. But no one was even looking at Libya at the time, and there was no unfinished business there.
BTW, long time US doctrine is to regard chemical and biological weapons as equivalent to nukes. that’s because US armed forces have nukes, but not chemical and biological weapons.
@Jay L Gischer:
IMO the way James framed it is correct. We did Iraq II because Cheney thought it would be “good and easy to win”.
@Kathy:
Have to bear in mind that at that time Iraq was the big boogieman for the neo-con/Israeli lobby crowd, not Iran. One can find Bibi’s testimony at a committee claiming that invading countries is easy, and gets easier with each one invaded.
https://www.c-span.org/clip/house-committee/user-clip-netanyahus-expert-testimony-on-iraq-in-2002/4529120
@dazedandconfused:
I should hunt down for a history of Iraq in the Saddam era (though it must make for depressing reading). As I figure from what I know, the butcher of Baghdad tried to get nukes, then Israel bombed his reactor at Osirak, and the nuclear program never recovered. Ergo chemical weapons, which are cheaper to make, easier to handle (though more dangerous), and far more readily used. They’re also good battlefield weapons, assuming an ill-prepared opponent, and utterly devastating against civilian targets (which the butcher demonstrated amply).
I can understand why he didn’t use chemical weapons against coalition troops in 1991. the two main reasons is the troops were prepared, and US doctrine allowed for retaliation with nukes if such things were used.
That the butcher didn’t use them in 2003, when it was clear his neck was on the line, suggests to me he didn’t have any left, or not in any usable form. For some reason, this wasn’t clear to em at the time…
@Kathy: IIRC, Saddam gave some “exit interviews” while waiting to be hung. Seems he put his chips on the notion that he would survive the war, just like he did in Gulf War 1, because the reasons he had been left in charge then were still valid…and it would be discovered in the course of the war that he had practically no current WMD programs.
@dazedandconfused:
It’s not unusual for absolutist dictators to become delusional after a long time in power.
IMO, the only way he could have kept on getting older, was to surrender in front of TV cameras during a live broadcast, and negotiate terms with America. Even then he might have wound up executed.
@Jay L Gischer:
I would say that is incorrect – the Neocon influenced GW Bush administration was seeking to implement their ill-advised imperialism project to remake the Middle East for the full benefit of the United States. This has been long commented on.
In an act of “self-own” déjà vu , Trump’s DOGE enhanced, anti-globalist mob is seeking to remake the world economic order even as the United States is the dominant player. How utterly stupid is that?
Also incorrect — Bush was reelected in 2004. Fallujah hadn’t happened yet. The full impact of the awfulness of Bush’s very bad decision was yet to be felt (we still suffer consequences today). The result was Obama wiping the floor with McCain and then getting a second term.
Then America returned to “stupid, insular, naive mode” and elected Trump in 2016 with a little help from his Russian friends.
So yes, Republican self-owns in 2000, 2004, 2016, 2024. And the world, including the United States us worse for it all.