Economy by Whim
Relief was followed by reality.
**
In a rational world with a functioning polity, this would be a good moment for Congress to claw back its power over tariffs. Because, as David French noted, “that which Trump arbitrarily revokes, he can arbitrarily invoke tomorrow.”
So, yes, the market meltdown was scary, but what we are left with is even scarier: A world dangling at the whim of a capricious, economically illiterate, megalomaniac.
Happy Thursday. Again.
Trump blinks
On Wednesday, Trump came down with a bad case of the yips and blinked. Markets momentarily surged. But then the stark reality of the moment settled in. {BTW: Lots of footnotes today — all of which are worth your time.)
The Trade War is still on as Trump plays an escalating game of global chicken with China. (As of this afternoon, he’s imposed a minimum 145% tax on goods coming from China; they have retaliated with an 84% tariff on US goods.)
The rest of the tariffs are “on pause” for 90 days. So all the fuckery can start all over again.
That means that the world economy is hanging on Trump’s latest arbitrary whim, which can move trillions of dollars with a social media post
What can go wrong? In just a few weeks Trump has threatened, insulted, and alienated our allies, whose help he now desperately needs to counter China.
The night before he announced the “pause,” Trump bragged that other countries were calling and "kissing my ass" — which aptly sums up the way he sees the “negotiations”.
Businesses now face months — if not years — of chronic uncertainty. How can any of them make decisions on investments when there is no way of knowing what Trump’s mood or policy will be a month from now — or even tomorrow?1
After a manic few days, markets remain in deep hole as they wrestle with the new reality.
Republicans in Congress won’t lift a finger to block him or protect their constituents from more tariffs by whim.
The potential for corruption has multiplied exponentially as we watched insider trading on a truly epic scale in broad daylight yesterday.
But that only scratched the surface. As Nick Cohen notes, “Trump has just created boundless opportunities for corruption.”2
We were reminded, once again that the author of the “Art of the Deal” is, in reality, a really terrible negotiator. In the last few days: (1) Trump imposed massive tariffs on the world, using a risibly stupid formula, (2) claimed that they are not negotiable; and (3) bragged they will bring in trillions of dollars in revenue and create millions of new American jobs. But when markets crashed, wiping out trillions of dollars of wealth, and Jamie Dimon warned of a recession, Trump caved. No deals were made with anyone.3
What happened? Daniel Drezner explains:
Three-dimensional chess it ain’t. Trump acknowledged that he was responding to market turmoil, saying, “I thought that people were jumping a little bit out of line. They were getting yippy. They were getting a little bit afraid.” The fact that credible stories were being written about whether the U.S. dollar was still a safe haven after the last week was probably the most obvious sign.
But, but , but…
No matter how humiliating the surrender, Trump will always declare victory; and the clapping seals of MAGA will vie with one another in going Full Pyongyang.4
The Trumpian cycle repeated itself. “Like clockwork,” quipped Kara Swisher. “He is a chaos feces throwing monkey.”
**
More Thursday dogs
From my wife’s splendid Substack: “Auggie’s spectacular jumps” - by J. F. Riordan
Visiting a friend one day, Auggie received a gift he really liked; unfortunately it only lasted a few minutes. And he didn’t even consider sharing it with his baby brother.
The uncertainty tax that Trump’s tariffpalooza has created is considerable and will not subside. Diane Swonk, the chief economist at KPMG, vented her frustration to the New York Times: “This is nuts. Damage done. Market relief is a headfake, unless the administration makes a major course correction. Uncertainty is its own tax on the economy.”
[Ever] since the enlightenment, liberals have been wary of tariffs on the grimly utilitarian grounds that they allow corrupt politicians and officials to feast on a banquet of bribes.
Think about how it might work today. Trump is inviting every country in the world to come to him and make the case that the US should not reimpose extraordinarily harsh tariffs in 90 days’ time. He is threatening to inflict terrible damage if they fail to please him.
What price might they pay to make him back off? I doubt very much even the citizens of Western countries would object too much if Keir Starmer, for instance, agreed to put a couple of billion into the Trump crypto business in return for lifting tariffs on the British car industry.
We already know that the Trump family is – and how to put this delicately? – open to all reasonable offers to wet its beak.
Perhaps the weirdest and most dangerous assumption about Donald Trump is that he is a master negotiator. There is no evidence for that. Indeed, there is a growing sense that he is, disastrously, quite the opposite. He has one tactic: he bullies. This may work with law firms and universities, but not with Putin or Xi…or Canada, for that matter. It is becoming obvious that bullying is not just the defining attribute of Trump II, it seems the only tool in his shed.
The flip side of bullyragging is the flaccid, puling fold. Trump does that, too. He did it Wednesday when it was clear that the world wasn’t buying his tariff regime.
“For many,” wrote Charlie Warzel in the Atlantic, “the second Trump administration has felt like a constant tearing of the fabric of our reality.”
Just as notable are the justifications from the far-right influencers who have served as a de facto propaganda arm for the White House. As markets tanked last week, they swiftly argued in favor of broad austerity measures as a necessary hardship, suggesting that Americans do “not need” consumer electronics such as cellphones and video-game consoles and that American lives have not been changed by the tariffs. Benny Johnson, a Trump loyalist, social-media personality, and podcast host, went further: “Losing money costs you nothing,” he said on his podcast. “In fact, you learn a lot of lessons actually by losing money. Losing your character costs you everything. Losing your country loses you everything.” Other MAGA devotees and some Fox News hosts have conscripted tariffs into the culture wars, justifying them as helping to fix the country’s “crisis in masculinity.”
It’s not just the shock jocks. On X, entrepreneurs, venture capitalists, and a faction best described as an anti-woke tech commentariat posted long threads, proclaiming the tariffs a Trumpian masterstroke. Chamath Palihapitiya, a venture capitalist and one of the hosts of the All-In podcast, recently hypothesized that Trump would bring world leaders to Mar-a-Lago to remake the world economy in what Palihapitiya referred to as “Bretton Woods 2.0.” Keith Rabois, a well-known tech investor, declared that “Trump Derangement Syndrome has morphed into Tariff Derangement Syndrome,” suggesting that the slew of economists and trade experts horrified by the administration’s proposal are all wrong. “I would believe in any macro trader w sustained returns for decades over any academic,” he wrote.
This combination of blind faith, reactionary ideology, and endless justification have less in common with any kind of politics and policy than they do with genuine conspiratorial thinking—a kind of QAnon 2.0 for finance.
We have met the enemy and he is a moron with nuclear weapons.
First, savage the SEC, killing market-trading investigations...next, set up the markets for yuuge swings, giving multiple downside-upside trade opportunities for selected insiders and his family...then, pull the trigger and watch all those short-term gains pile in...and finally, kneecap the IRS, so all those profits go unreported as fake transactions w/o fear of auditing.
A gangster regime in full flower.