Donald Trump is the only person in the whole world who really thinks that his tariffs are a good idea. His Cabinet of loyal yes-men and yes-women just cheer on the boss as he careens the global economy over the edge of the waterfall. The longer that he holds firm to his autarky fantasy the more damage that he will cause.
The tariffs will range from a base rate of some 10% for goods imported from all countries and rise to staggering levels for others, including 54% on China, 46% on Vietnam, 24% for Japan and 20% for the European Union, representing in sum the highest tariff rate by far ever seen in the United States.
It didn’t take long for people to realize that this calculation of global significance was done using high-school math: each country’s trade deficit divided by imports. That’s it. That, along with the fact that the administration levied tariffs against uninhabited islands led some people to speculate that the White House had arrived at its methodology by asking ChatGPT.
The president, tasked with stewarding the country’s future, is driving blind and saying he’s doing great. He doesn’t understand that it is impossible for the United States, a country of more than 340 million and the world’s highest GDP, to have trade balances of zero with every other country in the world.
At a more basic level, under what reasoning has he decided that trade deficits are inherently bad across the board and must be stamped out? Is the conceit that the United States can or should make everything domestically? In what century are these people living? Nothing gets made in any one place anymore; components travel back and forth, things are designed in one country and built in one or two others, things are built here and finished there.
Even from the standpoint of protecting local industry, which is at its base level a worthwhile objective, the way to move towards that is not to hold a gun to the head of domestic agriculture and manufacturing and give it weeks to infill the capabilities of the entire rest of the world as all the raw materials surge in cost and in a completely uncertain economic environment?
The fact that this is happening at all was farcical, and there’s a lot of blame to go around, not least for the many commentators, investors, CEOs and others who spent months hand-waving away the possibility that Trump would actually follow through on his one most persistent and explicit campaign planks.
But it’s real and Dow dropped almost 1,700 points at the moment of the most extreme public economic fear since the start of the COVID pandemic, and everyone’s going to suffer. Our allies are disgusted with us, prices are jumping even before the tariffs are in effect, the dollar is bracing to weaken and think tanks are estimating that this will represent a tax worth thousands of additional dollars on the average U.S. household. All for what?
The tariffs are set to go into effect on Saturday for the base rate and next Wednesday for the heavier rates. The economic shock cannot be undone but we can avert the worst of the damage. If Trump won’t then Congress must.
