The Art of the Deal, Trump vs the World = Terminal Uncertainty

 Economist in 2024: US Economy is  the “Envy of the World”

After Trump Tariffs Announced

US already is a manufacturing giant

The Art of the Deal, Trump vs the World = Terminal Uncertainty

PETER ON THE WRITERS’ HANGOUT PODCAST!

“I think it's going very well…The markets are going to boom, the stock market is going to boom, the country is going to boom.” 

Donald Trump, as global stock markets were crashing, April 3rd

"We're going to have a booming stock market for a long time because we're reinvesting in the United States." 

VP JD Vance mirroring his boss, as stocks fell further.

Aside from my education, experience and logic, I often like to see what the rest of the world thinks of the goings-on in America, especially since the United States seems to have gravitated to a government based on conspiracy theories, a war on “woke” and witch hunts… where empirical facts generated by the best minds in the nation are relegated to the garbage dump of “fake news.” One of my favorite go-to periodicals is UK-based The Economist. As post-COVID Europe stagnated, as even China and the tigers in Asia sputtered, The Economist used the first image above, a dollar-powered rocket, as the metaphor for America. The next two recent covers tell a very different story: Trump’s “Liberation Day” became a more universally described “Ruination Day,” and with only one other economic powerhouse alternative left, The Economist was predicting a new rise for China… reversing a sputtering economy in the post-COVID recovery.

The basis for the determination of US tariffs was an inscrutable formula (where the variables were not identified) based on actual tariffs embellished by any trade imbalance, with a floor of 10%. Sigh! We’ve already seen the boom that flowed from the infrastructure investment legislation enacted during the Biden era, which Trump wants to shut down… even though it was working well. Instead, Trump wants manufacturers to build and retrofit factories all over the United States, which as the final chart above illustrates, is already the second largest manufacturing nation on earth.

So, put yourself in the shoes of a would-be manufacturer building or rebuilding in the United States. First, if you depend on raw materials that necessarily come from overseas, you’re already screwed once. Second, even though US manufacturing wages are not particularly high, their level above less affluent manufacturing nations is high enough to force as much automation as can be built. Fewer jobs than we might want. Third, with share prices down, and there will be some up and down movement, access to the private construction capital needed carries with it the risk of “terminal uncertainty,” which increases that cost of that capital. “Terminal uncertainty” is a whimsical Trump trait, and his rubber-stamp congress is no help in creating consistency. Fourth, it takes years to build or rebuild these manufacturing centers and recruit and train the workforce… so this construction only works in a time of clarity and stability. If you build those plants, and the tariffs come down, all the business models you used to make that build decision crash and burn. So, why take the risk in the first place? All this even without looking at the failed history of tariffs in the modern world.

No, Donald, good employment numbers for March are only a backward statistic. If you want to see what the companies (read: employers) expect, look at the forward-looking stock market. Do we want to place our economic future in the hands of a mercurial bully? So, I am going to push the “easy button” and rely on that quintessential Republican President, Ronald Reagan, who unlike the Trump/Musk cabal, actually understood the impact of tariffs and their treacherous history here in the United States. Excerpt from his April 25, 1987, radio address:

Now, that message of free trade is one I conveyed to Canada's leaders a few weeks ago, and it was warmly received there. Indeed, throughout the world there's a growing realization that the way to prosperity for all nations is rejecting protectionist legislation and promoting fair and free competition. Now, there are sound historical reasons for this. For those of us who lived through the Great Depression, the memory of the suffering it caused is deep and searing. And today many economic analysts and historians argue that high tariff legislation passed back in that period called the Smoot-Hawley tariff greatly deepened the depression and prevented economic recovery.

You see, at first, when someone says, "Let's impose tariffs on foreign imports," it looks like they're doing the patriotic thing by protecting American products and jobs. And sometimes for a short while it works-but only for a short time. What eventually occurs is: First, homegrown industries start relying on government protection in the form of high tariffs. They stop competing and stop making the innovative management and technological changes they need to succeed in world markets. And then, while all this is going on, something even worse occurs. High tariffs inevitably lead to retaliation by foreign countries and the triggering of fierce trade wars. The result is more and more tariffs, higher and higher trade barriers, and less and less competition. So, soon, because of the prices made artificially high by tariffs that subsidize inefficiency and poor management, people stop buying. Then the worst happens: Markets shrink and collapse; businesses and industries shut down; and millions of people lose their jobs.

The memory of all this occurring back in the thirties made me determined when I came to Washington to spare the American people the protectionist legislation that destroys prosperity. Now, it hasn't always been easy. There are those in this Congress, just as there were back in the thirties, who want to go for the quick political advantage, who will risk America's prosperity for the sake of a short-term appeal to some special interest group, who forget that more than 5 million American jobs are directly tied to the foreign export business and additional millions are tied to imports. Well, I've never forgotten those jobs. And on trade issues, by and large, we've done well. In certain select cases, like the Japanese semiconductors, we've taken steps to stop unfair practices against American products, but we've still maintained our basic, long-term commitment to free trade and economic growth.

Ronald Reagan was acutely aware that American post-WWII explosive economic growth was driven by an era of expanding global free trade. I think that Donald Trump has proven beyond a shadow of the doubt that he is a RINO (“Republican in name only”), and his true party affiliation is the conspiracy theory MAGA perspective on the world, were vaccines that have saved millions and millions of lives over decades or longer are treated with deep suspicion, where the Secretary of HHS dispenses medical advice (but is not a doctor), where veterans are labeled “losers,” in an administration where our most detailed war plans appear on private, unsecured, smart phones and platforms, and where Social Security is labeled a “Ponzi scheme.” All the DOGE cutting of government services is NOT to root out corruption and waste; it is to replace the entire federal bureaucracy with diehard Trump loyalists and to give the richest in the land 95%+ a massive tax cut they do not need and which only benefits them. Stagflation, anyone? Recession?

I’m Peter Dekom, and our “allies” are indeed increasing their bonds… but with each other, China… and most definitely not us, their new enemy.