Tuesday, May 13, 2025

Supply Chain, Chain, Chain of Fools

 A mathematical equation with a line

AI-generated content may be incorrect. A map of a hurricane

AI-generated content may be incorrect. A group of people holding signs

AI-generated content may be incorrect.

Supply Chain, Chain, Chain of Fools

PETER ON THE WRITERS’ HANGOUT PODCAST!

“Europe has not started this confrontation… We do not necessarily want to retaliate, but if necessary, we have a strong plan to retaliate and will use it.” 
European Commission president Ursula von der Leyen

You can tell that the proposed Trump tariff scheme had three clear underlying philosophies: 1. Obfuscate the numbers, 2. Maximize fear/bully power. 3. Even if it is just a slapdash litany of angry numbers, let the nations impacted retaliate so we can rally American voters around that. Even as Trump has suggested that American companies will make more here and that foreign manufacturers will relocate here, for companies (at least those with the highest wage rates) to manufacture, it does not help that their raw materials and secondary modular add-ins (often patented) are still being imported. Not to mention the years it takes to build or retrofit factories. Prices will continue to rise, and the probability of a near-term recession or worse (like stagflation) increased very quickly, from 40% to 60%+.

Trump hates numbers that make him look bad. So, for example, the Department of Commerce is already twisting an alternative to our GDP measurement, the Treasury is suggesting that expired or expiring tax rates which are renewed must not be counted as tax increases. The Trump administration continues to believe that tariffs are not “taxes.” A very lonely perspective. The above formula, where the variables are not clearly identified, is how they determined the “effective” tariff rate. The numerator seems to deal with trade imbalance, and the denominator addresses the tariff differential. But since tariffs are often set, product-by-product, the numbers used for Trump’s giant billboard from hell are of necessity deeply flawed and wildly in accurate. The Trump pattern to deal with facts he doesn’t like is to simply ignore those and substitute its own calculations as “truth.” “Fake news” is now the only Trumpian “truth”!

Back in Trump 1.0, in September of 2019, Trump tweeted that Hurricane Dorian would ultimately slam into Alabama. The National Weather Service immediately pointed out that Trump was incorrect, but he repeatedly doubled down, going so far as to add his black-line Sharpie “enhancement” (look carefully at Trump’s add above) to the NWS map to add Alabama (it was still on the Gulf of Mexico in those days) to the danger zone. Trump even presented his “enhanced map” in a public showing in the Oval Office. The same NWS that DOGE is slicing today, was right then… and usually is… saving farmers, travelers, pilots and navigators and their people they impact billions of dollars… not to mention lots of lives. From changes at RFK Jr’s HHS, to the cut off of USAID medicine and food to starving millions overseas to cutbacks at OSHA and a willingness to ship documented and undocumented aliens from the US to life-threatening detention in El Salvador without due process if they have tattoos the ICE doesn’t like.

Americans have seriously benefitted from less expensive manufactures from overseas market, almost as foreign nations were subsidizing US consumers. Let’s face it, Europe has a lot of cool stuff, from designer fashions to cars and unique food products that taste the way they do because the soil, climate and location of where they were grown. Trump wants to force Americans to buy local substitutes, which can be radically different from the imports they replace. Example: “cheese” is not a uniform product.

Unfortunately, Trump always believes that he not only is the smartest person in the room, he seems to have expanded that belief, first to the United States… and now… world. Yet he seems to have derived his belief in the efficacy of tariffs from “tariff guru” Peter Navarro, who seems to have been recommended by Jared Kushner based on his online search for books touting tariffs. Navarro was thus selected. Suspicion has recently mounted against “expert” economist, Ron Vara, whom no one seems to be able to find… but is frequently cited by Navarro for “factual” support. Was Ron Vara simply an anagram derived from Navarro? Uh oh! The same Peter Navarro who served four months at the Federal Correctional Institute in Miami after a contempt conviction?

Trump’s overall vector is to demand personal fealty to him from every federal employee, even if there is unequivocal hard evidence to the contrary. That, and generating one of most massive, deficit busting tax cuts for the mega-rich while cutting programs for the rest of us, directly threatening Social Security (wink, wink, “we are not touching existing benefits”), Medicare, Medicaid, VA hospital staffing. etc. Retribution is priority number one! Death is acceptable collateral damage.

After the plunge of trillions dollars of US shares value after the tariffs were announced, US stock markets continued in free fall in the days beyond, but Trump enjoyed several rounds of golf (of America?). Ignoring an almost unanimous voice to the contrary from the major economists in the world, Trump smugly reassured Americans that a big payoff was just around the corner. Prices continued to soar. Millions of Americans protested all across the country on April 5th.

Trump felt secure as the business world and cowering law firms stayed silent, but there was one huge surprise “financial bazooka” that the European Union could deploy against the US banking and financial services sector, one of our most profitable areas… and lots of that activity does involve Europe… in a huge way. So if the US and EU do not reach a tariff accord, what exactly that that “bazooka”? Stuart Dyos, writing for the April 3rd Fortune.com, explains: “That plan could involve the Anti-Coercion Instrument (ACI), allowing the bloc to place market limitations on service companies that could hit American tech or Wall Street. Put in place in 2023, the ACI allows the bloc to respond to coercion through diplomatic means by any retaliatory measure necessary like import or export restrictions or limitations on access to the European market…

“‘It’s called the big bazooka,’ Fabrizio Pagani, a partner at the investment bank Vitale and a former top economic official in Italy, told DealBook. ‘I personally think the big bazooka should be used first of all as a deterrent. So put it on the table, and let’s negotiate,’ Pagani said.

“According to a preliminary plan obtained by DealBook, in response to tariffs, the EU officials have brought up the possibility of implementing ACI to limit American banks’ ability to access the bloc’s public procurements market, essentially barring banks from projects worth $2.18 trillion each year . Additionally, the plan suggested targeting the roughly $327.02 billion annual flow of European investment into American companies… ‘It’s more the nuclear option,’ global economist for ING Carsten Brzeski told the New York Times... Use of the instrument could escalate the trade war and some experts believe this would further impact consumers.” You mean like Meta, Google, Morgan Stanley, Blackstone, Goldman Sacks, Bank of America, etc.? And I know why Trump is attacking our finest universities: no matter the DEI excuse, they teach economics, physics, history, engineering… what we affectionately call “facts.” Folks who cannot be fooled are not Trump’s buddies.

I’m Peter Dekom, and I am still puzzled at what Trump’s grades at Wharton (University of Pennsylvania) must have been to result in the unconscionable babble that emanates from the Orange Man himself.

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