The Demos’ political game to undermine fair trade policy and foment another economic crisis of confidence.
Mark Alexander
“I think all the world would gain by setting commerce at perfect liberty.” —Thomas Jefferson (1785)
Do you recall that one of President Donald Trump’s Day One executive orders was “Restoring Names that Honor American Greatness“? This included reinstating the name “Mount McKinley” to the highest peak in North America, Alaska’s Denali.
In 2015, 40 years after the state of Alaska had restored the mountain’s native name, the Department of the Interior did the same. Though nobody in Alaska wanted the name restored to McKinley, why did Trump include this among his first actions?
Well, Trump admires McKinley because of his Tariff Act of 1890, intended to protect domestic markets and workers by leveraging an average duty increase on imports from 38% to almost 50%. McKinley would later revise his stance and advocate for more tariff-free international trade, which is not inconsistent with what Trump ultimately seeks — a level playing field.
Thus, Trump has ordered tariffs on imported goods from every country that imposes tariffs and/or other trade barriers on U.S. exports — and some that don’t.
If you are fortunate enough to have accumulated some investments or retirement assets, the prospect of tariffs has taken a heavy toll on equity values — for the moment.
As of the close yesterday, the Dow was down 11.51% year-to-date. For comparison, it was up 18% in 2024. The S&P 500 was down 14.94% YTD (+23% in 2024), and the Nasdaq Composite was down 19.08% YTD (+30% in 2024). Meanwhile, 10-year Treasury yields were back above 4%. (Investor pro tip: Don’t get swept up in the short-term market hysterics.)
Today, expect major equity market recoveries because, after firing a loud shot across the bow of those subjected to last night’s global implementation of his tariffs, Trump has proven once again that the strategic “art of the deal” often depends on being unpredictable — the art of “organized chaos.”
For weeks, Trump stood firm on his tariffs and levies, which he characterizes as “a beautiful thing to behold.” He declared: “We have massive Financial Deficits with China, the European Union, and many others. The only way this problem can be cured is with TARIFFS, which are now bringing Tens of Billions of Dollars into the U.S.A. They are already in effect, and a beautiful thing to behold. The Surplus with these Countries has grown during the ‘Presidency’ of Sleepy Joe Biden. We are going to reverse it, and reverse it QUICKLY. Some day people will realize that Tariffs, for the United States of America, are a very beautiful thing!”
Trump’s biggest tariff target is, of course, Red China, our largest trading partner after Mexico and Canada. China’s communist leaders promised to “fight to the end” against the tariffs slapped an additional 34% tax on all U.S. imports last Friday. In turn, Trump implemented 100%-plus tariffs on China, and the latter then matched the tariff increase. (Remember if you will that five years ago, China dropped the most devastating economic bomb ever detonated on the planet — the ChiCom Virus pandemic, so its reckless resolve should not be underestimated.)
At the same time, the National Economic Council director and Treasury secretary both report that more than 50 nations have reached out to the White House to negotiate — and I suspect the number is substantially higher.
In other words, Trump’s tariffs are having the desired effect, except with China.
Now, Trump has dramatically altered his 12-hour-old tariffs, declaring: “Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately. At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other countries, is no longer sustainable or acceptable.”
Moreover, he declared: “Conversely, and based on the fact that more than 75 Countries have called representatives of the United States, including the Departments of Commerce, Treasury, and the USTR, to negotiate a solution to the subjects being discussed relative to Trade, Trade Barriers, Tariffs, Currency Manipulation, and Non-Monetary Tariffs, and that these Countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States, I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately. Thank you for your attention to this matter!”
This is a wild ride, but frankly, while his vacillations drive his leftist adversaries bonkers and are distressing to more than a few of his otherwise strong conservative supporters, I find Trump’s dynamic leadership invigorating, if not just refreshing.
Clearly, as the Wall Street Journal editors note, Trump owns the economy now — he can’t point at the Biden/Harris regime for the consequences of his actions.
But the WSJ editors still don’t seem to get Trump’s modus operandi, insisting: “Trade wars are easy to start, but they can be hard to stop once the retaliation gets rolling. Mr. Trump started this war, and he owns whatever happens next to prices, jobs and economic growth.”
The notion that “Trump started this war” is being parroted far and wide by the mainstream media, and it is grossly misleading. The fact is, we have been in a global trade war for 60 years, and getting our butts kicked. Trump is the first U.S. president in decades with the guts to fire back.
However, in doing so, Trump is betting the near-term future of the GOP on his “emergency tariff plan,” which is going to have near-term implications on the livelihoods of all Americans. There are big pros and cons, and there has been no shortage of opinions regarding his so-called “reciprocal tariffs.” For the record, the tariffs are only in part reciprocal, and many are calculated on a host of other factors that appear to be non sequiturs.
Indicative of the range of tariff opinions, commentator David Harsanyi protested: “Treasury Secretary Scott Bessent cautioned last month that Americans will likely experience ‘a detox period’ after President Donald Trump implements his wide-ranging tariffs. What are we detoxing from, exactly? From an abundance of affordable goods and the world’s highest living standards? From consistent economic growth? From leading the world in nearly every possible innovation and quantifiable economic measurement? From being an evolving manufacturing powerhouse? From enjoying an unprecedented per capita GDP or the low unemployment rates? The Trump administration suffers from Munchausen syndrome by tariff, prescribing toxic cures for mythical ailments to gain attention.”
National Review’s Rich Lowry chastised Trump for dubiously claiming tariff “authority under the International Emergency Economic Powers Act of 1977 (IEEPA)” in order to claim “power to impose tariffs that would otherwise have to pass Congress.” According to Lowry: “This an abuse of language and logic in the service of bad policy that hardly interacts with the alleged threat to national security. … In sum, it’s best, especially when making consequential determinations, to adhere to the true meaning of words, even the much-abused ’emergency.'” Likewise, NR senior political analyst Jim Geraghty argues: “Peter Navarro, Kevin Hassett, Scott Bessent, and Howard Lutnick all went out to the Sunday shows to make the case for the sweeping new tariffs. We also got additional comments on social media from Elon Musk and Senator Mike Lee. All of them made the case for the president’s decision. The only catch is that almost all of their arguments contradicted each other.”
And the tensions have resulted in disputes among key advisers, with Navarro asserting that Musk was just a “car assembler” who “wants the cheap foreign parts.” In response, Musk said Navarro is “truly a moron” and “dumber than a sack of bricks.” Musk also broke with Trump, saying he wants a “zero-tariff situation” between the United States and Europe.
Even Sen. John Kennedy (R-LA) cautions in his southern drawl: “A little whiskey under the right circumstances can be refreshing. Too much whiskey under the wrong circumstances, and you end up drunk as a goat. We just don’t know right now. But we’ll know within the next six months. If it works, let’s take a dozen. If it doesn’t work, the president will have to recalibrate.”
For those who better understand Trump’s global negotiating strategy, we know this is a multidimensional chess match, not the checkers game that too many pundits and media talkingheads would have you believe.
Conservative commentator Erick Erickson warned yesterday, “China has begun dumping US treasury bonds, which has the effect of making the bond yield go up, thereby negating some of Bessent’s ability to deal with the national debt and interest payments.”
I am not sure what Erick was expecting from China, but these are just the first moves in what Trump, et al., know will be a lengthy and complex battle.
At the moment, China has some economic leverage to fire back, accumulated since the Clinton years, but the ChiComs also have economic and political vulnerabilities that will not easily absorb further economic slowdown.
I put much more weight on seasoned analysts, and regarding China and tariffs, that would be Victor Davis Hanson, senior fellow at the Hoover Institution.
In a thorough analysis, “Trump’s Just Trade War,” Hanson says: “Ignore the Wall Street hysteria. The president is trying to end a 50-year injustice directed at the U.S. — and to help the most overlooked Americans.” He concludes, “At some point soon, the less frenzied will look at stock bargains, remember the surging market during 2017–2021, conclude that the resistance to symmetrical trade abroad is more media and politically driven than rational, and thus that the future will not end in depression but more likely prosperity by too long-ignored and -delayed solutions to unfair trade imbalances, reckless budget deficits, and unsustainable national debt.”
On its face, an incremental approach to reciprocal tariff penalties looks more reasonable. But predictably, Trump has chosen the “shock and awe” full-frontal assault. No doubt, that shock and awe was necessary in order to get countries to the negotiation table quickly — and none want to be the last to be seated at that table.
Tariff shock and awe is a classic example of Trump’s organized chaos strategy.
And on that note, I offer a few of my own observations about the current tariff hysterics.
First, those of us who supported Trump’s return to office understood that, as I noted in “Trump 2.0 — Attack of the Disruptors,” one of Trump’s specialties is “organized chaos.” Most people are deeply threatened by what appears to be disorganized chaos, and evidence that has eroded public support for Trump is now emerging in his RCP job approval average showing a four-point decline since he took office, from 51.5% to 47.5%, and a rise in his disapproval from 43% to 47.5%.
The administration has done a poor job of rallying broad public support.
This is called “war,” but Trump has not adequately explained the sacrifices necessary for the war effort. He has not rallied Americans and imbued them with an understanding that we all have to do our part to win this war. And in failing to do so, our adversaries, both the Democrats and Chinese, are emboldened.
Last weekend, Trump’s message to the nation was: “This is an economic revolution, and we will win. HANG TOUGH, it won’t be easy, but the end result will be historic. We will, MAKE AMERICA GREAT AGAIN!!!”
That should be the unified message from every administration official and Republican across the board.
Trump’s approach has given the opposition ammunition for a short-term tactical fight, but in the long run, when he gets to the finish line with his tariff strategy, the trade reset will be good for America and will alter our disastrous course toward complete insolvency.
Second, there is the “tariff tax” issue.
I have argued a thousand times over the years that the Democrat obsession with taxing corporations is tantamount to a tax on consumers because corporations pass that tax burden on in the form of increased product prices. Trump has lauded all the tariff revenue that our nation could collect as if most of that revenue is not going to roughly equate to price inflation paid by consumers. In effect, the current tariffs, if not renegotiated, will result in a historic tax increase.
As Warren Buffett makes clear about who ultimately pays for tariffs: “Over time, they are a tax on goods. I mean, the Tooth Fairy doesn’t pay ’em.”
However, many of the assertions above assume a tariff status quo — that as Trump implements tariffs, other nations up their own tariffs, and the American consumers are the losers. That is a bad assumption.
In the coming weeks, there WILL be substantial negotiations on tariffs being levied by other nations on U.S. goods, and those negotiations may, best-case scenario, have a cascading effect that substantially levels the economic field, bringing free trade and fair trade into greater parity.
A colleague notes the evidence supporting why foreign nations will come to Trump’s negotiation table — and that is reflected in the respective investment indexes of our foreign trade partners. He says: “The phrase ‘a rising tide lifts all boats’ is famously attributed to John F. Kennedy, who used the aphorism in 1963 to argue that economic growth benefits everyone, citing it as a defense for projects and policies that aimed to stimulate broad economic development. Logically, the contrapositive is also true — a falling tide lowers all boats — as can be seen with the stock market’s reaction to tariffs imposed by the Trump administration this week. What can also be seen is that the tide has gone out faster in some places than in others.”
Fact is, foreign markets were disproportionately affected by fears of economic instability stemming from Trump’s tariffs, particularly in Asia and Europe. That is the direct consequence of Trump’s shock and awe strategy, and those foreign markets are paying attention — and by extension, so are their leaders.
This is more than just getting countries to the negotiation table quickly. These countries are finding the water rushing from their safe harbors and their boats foundering in the shallows. Again, a falling tide lowers all boats, and their boats may soon be grounded.
Finally, one of the greatest threats to the success of Trump’s economic trade plan is not the “trade war” but the Democrat Party’s war on Trump. In effect, they are ChiCom leader Xi Jinping’s closest ally.
Most Democrats are hoping that Trump’s plan will fail — which will provide them a political windfall, and in the process, our foreign trade adversaries know the Demos are on their side. Recall that Democrats seeded the 2008 financial crisis to enhance their political fortunes. They implemented policies that created a crisis of confidence in our economy and thereby paved a path for Barack Obama’s election.
Demos are experts at undermining confidence, and they are laying the groundwork for another economic crisis of confidence right now.
If Trump’s tariff strategy is even moderately successful, his domestic political opponents will be exposed as the fools they are.
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