Some Links
In effect, Mr. Trump also slapped tariffs on 10005, Wall Street’s ZIP Code, for America’s markets cowered in horror. Dollar assets experienced such a rout that Mr. Trump himself took notice of the damage he’d done, postponing most of his latest tariffs for 90 days on April 9, the day they were to take effect. Except, that is, for China, whose cost of selling to the U.S. he hoisted to 145%.
Watching from the sidelines at Dartmouth College is Douglas Irwin, an economics professor. He knows more about U.S. trade policy than anyone alive, having written “Clashing Over Commerce” (2017), the first definitive economic history of trade since Frank Taussig’s “A Tariff History of the United States” (1931). In a Zoom interview, I ask what governments and businesses around the globe should make of Mr. Trump’s mercurial approach to trade and tariffs.
“It is incredible,” he says, but he doesn’t seem disbelieving. “Well, Trump twice said that the 25% tariffs on Canada and Mexico would take effect and twice pulled them back, so perhaps we should have expected this. I think his heart is with this reciprocal tariff plan, and to walk that back because of pressure from the markets must be a big disappointment.”
But Mr. Irwin, 62, like most mainstream economists and business leaders, is unhappy. “To whipsaw the markets like this amounts to grossly irresponsible economic management.” On April 4 Mr. Trump asserted on social media that “MY POLICIES WILL NEVER CHANGE.” “And yet, after pausing the tariffs, he said, ‘You have to be flexible,’ ” Mr. Irwin notes.
Any relief that foreign governments might have over the tariff pause “will be accompanied by utter dismay over the shambolic nature of U.S. policymaking.” He calls Mr. Trump’s actions “cavalier” and says there is “no strategy. And this uncertainty is a tax on the economy, undermining consumer confidence and freezing up investment spending.” It could bring a recession.
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This helps make sense of the contradictions in Mr. Trump’s trade rhetoric. He embraces revenue, restriction and reciprocity, but “it’s not clear which one’s the priority, because there are conflicts across them. If you’re going to bargain the tariffs away in reciprocity, that’s not a stable source of revenue. If you’re using tariffs to restrict imports into the U.S. in order to reindustrialize, well, then you can’t bargain them away either, because if you put the tariffs up and then put them down, businesses aren’t going to make decisions based on these quick tariff changes.”
We don’t know when Mr. Trump’s words are deal-making feints and when they aren’t. “Is that statement a negotiating statement? Or maybe it’s the end-game. When will the tariffs take effect? Are they still going to be in effect a year from now?” In July 2020 the U.S.-Mexico-Canada Agreement supplanted Nafta. “The USMCA is Trump’s agreement,” Mr. Irwin says. “He negotiated and signed that in his first term. What’s the value of that trade agreement if he can come up with some new rationale to impose tariffs that’s outside the bounds of what was negotiated?”
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Mr. Irwin wonders where Mr. Trump gets his history. He’s “lost track of the number of times the president has invoked William McKinley as his role model.” As chairman of the House Ways and Means Committee, McKinley sponsored the Tariff Act of 1890, which raised import duties to nearly 50% to protect American industry. But as president, McKinley changed his mind on tariffs.
Also puzzling is Mr. Trump’s insistence that the high-tariff Gilded Age is a model to emulate. “Yes, there was a period of industrial expansion then. But there was another one between 1830 and 1860, before the Civil War. And during that period tariffs were going down. So this idea that we owe American industrial might in the 19th century to the tariff is erroneous. There were so many other factors going on that were making the U.S. economy wealthy”—among them technological change, mass immigration and capital inflows from Europe. “We were open to ideas, capital and people from the rest of the world.”
Markets have swooned and spiked and swooned again as President Donald Trump has alternately imposed and then paused large new tariffs. What has stayed consistent through every announcement is the dismal quality of the public arguments for these spasms of protectionism.
Treasury Secretary Scott Bessent has run through many of the worst ones. “A lot of our trading partners, including some of our allies, have not been good partners,” he told Tucker Carlson. “If tariffs are so bad, why do they have them?” Governments throughout history have pursued policies that impoverish their people. Many countries, including our own, have recently had high inflation. If it’s so bad, why has it been so widespread?
But Bessent’s point is even weaker than that. Even before this year’s tariffs, many countries — including Canada, the United Kingdom and Vietnam — had lower trade barriers than the U.S. Trump has put tariffs on all of them anyway. No developed country has tariffs as high as the ones we now have, even under the latest plan announced on Wednesday. If Trump restarts the paused tariffs, that gap will get bigger.
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The commentator Batya Ungar-Sargon suggested on Fox Business that Wall Street was, in “utterly despicable” fashion, trying to force Trump to abandon “the American worker” — an analysis that the White House amplified on social media. On this theory, investors around the world acted, in concert, to deplete their own wealth by trillions of dollars in order to achieve a shared political objective. An alternative theory is that the tariffs reduced investors’ expectations of future corporate profits and prices moved accordingly. I’ll trust readers to judge which explanation has more plausibility.
Meanwhile, keep an eye on the price of coffee, which has already been rising worldwide. The only coffee grown commercially in the U.S. is in Hawaii and California, as well as in Puerto Rico.
Also from Andrew Stuttaford is this sensible prediction of a Trumpian “golden” age. A slice:
After a brief setback, gold had already resumed its upward path and is trading at around $3,217, up nearly $900 more than a year ago and about 10 percent higher than a month ago.
Earlier this week, I noted a report describing the unusual way in which certain assets had been performing. When stocks (as an asset class) fall on bad news, that is typically mirrored by a rise in Treasuries, as investors look for a safe haven. But that did not last long this time, suggesting that the allure of U.S. government debt has been reduced by the administration’s bizarre tariff adventure. Adding to the pressure, institutional investors (buffeted perhaps by margin calls, clients redeeming their positions, or both) were dumping liquid assets, such as Treasuries and gold. However, gold picked up again, while Treasuries kept falling.
Yesterday, Dominic Pino discussed an article by the Wall Street Journal’s Greg Ip, in which Ip suggested that gold was becoming the safe haven of choice. The dollar has been weakening against a number of currencies. That will also (typically) mean that it costs more dollars to buy an ounce of gold. But on top of that, there is also increased demand for gold (for example, its price has increased in euros), adding to the upward pressure on its price in dollars.
What we are now seeing in America, is a protectionist policy that is totally incoherent, economically illiterate, and properly clownish.
Marc Wheat is correct: “Trump’s tariffs are taxation without representation.” Two slices:
Our Constitution creates a government of limited powers, restricting Congress and the president to only those powers specifically listed. Article I of the Constitution gives Congress the exclusive power to tax. The president has no such power. Therefore, he cannot legally exercise it. However, Congress has illegitimately yielded to the president some of its power to tax. It cannot do that, and this week’s tariff announcement exemplifies why. Before the 90-day reduction to 10 percent across the board, President Donald Trump’s tariffs represented the largest peacetime tax hike in American history. Neither the original tariffs nor the reduced rate were the result of careful congressional consideration but the whims of one man.
A growing chorus of legislators led by Senator Rand Paul (R., Ky.) has expressed concerns about the president’s tariffs. Senator Paul has called on Congress to pass a joint resolution to end the emergency declaration that was intended to justify tariffs against our closest ally, Canada. On the floor of the Senate, Senator Paul rightly said that the Founders “so feared the power of taxation that they gave it to Congress” and that “taxes should not be imposed by one person.”
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President Trump has promised that his tariff policies will usher in a golden age such as the one America experienced in the late 19th century. However, as economic historian Phil Magness has pointed out, “19th century tariffs were a corrupt and economically hurtful mess,” and “the income tax was adopted to escape the tariff trap.” America will certainly enter a new age if Congress refuses to reclaim its power to tax and the president refuses to relent. It will be an age not of gold but of pyrite: fool’s gold.
‘Drip, drip, drip.” One of President Trump’s funniest rally lines is his riff about low-flow shower heads, which make it hard to cleanse his “beautiful hair.” On Wednesday he issued an executive order telling the Energy Department to reverse a water regulation imposed by Presidents Obama and Biden. With any luck, this means more vigorous bath fixtures will be coming soon to the hardware store.
The main culprit here is Congress, which passed a law in 1992 that limits shower heads to 2.5 gallons a minute. Mr. Trump can’t unscrew that by himself. But if a plumbing fixture features multiple nozzles, can each of them spray that amount? Or is 2.5 gallons the restriction for the whole thing? The answer to that question now gets reversed with each new Administration, as the President washes away his predecessor’s handiwork.
A White House fact sheet says Mr. Trump’s order this week will undo a regulatory action under Mr. Biden that took an astonishing 13,000 words of background and explanation to define the term “showerhead.” The idea now is to make it legal to produce shower fixtures with multiple fierce hydra heads. Supporters of the current restriction seem to think Big Fixture isn’t eager to retool, especially since the next President might crink the tap again in 2029. But there’s a market opportunity. Maybe Elon Musk could start a plumbing company.
In his new book Lawless: The Miseducation of America’s Elites, legal scholar Ilya Shapiro explores the disastrous impact of leftist ideology in our law schools. He writes, “You’d think that legal faculty would be in the vanguard of protections for free speech and due process, given their deep understanding of the law. But it’s at law schools in particular that academic freedom is under threat, free speech in retreat, and civil discourse a thing of the past.”
Shapiro’s account is not abstract and theoretical. The book abounds in evidence, starting with his own experience at the hands of intolerant students, uncivil fellow professors, and cowardly administrators.
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