If March 12, 2025, were any other post-pandemic CPI day in the US, stocks would’ve been more than happy to celebrate a benign read on underlying inflation.
To be sure, equities were bid in the wake of the BLS release, which showed both core and so-called “supercore” price growth slowed sharply last month. And stocks may very well end up bid again tomorrow or Friday.
But headlines like the following, from midday Wednesday, are indicative of the new zeitgeist: “Markets give up earlier gain, as trade worries hit stocks once again”; “Stock rally wanes as tariffs cloud inflation path.”
Setting aside the idea that Donald Trump fully intended to torpedo stocks and brake-slam the US economy in order to bring down long-term rates and nudge the Fed back towards an easing bias — i.e., forgetting for a moment the “engineered” selloff/recession narrative which was conspicuously absent from Trump’s campaign trail rhetoric, and also from Wall Street strategy notes until stocks started to fall and the economy started to roll — the inescapable bottom line is that no one likes uncertainty and Trump’s schizophrenic trade war is creating all kinds of it.
As the figure shows, the latest reading on the monthly trade policy uncertainty index was the highest since August of 2019, when Trump abruptly called off a tariff truce with Xi Jinping. The real-time reading (i.e., for March) is even higher.
On Wednesday, Trump’s metals tariffs went into effect, triggering countermeasures including new European and Canadian levies on a combined $50 billion of US goods.
Canadian foreign minister Melanie Joly called Trump’s tariffs “nonsense.” Ursula von der Leyen was more diplomatic, as is her wont. Europe, she said, believes “that in a world fraught with geo-economic and political uncertainties, it is not in our common interest to burden our economies with such tariffs.”
On Tuesday, as Trump engaged in some of his most offensive rhetoric yet around Canada’s sovereignty (which this White House simply doesn’t recognize), I noted that history does show it pays for America to occasionally squeeze its allies for economic concessions, whereas such measures are mostly ineffective against adversaries because there’s no relationship to preserve or restore.
But as discussed here on too many occasions to count since Inauguration Day, Trump’s trade strategy seems cartoonishly capricious this time around, which is to say unless you count the nebulous contention that his policies are going to prevent America from being “ripped off,” it’s not clear there’s a goal beyond reducing bilateral deficits. If that’s an end, it shouldn’t be an end in itself. Because there’s nothing inherently “bad” about a trade deficit.
Trump offered no exemptions from Wednesday’s metals tariffs. So, everyone’s impacted from the Americas to Europe to AsiaPac. That, in turn, means Trump’s just slapped a whole host of US allies in the face, including key countries Washington needs to help prevent China from establishing a Sino-Monroe Doctrine which would effectively shut the US out of Asia-Pacific affairs, calling into question the sustainability of America’s military presence in the region.
In less than a month, the US may face a wave of retaliatory trade measures in addition to those already announced by Canada, the EU and China. The only reason other nations didn’t hit back Wednesday is that their respective leaders are keen to negotiate with Trump ahead of April 2, when he’s promised to institute “reciprocal” tariffs on all nations which tax American exports, a decision Goldman this week warned could bring the world closer to a trade war worst-case. And that’s to say nothing of auto tariffs, which Trump’s also threatened to implement from April.
Colloquially: There are ways to go about getting things done, including, if the US wants, reducing America’s trade deficit, and then there’s this way. This way is the way to collective ruin.
As regular readers can attest, I’ve written more in recent years on the deleterious effects of hyper-globalization than any contrarian economist. Similarly, I’ve spent the past decade penning trenchant critiques of neoliberalism’s many pitfalls and outright failures. Indeed, the Monthly Letters are a veritable compendium of such critique.
I know both sides of this story like the back of my hand. Indeed, as most of you know, I was once loosely “employed” as a consultant to a propaganda baron operating in the macro-contrarian, geopolitical agitprop space. You know that Kremlin-friendly, macro-market counter-narrative so many traders and investors swear by, and which dominates the discussion on finance-focused “X,” formerly “FinTwit”? Yeah, I co-founded that. And I’m telling you, it’s bullsh-t. Or mostly bullsh-t, anyway.
Trump’s methodology (if you can call it that), and indeed the whole effort on the part of right-wing, crusading populists to rewire the post-War world order, isn’t going to restore America to some bygone “greatness.” On the contrary.
Notwithstanding a few accidentally “good” outcomes — e.g., a Europe prepared to provide for its own defense because Washington’s apparently going to renege on its Article 5 commitments — all we’re going to get out of this whole sordid anti-globalist blowback is a more dangerous world where all the structures which underpin Western democracy are dismantled by autocratic opportunists keen to exploit the economic misfortune of globalization’s left-behinds for their own vainglory.
America’s “allies” were mentioned here. I wasn’t aware any such parties still exist except perhaps in southern Missouri, Missisippi and parts of Idaho. And those people, who don’t know it yet, are just awaiting their turn on the enemies list.
Trump wants Canada out of NATO and that’s why he wants Greenland.
Maybe Trump’s wet dream is a response to China’s rise and includes essentially fortress North America extending North from Greenland and Canada and South to Panama (leaving Mexico in limbo), and relying a big oceans for added protection?
Does 2025 know what they signed up for thinking they were signing him up.
Yo H what do you say to the argument that the US was already living in a corporatist state that only maintained a veneer of democracy? Even granting that Trumpism is a devolution for the country in general, this would mean that what’s happening right now is mostly a transition from the type of pseudo-democracy we were already living in (corporatism to oligarchy). Is that BS? I can’t tell. I don’t like it but I really can’t tell. Parts of that argument ring pretty true: see 2000 election, Obama letdown, Bernie railroaded.
I don’t think the argument you sketched there is a bad one at all. In fact, I’d describe that as more or less accurate.
I’m referring mostly to the kind of macro-market commentary which finds a seemingly / ostensibly plausible bear case in every, single data release, which distorts sell-side research to fit a bear case no matter what the original research said and, more importantly, the sort of finance-geopolitical nexus commentary which masquerades as unbiased truth-telling, but which is in fact Russia-style “Whataboutism” produced, seemingly, for the purposes of advancing the Kremlin’s strategic interests. Since 2015, that latter type of commentary has obviously skewed heavily pro-Trump, and even to the right of Trump.
I used to — and still do occasionally, although it’s rare now — get e-mail with references to that kind of commentary, and I’d respond with something like, “I can tell you that’s propaganda because I wrote it.” People would think I meant — you know — “I wrote the book on that,” in a figurative sense of the term, when what I really meant was, “No, seriously, I literally wrote that. Personally, myself, while drowning in liquor and eating takeout from the Whole Foods hot bar at a condo in the Monarch building at Ridge Hill in Yonkers.”
As I’ve detailed in three of the Monthly Letters, we’re seeing that stuff (which I regrettably helped produce) come full circle now. A lot of what the American right genuinely believes is a groundswell of support for anti-establishment political figures and fringe politics is actually the product of a decade-long information war which the bad guys have well and truly won. The protectionist / economic nationalism / tariff push is just one manifestation of all that.
None of that’s to say the collapse of the political center in the West wasn’t inevitable or isn’t attributable to genuine voter disenchantment with a neoliberal order which failed miserably to provide for, e.g., blue collar workers. It’s just to say that outside actors played on that disenchantment, leveraged social media to amplify it, and ultimately succeeded in fracturing the whole damn edifice.
What would happen if Canada, Mexico and USA had a free trade agreement? No tariffs.
“…it pays for America to occasionally squeeze its allies for economic concessions, whereas such measures are mostly ineffective against adversaries because there’s no relationship to preserve or restore.” Sure seems like Trump views everyone as an adversary. They should act accordingly.
The long sought after regressive tax overhaul.
Eliminate federal income tax on all. Fund it with a consumption tax in the form of tariffs.
POTUS can unilaterally institute the tax increase side of things. Republicans in congress can then dare Dems to oppose cutting income taxes on everyone.