I’ve said it over and over again: The Trump administration has no grand plan for managing the trade war and the associated macro-market fallout.
The ad hoc, improvised nature of tariff escalations and de-escalations isn’t “the art of the deal,” it’s evidence Trump’s making it up as he goes along.
And yet, each and every day, administration officials, shills for Trump and a handful of Wall Street strategists insist there’s a coherent economic strategy behind it all, and that the blueprint’s observable in the sequencing.
In the first phase, the administration will engage in a controlled demolition of the equity rally and the Biden economy, which’ll bring down longer-term borrowing costs as investors flock to the safety of bonds in a downturn. The Fed will be compelled to cut rates further, which’ll put downward pressure on the dollar, aiding and abetting the effort to dismantle a global trade architecture which treats the US “unfairly.”
In the second phase, tax cuts and deregulation will give the “detoxed” economy a supply-side boost, and what’ll emerge is a “re-privatized,” newly-lean machine — a “real” economy, as Trump and Scott Bessent put it, as opposed to the “fake” one Joe Biden created through government largesse.
Very often — more often than I should, probably — I try to avoid stirring the proverbial pot, a selfish editorial decision which stems primarily from my inclination to strike a balance between “edgy” and offensive, the former being good for business, the latter not so much. But occasionally, I’ll put the unvarnished truth out there and let it burn as it might, which is to say let anyone inclined to be irritated suffer the mental anguish they deserve for supporting, implicitly or otherwise, in word or in ballot-box deed, the Trump administration’s heinously cynical agenda.
So, here’s the truth: There’s a plan all right, and that plan is to f-ck over everyday people in the name of rescuing them, by trotting out “savings” (read: mass federal layoffs and budget cuts for critical government agencies) and “revenue” (read: money raised by a consumption tax paid largely by the lower- and middle-classes) as an offset for hugely expensive tax cuts for the rich and corporations.
I realize this has occurred to a lot of readers, but I wanted to briefly sketch the blueprint so that everyone can come to terms with just how atrocious it really is.
What’s a tariff? Well, again, it’s a consumption tax. By and large, importers who pay the duties pass along the cost of the levies to consumers. Who gets hit by a de facto consumption tax? The lower- and middle-classes. Why? Because, by virtue of having fewer dollars to work with, they’re compelled to spend more of each incremental dollar they have, which in turn means almost all of their dollars are subject to tariff-related price increases.
The rich, on the other hand, have a lot of extra dollars above and beyond what they have to allocate (as distinct from what they choose to allocate) to consumption, and those extra dollars are saved and invested. Savings and investments aren’t subject to the tariff consumption tax, and indeed some investments aren’t taxed at all.
So, to the extent the Trump administration trots out tariff “revenue” as an offset to lost tax receipts, they’re effectively funding tax cuts for the wealthy with a consumption tax on the lower- and middle-classes, who’re fed a lie that says the tariffs are being implemented specifically to benefit them through re-industrialization.
I don’t want to debate a hypothetical, but I think it’s entirely fair to suggest that the cost to the average middle-income family from a worst-case trade war scenario over a year could outstrip whatever relief such a family might receive from an extension of the Trump tax cuts, which is to say if the idea’s to pay for the tax cuts with tariff revenue, then the middle-class comes out in the red on that deal.
By contrast, it’s virtually impossible to posit a scenario where higher costs for things like washing machines and raspberries somehow tally high enough to offset the dollar value of the tax cuts to high earners, to say nothing of the richest Americans.
The same general dynamic’s at work with the cost-cutting and the civil service purge. The rich don’t work in government, and to the extent they’re impacted by the government’s diminished capacity to provide services amid mass layoffs and existential funding cuts, they can always just pay somebody in the private to provide those services.
Not so for the lower- and middle-classes, which get screwed twice: They lose their jobs in government (or their job tied to government contracts) and they lose services previously provided by government employees and agencies.
The civil service purge has the added benefit to Trump of leaving the bureaucracy woefully understaffed, opening the door to a re-staffing push once the tax cuts are a done deal, and guess who’s going to fill those open positions? Trump loyalists, of course.
All of that’s to say nothing of entitlements. The rich don’t need those either. They have plenty of money to fund their own retirement and health care. So, if Trump, Elon Musk and Republicans decide to fund tax breaks with entitlement cuts, that too will work out to a net gain for the rich, but could be nothing short of devastating to the lower- and middle-classes.
Earlier this week, Kimberly Clausing, a professor of tax law and policy at UCLA’s law school, summarized this in excruciatingly direct terms during a podcast with Ezra Klein. “You can’t really run a campaign where you’re like: I want to cut taxes for rich people and raise them on the poor, so instead, it’s all of this smoke-and-mirrors distraction about how foreigners are taking advantage of us [and] we’re going to have a great American economy again, because we’re going to levy these fancy tools where they will pay and we will industrialize,” she said, adding that if you didn’t know any better, which Trump’s rural and blue-collar base doesn’t, and if you “haven’t stopped to think about it,” sounds loosely plausible. “The more people who buy [the] story, the more [Trump] can do this fiscal switch and have an excuse for the tax cuts,” she added.
In an opinion piece for the Times, Clausing spelled it out in one sentence: “A better way to think about tariffs is as a key tool to achieve the core of Trump’s economic agenda: He wants to shift the tax burden away from the well-off and toward the poor and middle-class — while consolidating his power.”
Coming full circle, yeah, there’s a plan all right. And it’s pretty f-cking evil, with the caveat that, as an avowed atheist and enthusiastic nihilist, I don’t traffic in normative assessments. (“I believez in nothing, Lebowski. Nothing.”)
So, when you hear Wall Street strategists, right-wing bloggers, unhinged podcasters, Trump’s cabinet and Republicans more generally, pushing this agenda, I implore you: See it for what it is. They’re engaged in an effort to rob you and distribute what little you had (past tense) among themselves, and among people who had more than enough already.
The worst part of the whole nefarious charade is that they’ve convinced large subsections on Main Street that this is a policy platform designed specifically to advance the economic interests of everyday people, a criminally brazen lie.
That’s the truth, folks. And to everyone complicit in that agenda, let me extend an emphatic “F-ck you” from the bottom of my cold, dark heart.
I don’t know if it is intentional, but the tariffs have the effect of putting big business under trump’s thumb. I have thought for a while it was intentional. After reading this article, I am not as sure.
https://newrepublic.com/article/192691/transcript-trump-anger-spirals-presser-another-bad-poll-hits
Mr. Trump has long been obsessed with the US trade deficit. I recall that he paid for full page ads in the New York papers demanding measures to address the deficit in the late 1980s. So this is not something new.
What is new is how tariffs have morphed from vehicles to “level the playing field” in his first term to being a revenue source to fund his tax cut promises, including no tax on tips, and well as a vehicle to transform the US economy.
It appears that the forces who he put in place this term are taking advantage of his mercantilist beliefs to push through a much more widespread agenda, such as Project 2025.
Will the hijacking of his core beliefs irk him enough to rid himself of Elon and some of the Thiele/Vance/Bessent contingent?
Its really incredible that someone (Lutnick or Navarro) has convinced him that the tariff revenue can make up for potential lost income tax and capital gains revenue in a way that is in balance. With a higher UER and lower S&P how are the taxes going to balance out with tariffs unless he somehow believes countries will trade more with us?
Pardon me if I don’t care for trump’s plans. Last time he gave us in the higher parts of the stratosphere a “break”, it cost me a couple hundred grand or so. I don’t need more of that kind of largess. Besides, I’m not convinced this is all about money. He’s still trying to get imagined payback from the poor kids who made fun of him when his daddy wasn’t around. All of his life is about payback. My wife died of Alzheimer’s and I know where this is all headed. It ain’t going to be pretty.
To make a plan like this work, though, you need actual messengers who can spin it. His creeping drop in popularity is only going to get worse as the “plan” here keeps rolling out more and more and gets messaged by….well Trump and Lutnick.
Having Lutnick be your Navarro 2.0 in trying to sell this to the skeptics is the exact same mistake he was making in 2018 – sending out loony tunes and charlatans on CNBC to look like a bunch of complete idiots to Wall Street and Main Street while eroding confidence and popularity. Its kind of funny at this point that he didn’t learn the lesson from the last time (like his December 2018 Navarro experience or his August 2019 mean tweets). None of this ends well for his popularity.
I’d pay money to see Trump’s face when someone explains to him his plan (the Wall Street narrative described at the beginning of the article). I doubt he’s even capable of grasping it, let alone devise it.
Must be exhausting.
Wait, how did this only occur to me now:
Are these the Nazis Walter?
No Donny, these men are cowards.
In Florida, lawmakers are proposing to eliminate property taxes while increasing sales taxes. This proposal will disproportionately benefit the wealthy, while burdening the lower and possibly even the middle class.
Here!Here!
Many more rounds of fuck you.
A fella around 40 described to me what his investment advisor had just told him.
Trump is trying to lower the cost of stocks so that poorer people could buy into the stock market. He’s trying to keep only the wealthy from owning stocks.
The keystone to this edifice is to persuade voters that it is good for them. Not all voters, just 49% of voters in some key states and districts (vote tampering will deliver the remaining 1%). I think we’ll see federal spending unfrozen and federal cuts blunted in those key states.
Against a backdrop where Americans have been assured that: 1) US import tariffs are NOT paid by US importers (ergo also not by US consumers) and, 2) “tariff” is Trump’s fourth (revised) favorite word after those other three stalwart pillars of his existence — God, religion and love — does it really matter if there is a plan or not? The man who relies on common sense, concepts of a plan, and disputing fake news has us all living in this made up menagerie in which real is whatever he says it is.
So it’s a little odd that while “tariffs” are the genius spearhead to Make America Great Again, sufficient to reindustrialize the country and solve all of our budgetary evils, God forbid if any other country wants to get into the act and tries to wet its beak too. Fortunately, Trump already has his secret weapon in his turf wars — a little something called “reciprocal tariffs” — one of those terms he’s never heard of until recently and now bandies about as evidence of his 4D chess bona fides on the matter. Forget about MAGA, we only got FAT — fraud, abuse and tariffs — which, Ozempic notwithstanding, seems to fit us perfectly.
Exactly – even Navarro didn’t use the genius of “reciprocal tariffs”. It seems like he wants to believe that everyone will just pay us in tariff revenue enough to eliminate the need for any taxes at all.
Even Republicans have to ask themselves how someone can look them in the face and say they are going to eliminate all taxes for people making 150k or less and somehow balance the budget.
The dollar value of all imports into the US in 2024 is ~4 trillion. A 50% tariff on all imports generates 2 trillion in revenue (obviously volumes will be impacted but this is napkin math).
Total tax receipts by the irs in 2024 were 5 trillion.
If DOGE cuts 1 trillion and tariffs supply 2 trillion it’s 60% of the way there.
You really have to find some room on that napkin to pencil in some significant elasticity. At a universal 50% rate, I would hazard that imports of nearly everything would quickly verge towards zero, only lowed by endless litigation over contracts and/or petitioning the Administration for tariff exemptions and carve outs.
Consider a very simplified example of China, Walmart and the consumer. Someone is paying that 50% for the good to get into the country. They may informally split the tariff bill into pieces, with each taking a part, but if that good does not sell and then languishes unsold at its new higher price, Walmart gets hit the hardest. So unless Walmart is confident that it can actually sell that tariff-inflated good, regardless of how much it eats (or tries to force back on the supplier) or passes through to its pending customer, it’s not going to import that item in the first place. And I would hate to be the buyer or broker who authorizes paying the 50% import tariff because there were no better options just a few days before Trump decides to call the whole thing off again.
You are using the almost unbelievable assumption that import levels would remain the same. Isn’t the whole plan to get things made in America ? Is the plan to tariff everything at 50 percent while we don’t pay any tariffs on exports ?
I keep hearing about the parallels of the Trump administrations tactics to what Milei did in Argentina. Do you think he is trying to mimic Argentina?
I forwarded this to my non-finance friends who have been discussing tariffs on a group text as it’s something they can understand…which is credit to the writer.
I think the hardest thing for the average Joe to understand about Republican economic policy over the last 45 years is how it inhibits their ability to build wealth. They see the direct impact of the small cuts to their income taxes, but don’t see how the much larger tax cuts for the wealthy inflate assets and reduce their ability to build actual wealth unless they already own significant assets.
Our society is increasingly moving toward rent seeking and we are well on our way down the road to serfdom.
There is one rather famous economic theorist, who warns of a possible outcome of a rentier elite. I would hope to prefer Adam Smith, but alas, the wealth of nations has evolved to wealth of the greedy individual .
Monday I told my Republican money manager, from now on I’m treating you “presidentially.” I want you to donate 10% of the fees I pay you to Act Blue and I want proof of contribution. If you are as dumb as a rolling rock you will ignore me. You have until April 1, 2025. Failure to do so will result in me moving my accounts to another broker – call it a tariff, a beautiful thing! An interesting conversation followed. So far he has not gotten back to me. I will move my account in April, I swear (easy to say as an atheist), all 4 of them!
This sounds like we’re entering uncharted territory. Not sure what’ll result. Thanks for helping to connect a few pieces.
We have been sucked into Trump’s psychosis, narcissistic personality disorder. In the previous incarnation at least there were some adults around him who knew how to manage such a personality, for example, divert his attention to a rumor of McDonalds in the dining room. Now he has ensured only toadies counsel him, feeding his narcissism. With no one except Putin to call his bluff we are staggering into a brave new world.
What should have happened when he came down his golden escalator in 2015 was have no cameras and no news commentators around. That would have been the end of it. Donald Trump announces he will run for
President, and no one noticed.
Is it correct to say that Canadian crude oil imports and Mexican food and produce imports are exempt from tariffs. I don’t know the details of the current tariff policy. (Its a moving target…it keeps changing because they are making it up as they go along, as U correctly exposed in a recent article)
Also, I will vehemently disagree with Ur statement that U have a cold dark heart. 🙂
I believe that tariffs on all (or at least most) Canadian goods except steel and aluminum are deferred until April. Don’t know about Mexico
H-Man, my, my, my, we certainly got that off our chest.
T-Bills baby!
Yes. However, there is the non-zero chance that they won’t be honored at the time of redemption. For now that chance seems small. I’ve thought that perhaps CDs from a strong institution (since I’m not sure we can count on FDIC insurance) or tax-free muni bonds (i.e., issued from non-federal governments and agencies) are the safer choice.
If you believe he has any plan at all, which is debatable, then this fits the bill better than most.
Criminal FBI Charges announced today for Habitat for Humanity due to fraud of taking money from Biden administration for purposes of mitigating climate change by evidently creating housing for the poor.
This is just plain evil. Anti-Jesus Christ.
If Habitat for Humanity can be charged criminally for taking grant money from past administration then any government contract for any purpose can be challenged. Whether they win or not, they will be punished. The FBI has unlimited resources to pour into an investigation and trial.
Rep. Summer Lee (D-PA) weighs in, saying, “When we’re talking about authoritarianism, there are a couple things that are your key signs. The first thing is anti-intellectualism, eroding public education, eroding our access to knowledge. The second thing is freedom of speech, and we’re seeing those two attacks go hand-in-hand.”
She adds, “There is a reason why Musk, Trump, all of these people want an uneducated electorate. They want people who cannot compete with them as they steal from us, as they steal our money, as they steal our labor and underpay us, as they take advantage of us. They want a free path to be able to continue to do that.”
Last post. See you on the other side.
You made my week H. What a well written article. It sums up the current administration’s focus perfectly, bluntly, and so anyone who can read should be able to understand what the hell is really going on in this country. What a disgrace for the citizens of the United States. I found you on Seeking Alpha in 2020 and have been a subscriber ever since, the thought you put into your articles is worth every penny. I have never posted a comment about any of your articles, but had to on this one. You know it’s going to be a great article when you drop a Big Lebowski line. Thank you for your humor over the years, we’re going to need it for the next 4.
This is why you show up on election day, to avoid bad consequences. Evidently, the threat wasn’t clear enough for people to see it. I mean, it’s not like the Republicans wrote a 900-page manifesto (Project 2025) that outlined the whole plan that we are now watching unfold.
… if only there had been some sort of sign this was coming.
Apology in advance for posting an external link:
“You must sacrifice”: MAGA excuses for Trump’s trade war echo “prosperity” preachers
Trump’s closest faith “advisor” teaches that if you give her money, God will reward you with riches
https://www.salon.com/2025/03/14/you-must-sacrifice-maga-excuses-for-trade-echo-prosperity-preachers/
Amanda Marcotte draws a direct line between the economic policies of Trump and the religious philosophy of the so-called “prosperity gospel” that promises believers material wealth in exchange for donations.
In her latest piece, Marcotte found striking similarities between Trump officials saying Americans need to suffer from the president’s trade wars to prosper more in the future and the promises made by prosperity preachers such as Trump ally Paula White.
“What’s striking about the prosperity gospel and its empty promises of future wealth in exchange for current privation is how much it sounds exactly like the excuses Trump and his allies are making for the economic wreckage he’s inflicting on the U.S. through unnecessary and unjustifiable tariffs,”
She also suggested that Trump seems to have a natural affinity for prosperity gospel, given that he “built his career on scams” and he seems to appreciate prosperity preachers’ “especially shameless grifter style.”
Marcotte then went through a recap all of the members of right-wing media who have been counseling their viewers to embrace financial sacrifice in recent weeks with promises that Trump’s trade wars will make them richer over the long term.
“In truth, the argument that financial suffering now will lead to wealth later is magical thinking, of the same sort that fuels prosperity gospel claims that donating to a preacher’s private jet fund will inspire God to fill your coffers,” she cautioned.
“There’s significant overlap between prosperity gospel adherents and Trump’s fan base. He’s likely counting on that fact to sell his tariff lies, assuming — for good reason — that his base voters are accustomed to calls to ignore reality and to have blind faith in their leaders instead.”
There is another insane basis for the tortured alliance between the GOP and Israel that has nothing to do with geopolitics or even the basic security of “allies,” in that (as I don’t really understand it), the fate of the Jewish people is tied up with the long-awaited rapture of evangelical Christians who seem willing to put up with anything as long as abortion is on the run and Jews aren’t.
Having said that, I am currently putting the odds of Trump ever giving even $1 to a religious cause, whether legit or con, at absolute zero, including accidentally. And given that neither conservation nor financial sacrifice is a national strength given how we lapse into hissy fits anytime eggs or gasoline are over $4.00, I’m not confident Trump’s “pain, then gain” bait and switch is going to go down easily even among his red-dyed-in-the-wool MAGAts.
If “controlled demolition of the equity rally” in order to “bring down longer-term borrowing costs” is indeed part of a plan, then the 10% correction we have already seen is simply not enough to get us there. They would have to crater markets another 10-20%–either through additional policy turmoil, or through the longer term impact of the tariffs themselves–in order to “succeed.” That’s a lot of pain. The markets rallied today, and Donny is not a patient man, so that could mean even more turmoil is on deck for sometime very soon.
Amen