“The damage is done.”
I keep hearing that vis-à-vis Donald Trump’s botched “Liberation Day” unveil, and I don’t necessarily buy it.
Certainly he burned some political capital with the likes of Ted Cruz and a few other GOPers who, while ready and willing to sacrifice American democracy at the MAGA altar, can’t completely ignore an economic Chicxulub impactor when it threatens their constituents. At the same time, anyone in the C-suite still naive enough to give Trump the benefit of the doubt, won’t now.
But has the world at large really learned anything in the past 72 hours it didn’t already know about Trump, particularly in light of everything that’s unfolded on the geopolitical stage since his second term began? I doubt it. That damage is done, all right. But not because of any tariffs.
This is the same US president who de facto reneged on America’s Article 5 commitments a mere six weeks ago, and who has his UN delegation voting with Belarus and North Korea. He’s also threatened to annex Canada and seems bent on commandeering Greenland, possibly by military force.
Is it really all that surprising that he’d tax the bejesus out of everyone from chocolatiers in Switzerland to carmakers in Japan to penguins minding their own business on the Heard and McDonald islands? And not tax any Russians?
This is a guy who’s running an extortion racket on everyone from America’s staunchest global allies to the country’s most prestigious universities and largest law firms. He has a crypto token which pretty much everyone agrees could at least in theory be used as a vehicle for influence-peddling, which is to say the door’s wide open for anybody and everybody, including autocratic governments all around the world, to buy favors with The White House.
And this is a man who still, to this day, as President of the United States, sells a series of co-branded Bibles with Lee Greenwood for up to $1,000 each. Who the f-ck brands the Bible? On the website, there’s an FAQ page, and the top two questions are, in order, “Is this Bible officially endorsed by President Trump?” and “Is this Bible officially endorsed by Lee Greenwood?” The answers are, again in order, “Yes, this is the only Bible endorsed by President Trump!” and “Yes, this is the only Bible endorsed by Lee Greenwood!” To make a few of the multitudinous possible jokes, what else would the answers be there? “No, we’re selling these Bibles, but they aren’t endorsed by us”? Or, “Yes, this is the only Bible endorsed by President Trump, but in the interest of full disclosure, Lee Greenwood also endorses several other Bibles”? And then there’s the fact that the Bible doesn’t need Trump’s “endorsement,” nor Greenwood’s, because it’s the Bible. It’s endorsed by God himself and also by his “son,” one Jesus Christ. And why are we even talking about this? Why is The President of the United States running a Bible-selling business on the side with Lee Greenwood?
Oh, and this is also a man who turned his own near-death experience into a line of unisex fragrances. You know, for everyone who wants to know what it smells like to have a quarter of your ear blown off in a botched assassination attempt.
I say all of that to… well, to make you laugh, but also to ask if we’re really “surprised” that Trump would instruct the USTR to enshrine, by way of a farcical “equation,” the elimination of trade imbalances into official US economic policy, despite that goal making no sense whatsoever outside of the extent to which tariff revenue can offset taxes we might otherwise have to collect from the rich? I hope not. I hope we’re not surprised by that, because if we are, then we’re a gullible bunch, aren’t we?
Circling back, I think the damage is done in a broad sense, but that’s been true for a very long time. The tariff unveil on April 2 wasn’t the straw that broke the camel’s back here. It was just the latest in a never-ending series of egregious offenses which, lest we should forget, includes leading an armed insurrection at the US Capitol. I know four years is a long time, and some people have short memories, so as a quick reminder, “Tariff Man” once tried to overthrow America’s system of government via a small army of rednecks, some of whom were armed with bear spray and makeshift spears. Then he pardoned all of those people the first chance he got.
I suppose you could argue there was no direct read-through from January 6 to markets, whereas you can draw a straight line from April 2’s tariff announcement to corporate profits, but if markets can get past the violent ransacking of the US legislature, a PR debacle should be water under the bridge in no time as long as that’s all it ends up being. If someone (anyone) can impress upon Trump the very real possibility that forging ahead risks a stock wipeout on par with Lehman, I think he’ll find a way to wriggle out of this. Remember: The average US tariff rate when he took office in January was between 2% and 3%. It doesn’t have to go up very much to look like a huge increase on a chart if you zoom in enough. So, Trump doesn’t need to blow up the world to convince the MAGA faithful he’s living up to his promises. And besides, they’ll believe anything he tells them.
As discussed in the latest Weekly, if Trump goes through with the tariffs as announced, and tries to sustain them indefinitely, he’s going to crash the stock market (literally crash it, GFC-style) and the US economy’s going to plunge into something that’ll feel like a depression to a nation which, notwithstanding pockets of almost Third World poverty, doesn’t know the meaning of true deprivation. I don’t think for a second Trump’s got that in him.
He was still pretending on Saturday. “THIS IS AN ECONOMIC REVOLUTION, AND WE WILL WIN,” he declared, on TruthSocial. “HANG TOUGH, it won’t be easy, but the end result will be historic.” “Hang tough” doesn’t quite capture it in terms of the persistence this endeavor would require. It’d take forever to do what Trump claims he wants to do, and let’s face it, he doesn’t care about blue-collar America. Everyone knows this is a sham except for a minority of the MAGA faithful who genuinely don’t understand what it means to say we live in a globalized economy.
Make no mistake: I don’t think the world will ever trust America again after we elected this bloviating Mussolini a second time, knowing full well what he planned to do if given the keys to the castle again. So, I do think it’s accurate to say the damage is done on any number of fronts, global and domestic.
But in terms of corporate America and corporate America’s capacity to earn and pay out to shareholders — a much more narrow concern — the damage won’t be done until supply chains are shattered irreparably and trade rewired and rerouted to avoid interactions with a toxic, isolationist America gone irretrievably rogue.
That’ll take a while, and in the meantime, US stocks will burn absent some indication Trump’s reconsidering. So, I think stocks (and the economy) will serve as a circuit breaker. 20% down on the S&P gets Trump nervous, 30% down gets him panicked, 50% down gets him impeached.
With the Supreme Court giving him immunity from prosecution while in office, on what grounds could the Congress impeach him? Sincerely asking.
Part of the SC’s finding in favor of presidential immunity is that impeachment exists as the primary mechanism to hold presidents accountable. As such, nothing has changed from the perspective of things congress can use to justify impeachment.
See pretty much everything he has done since he’s taken office. The list of impeachable offenses is unbelievably long.
I made a comment on Meltdown article that would have been better suited here. Thanks, as always, for your insights and commentary. How about something else ‘lighthearted’ about the stupidity (ignoring that the stupidity in question is burning a lot of good things to the ground along with whatever real grievances they may be accidentally addressing):
More evidence that the tariff framework was written by ChatGPT: the locales named, famously including some islands full of penguins and nothing else or a US/UK military base, happens to coincide with top level internet domains. So much for applying rigor or even understanding how to fact check your own work! If it wasn’t all so horrifying, we could be entertained by their ineptitude.
I do hope he doesn’t wait until -30% or -50% down to walk this back. As you noted before, -900k / -30% down on a 3m retirement account would be extremely hard to stomach for people nearing retirement.
A distracting war will solve everything!
Not that this means anything to a man who is sure the rule of law doesn’t apply to him, even a distracting war requires money. When Congress has had enough it can shut down the defense budget.
Recall that monthly-pay closed end funds are widely used by Americas retirees; the CEF structure is literally tailored for them. Here’s a list of what some of the top 10 most popular CEFs in America did to retirees on a day when the SPY was down a mere 5.8%:
PDI: -9.94%
UTG: -9.59%
PTY – 9.85% (I could list another two dozen large CEFs with corporate debt exposure; the high-yield space has been utterly decimated in the last week; in fact, much more than decimated if you’re using the milquetoast historical definition.)
EXG: -7.23%
CSQ: -8.6%
GOF: -9.41%
GDV: -7.49%
KYN: -9.88%
JPC: – 6.3%
etc. The brief list above includes CEFs from various asset classes: hi-yield, equity, utility/infra, MLPs, preferred, and equity/options. And heaven help you if you’re in CLOs, senior loans, or various other CEFs with private credit exposure.
What I’m saying is that the damage trump caused equity investors yesterday, you can pretty much multiply by two to arrive at the damage done to many of America’s retirees. Long memories, there.
How does any company logically move forward after the cartoonish tariffs unveiled this week? Where can I now source my raw materials, and where can I ship my finished goods and still remain profitable? All you can do is wait and hope that a calamitous stock market forces a quick rethink of everything first. What a plan. Let’s say some countries do decide to eliminate their tariffs, while others decide to match ours, while still others decide to rewire their trade in order to avoid the US all together. What does our economy even look like after that? Did they honestly expect every country to cave? Sheer lunacy.
We’re about 4 weeks from Q1 earnings releases. I’m assuming call after call of lowering guidance. The last two days are just a preview of earnings week. The damage isn’t done after you get the bad diagnosis. Surgery and chemo to follow
The Great Penguin Trade War will never get old. Future presidents should maintain that tariff as a reminder of the economic livelihoods sacrificed to fend back the penguin aggressors.
The more I watch Trump though, the more I think his greatest strength is deftly alternating between grifting and stupidity. It’s the yin and yang of his persona that allows him to make himself appear genuine to the MAGA faithful while giving the wealthy backers the wink-wink, nod-nod so they know he’ll wet their beak.
My goodness though, the incompetence is staggering. We aren’t even 3 months in and the potential downside scenarios are limitless. Laura Loomer, Pete Hegseth, Elon Musk, Mike Waltz, and the rest of this cast of clowns making national security decisions? I hope that helps everyone sleep better at night. If we do end up in a hot war, China will shut down our electric grid and computer systems so fast…
In my view, the ‘Trump put’—or market circuit breaker—is more likely to be triggered by shifts in approval ratings than by a specific percentage decline in the S&P 500.
I have a bridge to sell if his approval ratings hold up after all this chaos and commotion – even his rusted-on MAGAtts must be dizzy, and not in a good way.
This all rhymes with BREXIT. Crazy “conservative” isolationism. Let’s call it exitUS.
Great piece!! So many salient points.
I’m expecting markets to stabilize in the near term, but the damage is done. The USD and equities don’t correlate downward unless the economy is turning.
Global demand destruction for US goods will be material as global consumers boycott.
Economies don’t break overnight, but we’ll be in a recession some time between late Q3 and Q2 2026. Only question is if it’s a depression level event. Once the everything bubble starts to unwind, it won’t matter what anyone does until the S&P 500 bottoms between 2600-1500.
And I believe Trump will be impeached Jan 7, 2027. That’s been my call since late Nov after processing the insanity of the Republican successes last election. So far, he’s still on track.
Our very big brained leader actually initially posted to “Hank Tough,” who I suppose is a good friend of Ron Vara.
We are getting to the point where lampooning is becoming impossible. We may never again see something like Dr. Strangelove, Veep or Idiocracy, or if we do, they will be categorized as documentaries rather than spoofs.