Trump's Tariff Catastrophe & The Manufacturing Mirage
Plus an update after Trump manipulates the market.
Virtually every sane economist of every political stripe agrees: Tariffs and trade wars are terrible for this country. For businesses, consumers, and taxpayers.
Kamala Harris said it on the campaign trail every day last fall. But, for some reason millions of people ignored that message as Trump was running on tariffs every day at the same time. Some sat on their hands of simply believed it wouldn’t happen. The Wall Street collective thought that as well — that it was bluster or would be small, targeted tariffs — easy to justify given another round of huge corporate tax cuts they stood to gain.
Well, Kamala was right and the other side was wrong and the market is tanking, we’re isolated from all our allies, and we now stand at the precipice of a recession. All for no damn good reason other than what’s in the twisted and delusional brain of Donald Trump.
WTF is Trump Thinking?
The question of why Trump really does anything is next to impossible. But, it’s usually based on stupidity, revenge, power, or corruption. Or some combination of all four.
On the stupidity front Trump has been a fan of tariffs since the 1980s, believing that they do the exact opposite of what he thinks. But, given that tariffs are so antithetical to Wall Street and business leaders of all stripes (especially Conservatives) it’s hard to believe that countless leaders haven’t tried to educate him even in the gentlest way possible over his years in power.
So, yes, abject stupidity is a real contender here. Because when you get past all that Wizard of Oz, reality show projection it’s pretty damn clear that Donald Trump is as dumb as a bag of rocks on any real substance on almost any issue.
I think the most likely reason is a combination of stupidity and the last three suspects — revenge, power, and corruption. Donald Trump wants to both punish and reward companies and countries based on his own ego or pocketbook, first and foremost.
He wants to be seen as some global dealmaker, changing markets based on megalomaniacal sense of genius — which is all really layer upon layer of bedrock repression covering the void where a soul should be. But that’s a different story. I do hope that Trump’s brain is preserved when he dies, because when we have the technology it’s going to be the motherload.
First and foremost, it’s power and revenge. It really is the economic side to his thirst for Dictatorship. And never discount the idea of personal gain. Trump (and his friends) can easily sell the market short and make untold millions. I wrote an article last month that laid this out last month called Donald Trump: Tariff King which you can read here.
Now even the Wall Street Journal is singing the same tune on power and corruption:
“Tariffs impose costs that businesses will want to avoid. They will thus be a windfall for Beltway lobbyists as companies and countries seek exemptions from this or that border tax.”
“Mr. Trump is saying there will be no tariff exemptions. But watch that promise vanish as politicians, including Mr. Trump, see exemptions as a way to leverage campaign contributions from business. Liberation Day is Buy Another Yacht Day for the swamp.”
How is Trump selling this? For starters, he’s lying. Bald-faced lying about how tariffs work. It’s his most over-the-top lie since January 6.
But, his broad, gauzy promise of bringing back American manufacturing — and better economic days when people in the middle got by on one paycheck — is deeply tied to a genuine desire in America and a nugget of truth.
This aspect of the debate deserves a little more history and analysis.
The Allure of American Manufacturing
It wasn’t that long ago when there were traditional hubs of different types of manufacturing across America. Shipbuilding in the northeast, textiles in the southeast, steel and metals in Pennsylvania, auto manufacturing in the Rust Belt, aerospace in the northwest.
You get the idea. It even went right down to the city level, with some town in, say, Oklahoma that produced much of the nation’s step ladders or some other quirky good.
That manufacturing base — and the good-paying jobs it provided — was the economic engine that created the rise and stability of the middle class after World War II. Tied with the GI Bill and the sudden affordability of college and you have decades of American productivity and a rising standard of living that had never been seen before in global history.
Starting in the late 70s and speeding up into the early 90s all that changed as companies shipped jobs overseas in search of cheaper labor. And while we learned to love a dozen tube socks for six bucks, that change radically altered our economic landscape. It decimated a huge swath of non-college workers, mostly men, who could make a decent living in all types of manufacturing jobs, from automotive to textile and beyond.
That begat the Regan Democrats, exemplified in Macomb County, Michigan which itself (after a healthy injection of racial and immigrant hatred) begat the core base of MAGA.
And while all that is true. It’s only part of the story. Because while many industries were decimated the United States is still a manufacturing powerhouse, second only to China. But, the dream that textile jobs are going to come back, or phone assembly jobs are going to leave China is never going to happen. Those days are over.
That’s why blanket tariffs are so stupid.
In China they put suicide nets around the apartment’s workers are forced to live in if they put together your iPhone. To minimize the suicide success rate. We don’t want those jobs.
Yes, there is an argument for some targeted tariffs. Take EVs from China which they’d love to flood our market with. EV jobs are a higher-skilled and we have a relatively new manufacturing base that deserves some nurturing in the form of keeping China out. The same argument could be made for solar panels and a number of other new products that could take off here. And some raw materials, say steel if our market is being flooded by cheaper, shoddier alternative.
The ironic reality is that the President who has done best on manufacturing since that giant sea change was Joe Biden. We’re not going to bring sweatshop jobs back. But, there are sectors of the emerging manufacturing economy that can be grown here and actually providing semi-skilled, good-paying jobs.
After decades of Buy American becoming jingoistic joke he required the federal government — one of the biggest buyers of tons of products — to only buy American. Symbolic, but significant. Even more significant was aspects of the rescue plan and CHIPS Act that brought tons of these new jobs to our country — especially in the semi-conductor industry.
One of the reasons Biden didn’t get the credit he deserves is that it takes time for larger manufacturing to get up-and-running — three to five years to construct a plant. Even buying into Trump’s fantasy that tariffs are going to bring manufacturing jobs flooding back into the country is going to take a long time. The idea that we’re at the edge of brief discomfort is another lie.
And while we are still a manufacturing powerhouse, that’s not our real economic reality. Post that 1970s manufacturing upheaval we transitioned into an information and tech society. Or at least that’s the short-hand. It’s primarily every small business under the sun.
As Mark Cuban recently noted, there are 33 million companies in the United States. Only 21,000 of those have more than 500 hundred employees. That 21,000 is 23% of total workers. A giant chunk of the 77% left are small businesses. 32 million entrepreneurs and small business people will all be crippled for something that makes no economic sense — short, medium, or long-term.
The point? This fantasy of some blurred vision of halcyon days is gone. And the sad reality is that the same folks who destroyed that entire way of life toy and manipulate people on how to bring it back when that is impossible.
It’s part and parcel with a long-term sad and sadistic spell Trump has woven. It’s a literal mirage when we need to be talk about true economic realities.
Trump and Elon are ignoring the more than 32 million entrepreneurs and small business owners and employees that can't afford to build a new factory or pay tariffs or absorb cancelled contracts. A giant number of those companies import either raw materials, parts, and components of all kinds to make their goods.
Right now, Trump is trying to run the global economy like a mob boss, abusing tariff powers that were only supposed to be used by the Executive Branch in an emergency. You know, like a pandemic or war, not because you’re an idiotic egomaniac.
If we do make it through Trump we need to go back to, and expand, the Biden model. That doesn’t mean that I support some Soviet-era planned economy. But, the government has the data, foresight, and expertise (well they did) to nudge with tax incentives and nurture a new economy where we have a comparative advantage.
Conservative will immediately yell that’s picking winners and losers! Well, to a certain extent, it is. But what is decades of subsidizing the fossil fuel industry?
Doesn’t it make economic sense to help burgeoning sectors create good jobs and exciting new products that other countries will want to import?
That’s rhetorical.
Of course, it is.
Trump Caves Update:
For people who know the markets things were looking very, very dire Tuesday night after another round of Trump tariffs kicked in. The Dow had dropped bigly that day and the futures market predicted another big drop.
But, when the Dow drops the money usually moves to U.S. Treasury bonds, because that traditionally represents security when things are going haywire. But not this time, as bonds were looking to crash too. One man had created so much chaos that investors globally were (and are) completely rethinking the stability of the United States. So, the next morning things looked so apocalyptic that Trump was convinced to back off — not before very likely manipulating the market so his cronies could make millions before it went back up.
None of this is over. US tariffs are generally 1-3%. Before he caved Trump had them anywhere from 10-50% and above. Even after his 90 day pause they are still at 10% for most countries, more for Canada and Mexico and China at 145%.
And now all that golden age of manufacturing bullshit is gone. It was never real anyway — just another fake excuse for a crazy strategy that really had no strategy.
Who know what the fuck this idiot will do next, other than bribe companies and countries. But, if things stay anywhere close to this the damage to our economy and real people is going to by huge.
It’s amazing to think that one desperately dumb, inherently crooked, and totally vengeful could literally destroy our economy and do severe damage to the entire global financial order.
Eggs anyone?