Why Would Anyone Trust Trump on Trade and Tariffs? “BE COOL” is Not an Adequate Answer

Why Would Anyone Trust Trump on Trade and Tariffs? “BE COOL” is Not an Adequate Answer

This has been a chaotic week for the U.S. economy. Late in the afternoon on Wednesday, April 2, President Trump announced sweeping tariff hikes across the board with all of the United States trading partners (except Russia). The president proclaimed this “Liberation Day” in which he would level the economic playing field, by applying reciprocal tariffs on goods imported into the U.S. equal to the percentage that countries impose on our exports. (The conservative Cato Institute sharply criticized the administration for inflating the percentages. For example, Trump claimed that India imposed a 52% tariff on U.S. goods, although the real amount was 12%.) The Dow Jones fell 1679 points, a 4% decline. The NASDAQ fell almost 6% and the Standard and Poor sank 4.8%. On Friday, they continued their decline. Over the weekend, national and international stock exchanges continued to crash. Leading economic advisers predicted that a recession was more likely than not. This past Wednesday morning, Trump tweeted “BE COOL” trying to persuade investors to start buying stocks and not to continue the sell-off. The situation became even more dire. Retirees saw their savings decline by over 10%. By noon, Trump knew he had to do something. He announced a ninety-day pause on almost all of the tariffs. (Some say, “he flinched”, or “he caved”, or “he retreated”. The Dow Jones which had been down a thousand points skyrocketed, and set a record for the largest turnaround in a single day. People hoped that the surge would continue yesterday (Thursday). It did not, because a China – U.S. trade war still looms on the horizon. China has imposed a tariff of 125% on U.S. products whereas Trump has placed a tariff/tax of 145% on Chinese items. The Dow Jones sank another 1000 points.

Trump’s tragic history with businesses – Anyone who knows the history of Donald Trump, the businessman, should not want him to be the CEO of our national economy. Although Trump has never filed for personal bankruptcy, he has filed for chapter eleven corporate bankruptcy on six of his companies:

• 1991: Trump Taj Mahal
• 1992: Trump Castle Hotel & Casino
• 1992: Trump Plaza Casino
• 1992: Trump Plaza Hotel
• 2004: Trump Hotels & Casino Resorts
• 2009: Trump Entertainment Resorts

Apparently, Trump has not learned from these mistakes. In fact, he does not even admit that they were mistakes. He claims these were savvy business practices. He personally did not lose much money…, his stock owning partners had colossal losses. These bankruptcies do not include the now defunct Trump University in which Trump was ordered to pay $25 million to the students who were swindled.

Some Trump supporters like to refer to his first presidential term (2017-2021) as a wonderful economic “success”. Nothing could be further from the truth! During that administration, Trump increase the national debt by $7.8 trillion. This was the largest increase in the national debt ever by a president in a four-year period! (Whether individually or nationally, irresponsible people can be “successful and happy” if they don’t have to pay the bills.)

Where Do We Go From Here?

This economic crisis is not due to a Covid 19 pandemic nor due to a natural disaster. This came about due to the irrational decision by one man, Donald J. Trump… and his “yes men” (like convicted trade adviser Peter Navarro). Elon Musk has repeatedly called Navarro a “moron”. It remains to be seen which man, Musk or Navarro, will win this squabble and which one will have to leave.

Trump is enamored with tariffs and has been for a long time. The overwhelming majority of trained economists disagree with Trump. Tariffs are taxes which are paid by importers, who then pass along these added expenses to the prices for consumers. Tariffs go against the logic of “comparative advantage” of free market capitalism. Tariffs are a form of protectionism which rewards inefficient national industries. This is why conservative economists oppose tariffs. On this issue, liberal economists agree with their conservative counterparts.

The trade war will probably continue until either the U.S. or the Chinese economy approaches the breaking point, because the Chinese and Trump are very stubborn. After pronouncing the beautiful economic benefits of tariffs, it is extremely difficult for Trump to walk back this policy and now to acknowledge it was mistake. But if inflation starts rising dramatically and/or if we enter into a recession, his supporters will demand he reverse his tariff policy. Maybe Trump and the Chinese can reach an agreement on a low reciprocal tariff. Let’s hope so.

I urge my MAGA friends and readers to examine the facts and to evaluate Trump by the consequences of his economic actions.