One of the benefits of these pages is that it keeps us in closer contact with the friends that read the notes than might otherwise be the case. Since a significant period of time has lapsed since the last post, some of these friends have recently very thoughtfully reached out to inquire whether we’re doing okay. Except for being a little bit poorer than we were at the start of the year due to the financial markets’ gyrations – a condition that we share with a large swath of Americans 😉 — we’re doing fine. The span between posts is attributable to both our need to attend to certain family matters and to the fact that having delivered several numbingly-long posts after the election, first describing what would happen when President Donald Trump returned to the White House and then decrying what has, completely predictably, transpired since he reassumed the presidency, I have seen little purpose to either boring you or further agitating you by telling you what you already know.
That said, although a post on the ways Mr. Trump is effecting his assault on our democratic republic and individual American liberties is in the offing, this note of impressions addresses perhaps the most benign of the manners (because they don’t, per se, affect our democratic processes or individual rights) in which Mr. Trump has wreaked havoc upon us since assuming the presidency: the President’s tariff policies. I have noted several times in these pages that Mr. Trump wants to take America back to the 1950s; a comment I heard from a pundit at some point in the last couple of months made me realize I’ve been wrong: Mr. Trump actually wishes to take us back to the 1920s. It is difficult to capture all of the ways in which the Trump tariff policies – to the extent they can be discerned – are ill-conceived; but here’s a try.
The Erraticism. Businesspeople are like major league hitters: they can adjust to a tight or wide strike zone (regulatory scheme); but they need the umpire to maintain a consistent strike zone. Mr. Trump’s erratic policies – one day on, one day off; uncertain delays; willy-nilly exceptions; playing favorites; capricious, completely in his head – are exhausting. They are causing American businesses across the board to reduce their projections for this year. Mr. Trump may find that the recession he is inducing follows the well-known maxim about wars: easy to start, hard to stop. (An aside: some financial pundits have expressed sympathy for U.S. Treasury Secretary Scott Bessent’s obvious discomfort at trying to rationalize Mr. Trump’s irrational tariff spasms. Mr. Bessent was respected as a professionally competent, steady figure by U.S. markets when he assumed his post. I have no sympathy for Mr. Bessent. Any professionally competent, steady figure who watched Mr. Trump’s disregard of the advice of the professionally competent, steady figures who joined his first Administration, and nonetheless agreed to become part of the second Trump Administration, is a damn fool.)
Faux Revenue Enhancement. The Administration’s claims that tariffs will increase government revenues without appreciable inflation are being debunked by about every reputable economist I have heard comment. Whatever the government receives in tariff revenues will be offset by a slowing economy that results in lower individual and business income tax revenues. I don’t think any 2024 Trump voters angered by inflation who lose their jobs because their employers had to cut costs or their employers’ customers bought less of a higher-priced product will consider it a good trade even if a recession cools inflation – a cooling which those of us with longer memories are aware is by no means a certainty (see, “1970s stagflation”).
Preventing Illegal Drug Importation. Let’s put Canada aside – the BBC recently reported that U.S. Customs and Border Patrol data indicates that only about 0.2% of all seizures of fentanyl entering the U.S. are made at the Canadian border (there may be more fentanyl entering Canada from the U.S. than the other way around) — and focus on illegal importation of illegal drugs through our southern border. While the stated objective is obviously vital and one to which America should devote its law enforcement resources, the cartels in the countries in which illegal drug manufacture and export are major industries can bring more pressure to bear on their governments than Mr. Trump can hope to apply through tariffs. This Administration rationale is a makeweight.
Reshoring American Manufacturing. Again, while the stated goal sounds good – and is good, in certain strategic areas such as advanced chip production and medical and pharmaceutical manufacturing – anybody with an IQ of 2 should recognize that America cannot meaningfully reverse four decades of manufacturing offshoring in months, or even in a few years. I would submit that those Americans who voted for Mr. Trump with visions of the golden pot of jobs at the end of the rainbow cannot help but be sorely disappointed. Any meaningful transition of manufacturing back to America – assuming such ever occurs – will take longer than the working lives of many Trump voters; the workers ultimately needed to operate any such reestablished factories will require sophisticated training from an educational system that the Trump Administration is currently gutting; the returning factories might well be placed near educational and urban centers, where relatively fewer Trump voters reside; what such reshoring will provide Trump voters who have been ravaged by inflation are relatively higher-priced goods created by workers paid more than their international counterparts; and – the cruelest irony of all for those envisioning the pot of gold — these new factories are likely to be so automated that they will provide few employment opportunities for the relatively small segment of 2024 Trump voters who will still be young and educable enough to benefit from any concerted, decades-long reshoring effort.
The President’s Gross Misreading of the Political Leaders He Confronts. I made this comment about Mr. Trump during his first term, and it obviously remains true today: he thinks like a businessman, not a political leader. Businesspeople think in terms of money – what is the best achievable financial deal. If one contracting commercial party has greater leverage than the other, the weaker party will bend to make the best economic arrangement it can. Political leaders think in terms of power and image. (One cannot maintain power without projecting a certain image – what the Asians refer to as, “face.”) The difference in perspective is crucial. Mr. Trump believes that because he (America) is big and other countries are littler, he can dictate to these smaller nations in the way he shorted the tradespeople who worked on his New York buildings in the last century. I don’t think he can. Political leaders don’t think that way. Take any number of the most formidable international leaders of the modern era – both American Roosevelts, Winston Churchill, Adolf Hitler, Vladimir Lenin, Joseph Stalin, Vladimir Putin, Mao Zedong, Xi Jinping; I would venture that required to make a stark choice between retaining their power and living in a cave, or ceding their power and living the remainder of their days in a luxurious palace, all would opt to retain the power and live in the cave. Mr. Trump would choose the palace. I don’t care how small one’s country is; one doesn’t become the leader of a nation – there are only 195 of them, out of a world population of over 8 billion people — without a significant amount of pride and chutzpah. I would suggest that Mr. Trump has been so blatantly offensive in his approach that any political leader can take a stand against America’s tariffs and will be able to credibly claim to his/her people for at least a year that any hardship they’re suffering is America’s fault.
Of course, Mr. Xi is a special case. One doesn’t become and remain the leader of the People’s Republic of China, the visceral heir to Chairman Mao and the most powerful autocrat in the world, by being a namby-pamby. He is not going to buckle because Mr. Trump says boo; he can’t afford to look weak, lest he encourage ambitions in the minds of some of his less-supportive Politburo members. Some have suggested that since America is the larger economy, it holds the upper hand in any trade war with China. I’m not so sure. I have seen reported that China’s top 2023 imports from the U.S. were oilseeds, grains, oil and gas — vital to the (relatively pro-Trump) energy and farming sectors of our economy, but available from other nations like Brazil and Russia. As all who care are aware, China has recently responded to Mr. Trump’s tariffs by restricting its exports of rare earth minerals, which are integral in the manufacture of a raft of items from military equipment to semiconductor chips to smartphones, and cannot be acquired elsewhere. Certainly, America has cards to play; at the same time, our relative economic size may not be that big an advantage when dealing with an autocratic government which can be less concerned about its people’s sentiment and can quell any unrest not only by force but by being able to justifiably blame America for the economic disruption that has caused their discomfort.
Political Ramifications. If you believe – I don’t, but such is a point best elaborated upon in a subsequent post alluded to above – that the Trump Administration intends to allow free and fair elections in 2026 and 2028, Mr. Trump’s tariff policies are an egregiously stupid political blunder, as they are seemingly likely to cause a recession that will cost jobs, fuel inflation – arguably the issue that provided him his 1.5% margin over Vice President Kamala Harris last November – and invite devastating retaliation by our allies and enemies alike against American economic sectors heretofore very supportive of him. I would submit that the Administration’s message, essentially, “Americans must absorb some short-term pain for long term gain,” won’t sell in an environment in which the American economy was humming when Mr. Trump took office, and there is no evident outside threat – such as Pearl Harbor, 9/11 or COVID – for which Americans have been traditionally willing to sacrifice. Although Mr. Trump occasionally refers to Abraham Lincoln, he obviously has no idea what Mr. Lincoln actually said during his lifetime; if he did, he might do well to recall Mr. Lincoln’s remarks to the Washington Temperance Society of Springfield, Illinois, on February 22, 1842:
“Few can be induced to labor exclusively for posterity; and none will do it enthusiastically. Posterity has done nothing for us; and theorise [sic] on it as we may, practically we shall do very little for it, unless we are made to think, we are, at the same time, doing something for ourselves. What an ignorance of human nature does it exhibit, to ask or expect a whole community to rise up and labor for the temporal happiness of others after themselves shall be consigned to the dust …. Pleasures to be enjoyed, or pains to be endured, after we shall be dead and gone, are but little regarded, even in our own cases, much less in the cases of others. [Emphasis Mr. Lincoln’s].”
Losing the Forest for the Trees. What I consider the most damning indictment of Mr. Trump’s tariff policies saved for last. I have heard a number of competent experts opine that Mr. Trump is correct when he claims that other nations haven’t always been “fair” to us in their trade practices. Through his tariff initiatives, Mr. Trump is seemingly seeking to “right” these perceived “wrongs.” I would argue that at this point in history, his approach, on the whole, is absurd. We have been the winners. I completely agree that China, which has taken advantage of us for decades through trade and currency manipulation and stealing our intellectual property, is a geopolitical and economic rival that must be dealt with differently and more aggressively, particularly in areas affecting our national security. I also agree that American Administrations in the last quarter of the last century should have been more cognizant of how manufacturing offshoring and our trade arrangements were going to adversely affect the American factory worker, and implemented tax incentives and development programs to counteract those effects. That said, as of the day Mr. Trump reassumed the presidency, America had the largest and best economy in the world, the envy of every other nation. Assuming that other countries have indeed technically taken trade advantage of us over the years, it was obviously of no account; it has been America that has grown ever economically stronger. Here, I admit to being influenced by my own experience. I recall the practices of the insurance company that I, and several of those who read these notes, served for decades; for most of our time there, our organization – contrary to the cliché – maintained a very generous claims approach toward the niche market it served. When one joined the Company, one was puzzled why the Company frequently paid claims that it arguably could have legally denied or limited under regulator-approved policy language. Then, as the years passed, one came to recognize – as the Company consistently grew – that its success was because its market rewarded it with loyalty, embraced new service offerings, and provided it a stream of ever-increasing revenue. Other providers serving the same niche customers in other capacities that hewed to the terms of their agreements — limiting their obligations where they legally could — ultimately lost customer share and departed the marketplace. We got bigger. We got stronger.
Mr. Trump, consumed with petty vindictiveness, simply doesn’t get how America prospered, how it achieved the strength he seeks to exploit by focusing on the forest rather than the trees. Such is beyond his compass. Perhaps at some point, if faced with a slowing economy, he will suddenly make some transparently face-saving declaration that will be gobbled up by his willingly-gullible supporters, and – perhaps save tariffs on China – return to essentially where we were on his “Liberation Day.” If such occurs, all that will have been achieved through his aberrant machinations – assuming a recession is avoided — is to have alienated an entire world. We are where we are, and we will be where we will be.
You’ve long since decided that you didn’t mind that period with less Noise 😉 . Stay well.
McCoy's Noise 