How long do we need to wait and see on the tarrifs?

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America doesn’t have the patience of China

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Shock and awe. Shock and awe certainly worked during the First Gulf War, but shock and awe in economic terms can backfire when your domestic economy is exposed to fallout from it. This is precisely what happened, and it is the cleanup from this fallout that will buys this administration for the next few months as it engages in trade negotiations with foreign governments. The British use the term “own goal” for when a soccer player accidentally scores against his own team. This now has all the appearances of a Trump-led own goal.

At the same time, Trump is still to be commended for addressing and trying to act on the fact globalism is no longer working for America and Americans. The bet that the USA placed on China opening up its political system through integration into the global trade regime lost, and instead it was the Chinese who have benefited the most from the architecture erected by America. The USA is now in pursuit of cobbling together a new system of trade, one which can only be a retreat from globalism, as it seeks to use any new arrangement to tame the Chinese by restoring America’s manufacturing base. The vision is sound, but the execution seems to be sorely lacking.

Julius Krein has analyzed the past three weeks of tariff-mania, and in the opinion of this layman his conclusions are sound:

To be sure, the tariffs proceeded from sound motivations. The hollowing out of the U.S. industrial base over the last fifty years is now widely recognized as a major national security and macroeconomic problem, especially after the Covid pandemic and the Russia-Ukraine War exposed glaring vulnerabilities in America’s defense industrial base. There is—or at least there was—a broad, bipartisan coalition to address this crisis. Unfortunately, the policies the Trump administration decided to pursue seem confused, and the process by which these measures were determined and implemented has been confusing, to say the least.

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Next to profit, business craves nothing more than stability. The initial shock combined with revisions, walk-backs, exemptions, and so on is akin to an earthquake measuring 8.5 on the Richter Scale. How do companies plan for the future if they have no idea what costs will be like from one week to the next?

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What have we learned?

At this point, it should be clear that a tariff-first strategy for reindustrialization is not going to succeed. Purely “protectionist” measures like tariffs work best when there is a domestic industry to protect. But many critical manufacturing sectors—such as cell phones, ships, consumer drones, processed critical minerals, various electronics components, and many others—are essentially nonexistent in the United States. In addition, certain critical manufacturing machinery and equipment are no longer produced here, so a reindustrializing America would, initially, have to increase imports of such equipment. Even when the domestic industry has not been entirely lost, trade protection without investment support has an uninspiring track record. American political discourse has been uniquely obsessed with tariffs as the first or only tool of industrial development, a fixation that is frequently counterproductive.

White House officials’ more recent statements suggest that they have finally internalized what their actions previously revealed: the liberation day tariffs were a costly mistake. The administration will now have to pull off a series of frantic negotiations just to extricate itself from an economic calamity, despite having already exposed points of weakness that forced a retreat from liberation day.

I am forced to agree with Julius that this entire episode has been “a costly mistake”.

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Democrats would win a 30 seat majority if election was held today

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Based on what? They’re at like a 20% approval rating as a party. They can’t get on the same page with a message.

We have to worry about RINO’s more than anything.

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