> I’m not sure whether I should be worried about Trump making terrible economic policy decisions, or heartened that doing so makes it less likely that his efforts to undermine democracy and the rule of law will succeed.
This is bankshot optimism. I am concerned that Trump will make terrible economic policy decisions, but that in the end they won't make his efforts to undermine democracy and the rule of law less likely to succeed.
Regarding #14, can anyone explain the relationship of the domestic savings rate to the trade deficit, and how a higher rate of domestic savings would cut the deficit? I know a higher savings rate means less consumption, both domestically and internationally, and ceteris paribus would push interest rates down, and the cost of government borrowing down too. Would it affect exports or exchange rates in a meaningful way, or is the reduction in the trade deficit purely a function of US consumers buying less stuff from abroad?
This is a pretty fair list. I would make a few more points.
1. The scale of the Chinese manufacturing surplus is so large -- $2 trillion -- that my intuition is that without trade barriers or reducing our own GDP to an extent that we are no longer at full-employment, we would not be able to reduce our trade deficit. Trade barriers can be helpful in such a situation.
2. Real US manufacturing output, according to BLS data, has not grown in 17 years. That's a genuine problem.
3. We Democrats should also offer solutions that address our real problems with our twin deficits and manufacturing base.
4. Previous Republican administrations, including the previous Trump one, blew up both our fiscal deficit and trade deficit.
5. None of our defense products come from China. Probably none of their immediate components come from China either. But, how about the components of the components of our defense products? Or of their components? I suspect we would find they are dependent on parts coming from Chinese companies.
6. The Ukraine war has already made it clear that the US has a serious problem with our defense industrial base.
I am a free trader and dislike the bilateral tariffs and big tariffs in general, but I'm wondering what the alternative scheme is for reciprocal tariffs. Just targeting countries' tariff rates doesn't account from non tariff barriers which can be more important. I've heard a lot of "this is asinine" without a counter proposal. Seems complex.
Maybe to make sense of Trump's tariff circus we should revisit not only his history of stewing about trade imbalances but also his lifelong pattern of personal greed. Specifically:
1) Although Trump has always been highly attentive to the stock market and pleased to see it booming when he's in office, now he's not only content to let it crash but behaving in such a way that it's bound to do so. We know that with Donald Trump, everything is personal. Isn't it possible that he's crashing the market so that people with plenty of cash can scoop up some bargains? Even if he's not directly trading (which he might be rash enough to do), he could easily see his way to a payday in such a scheme.
2) We read, in The New York Times for example, that foreign leaders are desperately "wooing" Trump to gain tariff exemptions. That's a classic script for graft. Isn't it possible that the pocket-lining aspect of the situation is uppermost in Trump's mind?
I know that's awfully superficial thinking, but -- Donald Trump.
29 thoughts inspired by one topic is a lot of thoughts. I wish I had that degree of intellectual vitality. I laughed aloud at the first sentence of thought 14 on losing weight via healthy dieting or getting cholera. Excellent illustrative argument.
For the record could someone tell Matt that I've enjoyed his twitter feed so much (todays was excellent) that it was one of the things that inspired me to subscribe to Slow Boring. I felt guilty about getting such enjoyment and stimulation for nothing and thought it appropriate I financially support this productive and valuable public intellectual.
It’s interesting that Trump chooses to ignore the US trade surplus in services. It’s not even mentioned. How will the Tech Bros feel if the EU and others target services?
If I had to try and steelman the tariffs (say from Bessent's point of view):
- If your threats aren't credible you have little bargaining power, so you need to let Trump go maximum crazy at the outset. While the tariffs make Americans worse off, the pain to big goods exporters is even more severe.
- Take advantage of the bond rally and 10y-30y compression to push out the maturity of the outstanding Federal debt (this was working up until April 4th, although since then bond yields have moved up a bit).
- Quickly strike deals with your key allies and trade partners (especially the blameless big exporters Japan, Vietnam, S Korea, India etc) and remove their tariffs before they go into deep recession. These guys are going to be your low cost manufacturing base going forward. No major concessions are required.
- Then do deals with your actual allies who are less trade exposed (Europe, UK, Australia etc). Maybe do a deal on GDPR and military spending.
- Then neutral countries.
- Finally, do a deal with China whereby they promise to revalue and reflate in order for a reduction in tariffs (that is tied to specific performance).
Or hide behind the blanket tariffs to never do a deal wjth China, but not make it so overt. The ways that the CCP has gamed the international trade systems to further a mercantilist agenda are truly appalling
My guess though is the voters probably before too long actually want cheap shoes from China again (the Dave Chapelle argument). Maybe they can get all that stuff from the rest of the world at only slightly higher than China prices but I dunno, seems like a pretty big switchup in global supply chains.
Eh, I get the point, but the Democratic party continued to embrace Jackson for a long time after the party moved to the left. My recollection is that Andrew Jackson continued to get profiled/named checked at the Democratic presidential convention in the montage of great Democratic presidents until like 1996 or 2000. (I can't find anything on-line about when he was taken out, but I remember some concern trolling in the media when it happened, so I have to have been an adult at the time.) And the annual Jefferson-Jackson fundraising dinner that the DNC used to host wasn't renamed until 2016.
Anyone who has worked in education knows that when you pile on punishments because they said z or did y you have totally lost control. Trump has lost control.
It is beyond frustrating that Dems have been so tepid in their opposition to these tariffs. Fortunately they will likely be such a disaster that no one will listen to the protectionist wing of the party again.
Whichever Dem 2028 hopefull can get ahead of it and lead the charge against tariffs will reap the benefits
I don't understand why you didn't include one of the most obvious explanations for his tariff policy: he's just using it as a universal stick to extort ALL other countries, friend and foe alike, into giving him various geopolitical concessions that aren't even necessarily primarily trade-related.
That's why he's slapping tariffs on both China and Vietnam.
This is Trump's alternative to hard power (which he knows is dangerous for his narrative, given the tendency of military options to lead us into unpopular overseas quagmires that we mostly lose): tariff power.
I think the most under discussed issue stemming from Trump is less the specific fallouts from each policy but instead the complete degradation of America as a stable and reliable partner. Who would sign a free-trade agreement with the US after this? Who would rely on us for security after this? Whatever gains Trump thinks we will get by being mercurial is negated by the lack of certainty. Trump basically tore up the FTA HE SIGNED HIMSELF when he was in office.
After his first term: electing Biden was enough to restore confidence. I do not think removing Trump is enough to restore our standing in the world anymore. The Pax Americana is over, you could argue that it ended a while ago, but any change of salvaging the best (or at least some) parts of it is now past. Its a dangerous multipolar world, and Trump is our steward for at least the next four years.
> I’m not sure whether I should be worried about Trump making terrible economic policy decisions, or heartened that doing so makes it less likely that his efforts to undermine democracy and the rule of law will succeed.
This is bankshot optimism. I am concerned that Trump will make terrible economic policy decisions, but that in the end they won't make his efforts to undermine democracy and the rule of law less likely to succeed.
Regarding #14, can anyone explain the relationship of the domestic savings rate to the trade deficit, and how a higher rate of domestic savings would cut the deficit? I know a higher savings rate means less consumption, both domestically and internationally, and ceteris paribus would push interest rates down, and the cost of government borrowing down too. Would it affect exports or exchange rates in a meaningful way, or is the reduction in the trade deficit purely a function of US consumers buying less stuff from abroad?
This is a pretty fair list. I would make a few more points.
1. The scale of the Chinese manufacturing surplus is so large -- $2 trillion -- that my intuition is that without trade barriers or reducing our own GDP to an extent that we are no longer at full-employment, we would not be able to reduce our trade deficit. Trade barriers can be helpful in such a situation.
2. Real US manufacturing output, according to BLS data, has not grown in 17 years. That's a genuine problem.
3. We Democrats should also offer solutions that address our real problems with our twin deficits and manufacturing base.
4. Previous Republican administrations, including the previous Trump one, blew up both our fiscal deficit and trade deficit.
5. None of our defense products come from China. Probably none of their immediate components come from China either. But, how about the components of the components of our defense products? Or of their components? I suspect we would find they are dependent on parts coming from Chinese companies.
6. The Ukraine war has already made it clear that the US has a serious problem with our defense industrial base.
I am a free trader and dislike the bilateral tariffs and big tariffs in general, but I'm wondering what the alternative scheme is for reciprocal tariffs. Just targeting countries' tariff rates doesn't account from non tariff barriers which can be more important. I've heard a lot of "this is asinine" without a counter proposal. Seems complex.
I don't follow 4. Giving power to the president doesn't take it away from Congress, who could always impose tariffs on their own anyway.
Maybe to make sense of Trump's tariff circus we should revisit not only his history of stewing about trade imbalances but also his lifelong pattern of personal greed. Specifically:
1) Although Trump has always been highly attentive to the stock market and pleased to see it booming when he's in office, now he's not only content to let it crash but behaving in such a way that it's bound to do so. We know that with Donald Trump, everything is personal. Isn't it possible that he's crashing the market so that people with plenty of cash can scoop up some bargains? Even if he's not directly trading (which he might be rash enough to do), he could easily see his way to a payday in such a scheme.
2) We read, in The New York Times for example, that foreign leaders are desperately "wooing" Trump to gain tariff exemptions. That's a classic script for graft. Isn't it possible that the pocket-lining aspect of the situation is uppermost in Trump's mind?
I know that's awfully superficial thinking, but -- Donald Trump.
29 thoughts inspired by one topic is a lot of thoughts. I wish I had that degree of intellectual vitality. I laughed aloud at the first sentence of thought 14 on losing weight via healthy dieting or getting cholera. Excellent illustrative argument.
For the record could someone tell Matt that I've enjoyed his twitter feed so much (todays was excellent) that it was one of the things that inspired me to subscribe to Slow Boring. I felt guilty about getting such enjoyment and stimulation for nothing and thought it appropriate I financially support this productive and valuable public intellectual.
It’s interesting that Trump chooses to ignore the US trade surplus in services. It’s not even mentioned. How will the Tech Bros feel if the EU and others target services?
If I had to try and steelman the tariffs (say from Bessent's point of view):
- If your threats aren't credible you have little bargaining power, so you need to let Trump go maximum crazy at the outset. While the tariffs make Americans worse off, the pain to big goods exporters is even more severe.
- Take advantage of the bond rally and 10y-30y compression to push out the maturity of the outstanding Federal debt (this was working up until April 4th, although since then bond yields have moved up a bit).
- Quickly strike deals with your key allies and trade partners (especially the blameless big exporters Japan, Vietnam, S Korea, India etc) and remove their tariffs before they go into deep recession. These guys are going to be your low cost manufacturing base going forward. No major concessions are required.
- Then do deals with your actual allies who are less trade exposed (Europe, UK, Australia etc). Maybe do a deal on GDPR and military spending.
- Then neutral countries.
- Finally, do a deal with China whereby they promise to revalue and reflate in order for a reduction in tariffs (that is tied to specific performance).
Or hide behind the blanket tariffs to never do a deal wjth China, but not make it so overt. The ways that the CCP has gamed the international trade systems to further a mercantilist agenda are truly appalling
My guess though is the voters probably before too long actually want cheap shoes from China again (the Dave Chapelle argument). Maybe they can get all that stuff from the rest of the world at only slightly higher than China prices but I dunno, seems like a pretty big switchup in global supply chains.
>In reality, very few Americans are represented by labor unions
Ok so what's your solution to that problem?
I'm not sure Matt would agree there's a "problem" there?
So, the guy who did the Indian Removal Act is somehow left wing now?
Eh, I get the point, but the Democratic party continued to embrace Jackson for a long time after the party moved to the left. My recollection is that Andrew Jackson continued to get profiled/named checked at the Democratic presidential convention in the montage of great Democratic presidents until like 1996 or 2000. (I can't find anything on-line about when he was taken out, but I remember some concern trolling in the media when it happened, so I have to have been an adult at the time.) And the annual Jefferson-Jackson fundraising dinner that the DNC used to host wasn't renamed until 2016.
Anyone who has worked in education knows that when you pile on punishments because they said z or did y you have totally lost control. Trump has lost control.
It is beyond frustrating that Dems have been so tepid in their opposition to these tariffs. Fortunately they will likely be such a disaster that no one will listen to the protectionist wing of the party again.
Whichever Dem 2028 hopefull can get ahead of it and lead the charge against tariffs will reap the benefits
What I find funny is that the root logic of trade deficits *seems like* it should be easy to explain.
You give me useful stuff.
I give you pieces of paper I printed.
You give the pieces of paper back to me.
I give you an IOU for more pieces of paper in the future.
How exactly does this leave me worse off, ever?
The paper is made from cutting down and buying Canadian lumber, you see. We are getting conned all different types of ways!! /s
I don't understand why you didn't include one of the most obvious explanations for his tariff policy: he's just using it as a universal stick to extort ALL other countries, friend and foe alike, into giving him various geopolitical concessions that aren't even necessarily primarily trade-related.
That's why he's slapping tariffs on both China and Vietnam.
This is Trump's alternative to hard power (which he knows is dangerous for his narrative, given the tendency of military options to lead us into unpopular overseas quagmires that we mostly lose): tariff power.
I think the most under discussed issue stemming from Trump is less the specific fallouts from each policy but instead the complete degradation of America as a stable and reliable partner. Who would sign a free-trade agreement with the US after this? Who would rely on us for security after this? Whatever gains Trump thinks we will get by being mercurial is negated by the lack of certainty. Trump basically tore up the FTA HE SIGNED HIMSELF when he was in office.
After his first term: electing Biden was enough to restore confidence. I do not think removing Trump is enough to restore our standing in the world anymore. The Pax Americana is over, you could argue that it ended a while ago, but any change of salvaging the best (or at least some) parts of it is now past. Its a dangerous multipolar world, and Trump is our steward for at least the next four years.