Tag: Economy
People are not pleased but it will get worse
Hard to picture a worse reception than President Trump got for his latest tariffs. American consumers are recognizing that they are inflationary, the stock market tanked, and the rest of the world gasped. That presumably includes the penguins on Heard Island, one of at least two places subject to Trump’s tariffs where no people live.
Not good for Americans
Trump’s minions are out trying to convince Americans the tariffs will not increase prices. But they will. Domestic producers will raise their prices, because they can once the competition raises its prices. The tariffs will act as a tax on consumption, reducing disposable income and slowing the economy.
The protection for domestic producers is badly targeted from a labor perspective. Americans don’t want to work in tee shirt factories that can compete with Vietnam’s. Nor do most Americans want to pick peaches. The US is a developed country that has moved up the value chain.
The re-shoring of manufacturing jobs to America will be slow. It takes years to build serious factories. What investor, seeing how capriciously Trump behaves, would lay out a few billion just because he has announced a 10% tariff? That could disappear tomorrow. Under Biden, the American economy had already created a record number of manufacturing jobs. Manufacturing in Trump’s first term lost jobs, partly due to the COVID-19 epidemic he mismanaged.
Eighty per cent of our jobs are in services. Retaliation will hit those hard and fast.
The economy
So inflation will be up, jobs will be down. The odds of a recession are way up. The firing of tens of thousands of government workers will hit communities all across the country, not just in Washington DC.
Wait until those who own stock have a hard look at their portfolios. They will cut back on spending. This “wealth” effect will be particularly pronounced for retired people, who are required to take amounts fixed on December 31 from their retirement accounts. Unless they anticipated the downturn in the market, they’ll have to raise those amounts by selling stock worth much less than it did a few months ago.
Meanwhile the Fed will have to do what it can to moderate prices. Its only real tool is to raise interest rates, which will pinch consumers even more. Trump will rail against the Fed, but it will have to hold the line.
The rest of the world
Trump is telling people the tariffs are not a negotiating ploy. He wants them to stay for years, which is the only way they can boost domestic production. This means America’s trading partners will be retaliating hard and fast, while turning to increased trade with each other. That will give them the competition they need to enhance productivity, while American industry grows fat and lazy behind high tariff walls.
The consequences will be felt in many ways. Innovation will lag. Trump has already done enormous damage to America’s research universities and government research institutions. His erratic enforcement of immigration laws is also actively discouraging foreigners from coming to the US. Young scientists and engineers will be going for advanced education to universities in Europe, Latin America, Australia, India, and China rather than the US. It’s not only the tourism industry that will suffer from their absence. Immigrant entrepreneurs are a far higher percentage of the total than immigrants are in the population.
Is it all purposeful?
It is tempting to suggest that all this is not an accident. Trump has repeatedly shown an inclination to weaken the United States, especially in Europe. Is that the real purpose?
But I’m afraid that would give him too much credit. The tariffs and immigration policy are just dumb. He is a profoundly uneducated mercantilist and racist. But I wouldn’t say the same about the attack on the universities and research institutions. That is an effort to rid the country of people who would dare to challenge him on factual and rational grounds. He wants an America swollen with racial prejudice and isolated from the world. Half the country supported that objective in last November’s election.
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America made a giant mistake
The Signal chat is now the talk of DC. On it, Secretary of Defense Hegseth shared information that could have given an adversary opportunity to kill American service people. That’s all you really need to know. But it turns out that information came from an Israeli clandestine source, which compounds to damage. Signal is a commercial system not authorized for classified information. Hegseth denies it, to his discredit, but the operational information he shared was unquestionably classified.
Dumb and dumber
National Security Advisor Walz and Director of National Intelligence Gabbard compounded the sin. They lied to Congress about the contents of the chat, which has now been published by The Atlantic. Vice President Vance and President Trump claim they and their underlings did nothing wrong. These are stupid denials. Any lower-ranking official who did what Hegseth did would be courtmartialed or fired. The US Government would never again hire someone who did what he did. No one who did it would ever be hired by the US Government again. We are talking gross malfeasance here, not nuance. If he doesn’t resign, Hegseth should be fired.
Now Trump is trying to distract attention. He has announced 25% tariffs on cars. Tomorrow it will be something else. He is determined to create turmoil. It shifts the ground under his critics’ feet and prevents accountability. Almost no one has noticed Trump’s Executive Order on elections, which is intended to severely curtail voting by poor people and minorities. That’s a big win for him.
Dumbest
But the dumbest thing is the supposed ceasefire agreements in Ukraine. There Trump has promised Putin sanctions relief in exchange for an end to fighting in the Black Sea. That disadvantages the Ukrainians in two different ways. The Russians were no longer fighting in the Black Sea, as Ukrainian naval drones had chased their warships into port. Relieving them of financial sanctions is a big reward for nothing.
Trump has already given Moscow a bar on Ukrainian NATO membership and permission to hold on to occupied territory. Sanctions relief is a hat trick for Putin. He is laughing at Trump, who is playing the fool. I shouldn’t say playing. He is a fool.
The world already knows what Americans need to realize
This Administration is dumb and ill-intentioned. It is literally knocking on doors in Greenland looking for people who want to meet the Vice President and his wife. Everyone is saying a polite “no.” Denmarkers wouldn’t be so polite. In fact, it is now hard to imagine any European country that would be pleased with a high level visit from the US, other than Viktor Orban’s autocratic Hungary.
The situation isn’t much better in the Middle East. Only Israeli Prime Minister Netanyahu would welcome Trump with open arms. Kurkiye’s President Erdogan might like a visit, but only because it would give him the chance to roll Trump again, as he has repeatedly done in the past. Even his friendship with the Saudis has cooled. No more sword dancing. Not to mention Canada, where Trump’s offensive behavior has infuriated a normally equilibrated citizenry.
It will take more time for Americans to fathom the mistake they have made. But buyers’ remorse will set in. Unfortunately, it will only be after tens of thousands have lost their jobs, many farmers have lost their farms, inflation has ravaged the country again, leading scientists have fled for greener pastures, untold numbers have lost their livelihood and lives, and the world has lost confidence in American leadership.
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Neither nothingburger nor whopper
The 30-day fighting pause agreed today between Ukraine and the US is not a nothingburger. But it isn’t a whopper either. More like a quarter-burger.
No pause is a pause until both warring parties have agreed. I imagine the Americans have good reason to hope the Russians will sign on. But it isn’t a real agreement until they do.
What else did they say?
The Ukrainians offered fulsome gratitude to President Trump, the US Congress, and Americans for their assistance. Trump and Vance had complained they hadn’t thanked the US enough.
The US says it is lifting the pause on intelligence sharing and military assistance. Administration officials are claiming neither entirely stopped.
Some Ukrainian humanitarian priorities are cited: exchange of prisoners, release of civilians, and return of forcibly displaced Ukrainian children. These are not new items, and there has been sporadic progress in the past. But for Kyiv they are important.
The Americans and Ukrainians agreed to name negotiating teams for discussions aimed at an enduring peace and Ukrainian long-term security. The Ukrainians want the Europeans involved in the negotiations.
Presidents Trump and Zelensky agreed to conclude a comprehensive critical minerals agreement. This is presumably like the one they didn’t sign at the White House 10 days ago. It is supposed to expand Ukraine’s economy and “guarantee Ukraine’s long-term prosperity and security.”
What’s missing?
I don’t see anything objectionable in this statement. But it leaves out a lot. It makes no mention of Russia’s continuing occupation of Ukrainian territory. It neglects the need for security guarantees beyond the minerals agreement, which is insufficient. The statement says nothing about Russian aggression and responsibility for compensation. It does not assert American support for Ukrainian sovereignty and territorial integrity. It leaves the Americans free to continue excluding the Europeans from the negotiations.
Of course the parties can cover all these issues in the future. But their neglect here tells you how far the US has gone in tilting towards support for Moscow. Nothing in this statement should cause any concern there. If Putin rejects the ceasefire offer, it will betray his lack of interest, not anything in this document.
What next?
If Moscow agrees, we’ll get a 30-day pause. Both sides will try to rearm, consolidate, redeploy, resupply, and prepare for more. I imagine it will be done initially without the trappings of a real ceasefire. It can be built out in subsequent iterations if both sides agree.
The critical question is whether the Americans are really going to continue intel sharing and military assistance. They may start using them to force the Ukrainians’ hand, switching on and off on a daily or weekly basis. The Russians would no doubt take advantage of that on the battlefield, as they have in recent days.
If Trump really wants success, he’ll use any Russian hesitation to tighten the sanctions on Moscow. The Russian economy is in deep difficulty.
Tightening sanctions might have a salutary effect on Putin’s willingness to deal. But Putin has weathered them so far. And Trump shows no signs of taking advantage of the opportunity, even though he has mentioned it in public.
This agreement between the US and Ukraine may not stop the war between Russia and Ukraine. But let’s hope it stops the war between Washington and Kyiv.
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All that glitters is not gold
President Trump is promising a golden era. Let’s have a look.
What’s he doing now?
Tariffs, immigration restrictions, refusal to help democracies in Europe: this reminds me of the 1930s. So too does withdrawal from international institutions and stock market jitters. We know how that ended. Will it be better this time?
The campaign against woke as well as diversity, equity, inclusion is racial and gender prejudice incognito. Racism without the white sheet and pointy hat.
Firing of government workers and canceling of government grants and contracts is how both Trump and Elon Musk conduct business. These are the people you never want to do business with. They don’t keep commitments. They lie about accomplishments. The savings are going to be minimal. Firing all government employees would save 4% of the Federal budget. Firing IRS agents is going to increase the deficit.
The dismantling of USAID is already killing non-Americans who suffer from HIV, malaria, and other diseases. It is also hurting American agriculture and the American contractors who implement most of the work done abroad. At less than .5% of the budget, the savings are minimal. Once the court cases clear, I doubt there will be any savings at all.
What’s he aiming for?
Trump isn’t hiding his goals. He wants to extend a tax cut from his first term that will cost the US government $4.5 trillion. We know what that did the first time around: it was expensive and skewed to the rich. It did not deliver promised benefits. There is no way to compensate for the full $4.5 trillion, but the Republican House proposal is to take $880 million from Medicaid, depriving one-fifth of Americans of health insurance:
Trump will claim the savings come from waste, fraud, and mismanagement (WFM), but that is flim flam. There isn’t anywhere near enough WFM.
Trump has already suspended military aid and intelligence sharing with Ukraine, while asking nothing of Russia. Moscow continues its bombardment of civilians and its push for more territory. Trump’s goal is to get Ukraine to agree to give up land in exchange for Russian security guarantees. Putin has repeatedly proved those worthless. Trump expects the Europeans to provide peacekeepers, but that is entirely dependent on US backup through NATO’s Article 5. Trump is saying he won’t commit to that. The push to end the war in Ukraine is again flim flam. Dangerous flim flam as it is encouraging Putin to do whatever he feels like doing.
In the Middle East, Trump is still bragging on Gaza-lago, his scheme for rebuilding Gaza into a Mediterranean resort. No one things that is happening. If he were successful at moving the Palestinians out, it would make Americans targets of terrorism worldwide.
Dross is what you get
I underestimated Trump. To me, he is an obvious fraud. But he fools a lot of Americans. They think Musk is doing something that will balance the budget. They believe Trump will somehow make peace in Ukraine. His supporters don’t care that his Gaza ideas are bogus. It’s not just that all that glitters is not gold. It’s that anything Trump touches turns to dross.
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Dark times, but the worst is yet to come
@blisterpearl tweeted:
The Trump Administration is moving to cut off military supplies to Ukraine. Europe is trying to step up its game. But it can’t substitute all of the American weapons and intelligence on which Ukraine relies. Secretary of Defense Hegseth has ordered a halt to offensive cyber operations against Russia. Moscow is still conducting cyber operations against the US.
Tariffs go into effect on Canada, Mexico, and China today. They are 25% for Canada and Mexico, and an added 10% for China. Americans consumers will pay them. The stock market knew what to think: it dropped 2% yesterday and is no doubt headed down further.
Elon Musk continues to weaken the US Government, including agencies that regulate his businesses. The courts continue to issue orders to stop his blockage of government funds, but the Administration is mostly ignoring those. Trump hopes “his” Supreme Court will back his authority to make the cuts.
The US Congress remains in Republican hands. Tonight their half will stand and applaud wildly during the State of the Union. Trump meanwhile is denuding the Congress of its most important responsibility: the power of the purse. He is not expending appropriated funds.
No cure in Congress before November 2026
The American people don’t support this. Many managed to forget the disasters of Trump’s first term and too many didn’t turn out for last November’s election. But most now think Trump is doing too much too quickly. That is what Presidents try to do early in their term, knowing that resistance will build later.
The first available cure is in by elections. Two will be held April 1 to replace members of Congress appointed to the Trump Administration. They are both in deep red districts in Florida. It would be a minor miracle if the Democrats were to win one, never mind both. Another will be in upstate New York at a date still to be decided. It, too, is a Republican safe seat, more or less. If I’ve got this right, even winning all three would not flip the House. Marco Rubio’s Florida Senate seat will be up for grabs only in November 2026.
So essentially we’ve got a Republican majority in both houses until then. The damage Trump will have done is enormous. But it will be much worse if the Congress remains in Republican hands thereafter.
Can the popular will change Trump’s course before the next election?
Polls won’t deter Trump, who can’t run again anyway. I’d like to see the Democrats walk out on the State of the Union address tomorrow night. Or maybe not show up at all. Or hold up photos of Ukrainian President Zelensky as soon as Trump mentions Ukraine.
I wonder whether dramatic manifestations of popular opposition can do what is needed. A statement from the ex-presidents would help. So too would a national day of protest, say on May 25, the day before Memorial Day. Each major city should organize its own demonstration, with a monster one in DC.
Some Republican defections would help. Republican Alaska Senator Lisa Murkowski, has criticized what Trump is doing on Ukraine. But she failed to mention his name. If she were to caucus with the Democrats, even as an independent, it would make a big difference. Better yet if she brings a friend or two. So far though, we’ve seen little indication of courage on her side of the aisle.
The worst is yet to come
We live in dark times. But the worst is yet to come.
The budget ax will fall on Medicaid this year, which provides health insurance to twenty per cent of Americans. Trump will need to increase agricultural subsidies to compensate for the retaliation his tariffs will generate. Tariffs and the roundup of immigrants will raise prices, which are already headed in the wrong direction. Trump’s first-term tax cuts for the rich, which he wants extended, will boost the deficit.
If Putin gets what he wants in Ukraine, Moldova will be next. And after that the Baltics. The dominoes will fall, unless Europe finds the wherewithal to back a Ukrainian victory.
But the biggest threat looming is the Supreme Court. If it upholds Trump’s egregious behavior in eviscerating the US government, American democracy is doomed. Already the Washington Post and other media outlets are bending to Trump’s will. With the Supreme Court backing him, no opposition will stand a chance.
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The agreement they didn’t sign
I wrote most of this piece before today’s meeting. The analysis of the agreement is I think correct, even if OBE.
The US-Ukraine minerals deal were supposed to sign today has one great virtue. There are no obvious no-no’s, like limits on its territorial extent or obligations Ukraine will find onerous. It really doesn’t constitute what President Trump said he wanted, which was payback for US assistance. It does make Ukraine devote half its future natural resource revenue to the joint fund the agreement promises. But that is no loss since the fund is devoted exclusively to investments in Ukraine.
But if there are no glaring errors, it still doesn’t constitute a “devastating blow” to Putin. The devil is in the details, which haven’t been negotiated yet. Does this agreement apply to all of Ukraine’s sovereign territory as of 2014, before the first Russian intervention? Can the US turn around and negotiate a similar agreement with Russia that applies to territory Moscow now controls? It just isn’t clear.
This is essentially an agreement to negotiate an agreement. No harm yet in that.
No security guarantees
The big omission from Ukraine’s perspective is the lack of security guarantees. The agreement says this:
The Government of the United States of America supports Ukraine’s efforts to obtain security guarantees needed to establish lasting peace.
That is a backhanded way of saying the US won’t give guarantees but will support Ukraine’s effort to get them. The implied source is Europe, including the United Kingdom and Turkey as well as the European Union. No one else is available. The Europeans should bear this burden. Russian guarantees aren’t worth the paper they are written on.
The problem is that the US saying that the US will not guarantee the guarantors. That is, if NATO European member states guarantee Ukraine’s security, NATO’s Article 5 will not apply to their forces. If the Europeans get into trouble, for example with the Russians, the US will not help them out.
That is important. The obligation to protect European forces in Bosnia led to the Dayton peace agreement. Dick Holbrooke convinced President Clinton it would be better to deploy Americans to end the war rather than conduct an evacuation of the Europeans.
Production isn’t going to be easy or quick
Ukraine is a big country and may have lots of resources of interest to the US.
Here are the more “critical” deposits, rare earths and others (the pinkish area in the southeast is Russian-occupied territory):
But none of this is going to be easy or quick to exploit. Yesterday’s NPR interview on the subject suggested it will 18 years from the required up-to-date mapping to mineral production from a mine:
That would be 18 years in peacetime, or in a peaceful area of the country. I’m not holding my breath.
So why did it blow up?
Signing this agreement, which is no more than an agreement to negotiate, would have been much better than a pissing match. But Vance and Trump seem to me determined to sandbag Zelensky, who wasn’t humble enough for their tastes:
Zelensky should not have taken the bait. Who knows what comes next!
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