Tag: Trade
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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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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The bad ideas keep on coming
Two weeks have brought us these, just on the foreign policy front:
- Proposed take over Greenland, Panama Canal, Canada, and now Gaza.
- Eviscerated the world’s largest humanitarian agency, recalling all its overseas staff.
- Reached bogus deals to postpone promised tariffs on Mexico and Canada
- Failed to reach a deal with China, which retaliates.
- Arrested thousands of legal immigrants and try to deport them.
Gaza
Trump’s idea is to make Gaza “the riviera of the Middle East.” That’s not the crazy part. I’ve been there (between the two Intifadas, around 1999). Gaza would make a very nice resort community on the Mediterranean. It has beautiful beaches and a flat approach to the seaside. It could accommodate a good sized airport and seaport. When I was there, its hotels were capable of serving Kosher as well as Halal food, shipped from Israel.
But to accomplish his developer’s goal, Trump wants to remove the 2 million or so Palestinians who call Gaza home. When they visit soon, Egyptian President Sisi and Jordanian King Abdullah will tell him what they think of the idea. Neither is willing to accept large numbers of Palestinians even temporarily. Both think their more or less autocratic regimes would not survive such an influx. Neither would want to exclude the possibility of a Palestinian state in the future.
A US takeover of Gaza would require tens of thousands of troops for at least a decade of occupation. Not to mention tens of thousands of contractors to clear unexploded ordnance, clear rubble, and start reconstruction. The cost would be many billions even before beginning to construct the resort.
US occupation of Gaza would also end hopes of a Palestinian state. Hamas and Hizbollah terrorists, Houthi drones, and Iranian missiles would target the Americans. Defense would be costly. The opportunity costs of putting that many American troops into a static position in the Middle East would be astronomical.
The other real estate propositions
Trump’s other real estate propositions are no better. Greenlanders oppose becoming part of the US by a margin of more than 10/1. Canadians feel about the same way. Panama isn’t going to give up the Canal, which is not run by the Chinese, as Trump claims.
In short, none of these things are happening because they are all the fantasies of a failed real estate tycoon. Trump has been successful in tacking his name onto other people’s buildings, not in developing his own projects. That isn’t going to change.
USAID
I am no fan of USAID, but yanking its overseas personnel and abruptly closing its life-saving programs is irresponsible. Folding the agency into the State Department is not necessarily a bad idea. Canada, the UK, and Australia have all incorporated their aid agencies into their foreign ministries. But it has to be done carefully and thoughtfully, which is definitely not what we are seeing right now.
Aid should come in two varieties. One is unconditional humanitarian assistance needed to relieve human suffering. Food, water, health, and shelter for victims of natural disasters, poverty, and oppressive governments belong in this category.
The other is assistance on building governmental and nongovernmental institutions where people are striving for more open and just societies. Even if their governments are oppressive, we should be willing to consider assistance that will improve the situation. This latter type of assistance really does belong in the State Department. The humanitarian relief part should be freestanding.
Mexico and Canada
Mexico and Canada handled the tariffs well. They threatened to retaliate, then offered Trump concessions that they had already made during the Biden Administration. Canada is beefing up its border controls. Mexico has already deployed more troops to its border with the US. Trump swallowed these non-concessions and declared victory. Mexico did even better, as it got Trump to agree to limit arms trafficking from the US into Mexico. That has been a perennial Mexican complaint. Now they get to complain when the US fails to follow through.
It remains to be seen what will happen in 30 days, when the postponement of the tariffs expires. My guess is not much. Maybe another empty concession or two. Then return to the free trade agreement that Trump negotiated in his first term in office. Trump will declare it a win.
As for immigration, Southwest Land Border Encounters were way down already in November and December 2024. Trump can declare victory, ignoring the fact this was accomplished under Biden/Harris.
China
The 10% tariff on Chinese imports to the US is far less than Trump has sometimes bruited. Beijing was ready. It responded with both tariffs on imports to China from the US and limits on exports of rare earth metals. It also launched an antitrust investigation of Google and labeled a couple of US companies unreliable. Those latter moves are not for now important, but they may indicate one direction of Chinese policy in the future.
Americans buy a lot from China, on the order of $500 billion per year. Without equally priced other sources for the goods, the tariffs mean a $50 billion hidden tax increase on US consumers. That’s still relatively small. Wait until Trump gets to his 100% tariff.
Immigration
So far, the majority of people arrested in Trump Administration sweeps of immigrants have not been criminals. This isn’t surprising. All Administrations, including Biden’s, have kept themselves arresting and deporting criminal immigrants. Now the Administration has exceeded the capacity of Immigration and Customs Enforcement detention facilities. So it is starting to release some detainees.
It is also flying hundreds on military planes out of the US to be repatriated. This is an expensive proposition. Someone will eventually tell the Defense Department to save its resources for a more useful purpose.
What could happen next?
Who knows. There is no lack of things we need to do. Trump can even be expected to stumble on a few.
Is there a better option for Iran than restoring maximum pressure? That is what the Administration is going to try to do. If that is preliminary to negotiations on both Iran’s regional malfeasance and its nuclear program, I’ll be for it.
The Administration seems headed for a tougher policy on Ukraine than many had thought possible. That’s good too, if it aims to end the Russian invasion and restore Ukraine’s sovereignty and territorial integrity.
But the ratio of good ideas like those to bad ones is unlikely to be high. The bad ideas keep coming because the President has so many of them.
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Disgrace everywhere you look
Less than two weeks in, the Trump Administration is proving more malicious, less competent, and more destructive than we imagined. The President can’t even pretend to mourn the victims of a plane crash. He needed to parade his racism in front of the cameras as well by blaming the crash on diversity. It turns out the Federal Aviation Administration initiated its diversity program during his own first term. His tariffs on Mexico and Canada will jack up prices and deflate the stock market by Monday.
The firing of dozens of experience prosecutors will hamper the Justice Department for years. The consequent lawsuits will cost more than the money saved by reducing the payroll. And the incompetents he’ll hire as replacements will be mostly white sycophantic males with little experience and no integrity.
The disgrace in the Senate
Some of the worst of Trump’s minions have been testifying this week in the Senate. RFK Jr., Tulsi Gabbard, and Kash Patel lied and insulted their ways through hours of painful fraud and bluster. The results were embarrassing.
RFK Jr. demonstrated no knowledge and no aptitude for Health and Human Services Secretary. Gabbard couldn’t call Edward Snowden a traitor because she had defended his theft and publication of top secret documents. I wouldn’t call him a traitor either until a court tries and convicts him. But she could have just that: he should come home for trial. Kash Patel just denied saying things he has said. The FBI will be Trump’s personal police force by the time he is through with it.
The disgrace at the borders
Trump is having a hard time on immigration. Not many people are crowding the border, because Biden already fixed that. Trump is flying a few immigrants to their home countries at high cost, without demonstrating they are criminals. And to get some more attention he promises to store 30,000 of them at Guantanamo. The US Government found it difficult to imprison 800 there, most of whom turned out not to be terrorists. The GTMO military commission has convicted only eight. The yearly cost of incarceration was $10 million per detainee.
Meanwhile, the Administration has canceled permission for fully cleared refugees from Afghanistan and other war zones to enter the US. It continues to lump asylum seekers with criminals. And it has canceled temporary protected status for hundreds of thousands of Venezuelans.
The disgrace in the budget
Trump initially stopped all Federal grants and contracts, including for major programs like Medicaid and for foreign assistance. That it turned out upset Republicans, as a lot of the money goes to red states:
So now they have lifted the general stop order but are slow walking specific programs through approval. The result is enormous confusion inside the government and the organizations that receive money from it. Everyone is working feverishly to get exceptions. That is a tremendous waste of resources.
Trump tried once before to stop foreign assistance, to Ukraine in 2019. The House of Representatives impeached him for that. Congress appropriates money. It is the President’s responsibility to execute what the Congress says it is for. He has no power to divert the money without at least informing Congress, which of course Trump has not done.
What he wants to do with the money is worse than his effort to slow its disbursement. He wants to extend the tax cuts for the rich approved in 2017. He also wants to pay for prestige projects his billionaire friends have been advocating. Those include sending people to Mars and buying Greenland. No doubt they will also convince him to provide cheap energy for the Artificial Intelligence projects.
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Four more years is four too many
It’s a sad day for America. Not only has Donald Trump re-entered the White House. His wealthy buddies are no longer hiding their allegiances. Elon Musk is not only supporting Alternative für Deutschland. He is copying a salute most Germans still remember with shame.
Off to the expected scams
Trump’s first moves are against immigrants and in favor of the fossil fuel industry. Ignoring the 14th amendment, he is trying to deprive people born in the US of citizenship it provides. He has also blocked asylum seekers. Raids that will round up legal as well as illegal immigrants are imminent. Trump wants to get rid of Biden’s efforts to slow global warming and accelerate oil, gas, and coal production. He is withdrawing from the Paris climate agreement, which allows Washington to define its own measures to prevent climate change. He has also ordered withdrawal from the World Health Organization.
Trump is also promising Tik Tok relief from a law that provides for no possibility of relief from the president. He is pardoning 1500 criminals, most of whom attacked the Capitol violently on January 6, 2021. The Trump family has launched a crypto “memecoin” that has already put billions in his pockets. It will implode, like other such frauds, plundering late-comer investors. Trump’s threatened 25% tariffs on Canada and Mexico February 1 will cause a major trade war. That will jack up inflation and impoverish many people in the Western Hemisphere.
Don’t lose sight of the baseline
Biden is leaving office with an extraordinary record of achievement. Federal and state prosecutors, including in deep red states, have found no reason to prosecute any Biden Administration political appointees. None have resigned in scandal. Biden pardoned his family not because they had done something wrong but because he rightfully feared Trumped-up charges against them. Trump’s nominee for FBI Director has promised such revenge. Note he did not pardon himself.
The economic stats at the end of 2024 are these:
- Unemployment 4.1% (12/24)
- GDP growth 3.0% (IV 24)
- Inflation 2.9% (2024)
- Budget deficit $2T (2024)
- Stock market (DJ) 43k, more or less
What are the odds that Trump will beat all these benchmarks? Close to zero. Three of them? Not much higher. We’ll have to wait and see.
Here are just a few other Biden claims:
—Strongest economy in the world —Nearly 16 million new jobs, a record —Wages up —Inflation coming down —Racial wealth gap lowest in 20 years —Historic infrastructure investments —Lower prescription drug costs —Record health insurance coverage —Most significant climate law ever —First major gun safety law in 30 years —First Black woman on Supreme Court —Help for 1 million veterans exposed to toxins —Violent crime rate at 50-year low —Border crossings lower than when Trump left office
Foreign policy
I fault Biden for his sloppy handling of the Afghanistan withdrawal and his failure to rein in Israel in Gaza. That undermined his claim that America stands up for democracy. He responded reasonably well and quickly to the fall of Assad in Syria. With Iran, Biden failed to revive the nuclear agreement. That has left a big challenge for Trump. But if Biden had succeeded, Trump would have withdrawn again.
Biden was great reunifying and rallying NATO to support for Ukraine. Fearful of provoking war between the US and Russia, however, Biden was too hesitant in providing long-range weapons. I hope Trump will give Kyiv all it needs to win. In the Balkans, Biden’s knowledgeable minions were miserably unsuccessful.
Biden was good on China, Taiwan, India, and Asia in general. But he couldn’t refocus more attention there due to events in the Middle East. We’ll have to see if Trump does better.
Next four years
Half the country did not think this was enough. They disliked Kamala Harris, an articulate, experienced, competent, Black and Indian woman. She had been a successful prosecutor and a senator. They thought they would do better with a convicted felon, womanizer, racist, and flim-flam man. I’ll be interested to hear what they have to say after four more years of his bombast.
PS: Let me be clear: four more yours is four too many. But the last thing I would want is to see the Vice President in the Oval Office. He is arguably worse.
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Stevenson’s army, February 3
– Politico says Air Force plans major reorganization
-Semafor says Iran tried to use an NGO to influence US
– WSJ details UNRWA links to Hamas
– Politic says Biden trade policy splits Democrats
– WSJ explains how a rogue billionaire could build a bomb
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My SAIS colleague Charlie Stevenson distributes this almost daily news digest of foreign/defense/national security policy to “Stevenson’s army” via Googlegroups. I republish here, with occasional videos of my choice. To get Stevenson’s army by email, send a blank email (no subject or text in the body) to stevensons-army+subscribe@googlegroups.com. You’ll get an email confirming your join request. Click “Join This Group” and follow the instructions to join. Once you have joined, you can adjust your email delivery preferences (if you want every email or a digest of the emails).
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