Tariffs just a populist MT POV

[CitizenBBN]

Well Chuck, these countries are lining up to talk to Trump about tariffs and my guess is over the next two months our trade partners are going to significantly reduce their tariffs, if not eliminate them all. The sticking point is China whose leverage is they own our bonds. All the more reason to reduce our dependence on borrowing and printing money

If that's the goal that's fine, that's great.

It's not at all clear that is the goal, and I seriously doubt it is the goal of some of Trump's advisors, like Navarro. Some seem to be back in the days of Alexander Hamilton, thinking tariffs are a good way to raise revenues, not a political tool to open up trade with other nations.

As I have said from the start, using them for leverage to get to free trade is fine and I support it. I think some in the Trump camp, like Musk, see it that way. I think some see it very differently, and some of them are just idiots, as is typical in Washington.

The problem is that no one has communicated what they are trying to accomplish, there are really 3-4 different positions being floated by various people in the administration, some of them completely contradictory. Maybe that's what Trump wants, as part of a negotiation strategy, but it could also be that they really want permanent tariffs in place or that they don't really know what they want.

Trump has repeatedly conflated a trade deficit with unfair trade, which isn't true. Now, it's OK to pressure these nations to buy more American goods, again I'm fine with it, as long as we understand that is the goal, not putting in a permanent 10% tax on the American people.

I still say the best approach would have been to negotiate this free trade with a handful of nations, and do so while we pressured China. Go to Vietnam and get a good deal, then start leaning on Indonesia for example, while putting tariffs on China.

The way Trump did it sure gave him maximum leverage for his aides who can go to every nation on earth and explain that Trump is nuts and will drive the planet off a cliff if they don't agree to X or Y, and that may work, but it's a huge gamble that was probably not necessary. There were far better ways to achieve these goals with far less harm to the average American.

[CitizenBBN]

Listening to Shapiro and other sources I think the answer is this:

Trump has a very broad, unclear notion of what he's trying to accomplish other than just get other nations to give us better deals, etc., and there is a war between his advisors as to the end goal.

Bessent, Musk, Akman,others are pushing to use tariffs to get to net zero and then Navarro and others are actually believing that something like a permanent 10% tariff on everything is a great idea.

I'm hoping Trump's desire to make deals and take credit overwhelm his notion that tariffs are inherently good.

Shapiro is saying the same thing I am: the problem is the markets don't know if Trump is using this to get to free trade deals, or he really wants permanent protectionism.

As Ackman said, Americans voted for fair trade, not protectionism for its own sake. I hope Trump gets it.

[CitizenBBN]

Trump decided to at least partially take the off ramp today, and the markets boomed in response.

Looks like they may pursue the strategy for which I take compete credit, and Trump can invite me to Mar Lago this weekend to celebrate.

OK, not really, but the strategy proposed by Musk, Shapiro and a bevy of others with which I agree, which is to cut zero/zero deals with everyone except China and isolate them as much as possible. Them we can tariff b/c it will absolutely put real pressure on them economically, but it will only work if we have booming trade with everyone else and they have it with us. That pushes more production to off shore out of China.

It's far from a slam dunk today, b/c the 10% mystical tariff remains, but the 90 pause gives time to work with our ally nations on a deal, and keeping the pressure on China works politically for Trump and the American voter.

But it's a very good start in the right direction.

[dan_bgblue]

We can assume this was the plan all along, or we can assume the selling off large amounts US bonds by the Japanese, a combination of both, but my thought is he just took pages from the Art of The Deal and put the Chnese in a tough spot and awarded the trading partners that want to do business with the USA.

[CitizenBBN]

We can assume this was the plan all along, or we can assume the selling off large amounts US bonds by the Japanese, a combination of both, but my thought is he just took pages from the Art of The Deal and put the Chnese in a tough spot and awarded the trading partners that want to do business with the USA.

That sounds good, but no way I buy it.

Trump lives off chaos, and a staff that fights in an adversarial way. It has been his method since way before politics.

He has a direction, but not details, and I really doubt there was any plan on the specifics, just a direction to make trade and trade parity the issue. that sure worked, no doubt, but then it was about handling the chips as they fell.

B/c this is far from over, and there clearly are voices in the Administration that are basically channeling Alexander Hamilton and some who are clearly anti-China but pro free trade.

Now, I hope the goal was always this strategy, this is the smart move, but even if so he could have done this without the negatives and losses, and far easier. He easily could have gotten Israel, Vietnam, even the EU to agree to favorable trade terms without threats. He could have gotten Canada to agree without galvanizing them into a broad hatred of the US that will impact US sales as Canadians stay home instead of going to Florida.

Long term this could be a huge win for the US and Trump, and I've said so from the start. If this is about negotiating free trade with the rest of the world except China. If this is about using tariffs to raise money or whatever then no it's an awful idea.

I think the reality is that:

1) this was done for negotiation b/c Trump loves to bluster and ask for the absurd and then negotiate his deal from that position, and
2) there are competing voices in the Administration vying for his support, and he will let it play out and go the way he thinks at that time.

I think in the end he will feel like he "won" (and it will be accurate) to get free trade with our allies, and then stick China hard.

I can live with that. A trade war with China but zero/zero with everyone around them means production moves from China to vietnam, Indonesia, India, etc., and that is a win for us.

I'm all for Trump, but it's not clear how much of this is negotiation bluster and how much he really believes. That's why the markets went crazy.

The problem is that consumer confidence simply will not fully recover that quickly, and this could have been achieved with less collateral damage, assuming that is the goal.

[VirginiaCat]

I'll weigh in.

I want permanent protectionism in key areas. We learned those key areas in early Covid period.

1. Micro circuitry/semiconductor mfg and Electronics in General : Why, key not only just for the world today but Defense

2. Pharma sourcing and Manufacturing: Why: Medical supply chain weakness

3. General ability to mfg. : Supply chain issues left us very low on supply and unable to produce some PPR and ventilators and other medical gear


For those, I want it made here or under NAFTA (read Canada/Mexico) with access and inventory and mfg numbers guaranteed under our control.

[dan_bgblue]

The markets went crazy because investors are crazy, pit traders are a step behind investors, and apparently little old ladies and grumpy old men think all the money they have in heir IRA or mutual fund is going to disappear and never come back.

[CitizenBBN]

I agree on key industries, but the best way to get that isn't tariffs, it's actually just legislation and subsidies. We can require things like pharma production be here, period. No need to use tariffs, which are just a round about way of doing it.

It's also more efficient to simply subsidize those industries with direct taxation, but that's unpopular even though tariffs are just a tax, and a less efficient tax. They are more hidden and less obvious so thus politically more palatable.

We can require those things either be made here or sourced only from allies for example, a list of permitted suppliers, i.e. Canada or Mexico, etc.

That's not even close to what Trump is doing however, with these broad tariffs targeting everyone.

We need some things made here, but that's a matter of industrial policy more than tariff policy, and even if we can get some of that result from tariffs just slapping broad tariffs on everything and everyone doesn't meet that goal.

Trump is just about the definition of "management by chaos", but in economics and foreign relations there is a big premium on avoiding chaos.

[CitizenBBN]

The markets went crazy because investors are crazy, pit traders are a step behind investors, and apparently little old ladies and grumpy old men think all the money they have in heir IRA or mutual fund is going to disappear and never come back.

Then call me a grumpy old man, b/c there is a real chance it will disappear, or be greatly reduced.

The problem with that is timing. If the market is way down for 1-2-3 years and that happens to be when you are retiring and needing that money to be there, you have a problem. If you're 20 and not touching it for 40 years OK, but if you're older you will worry.

Investors aren't crazy, though I can pontificate on how the entire market system is in fact an illusion. But based on the factors on which people make these decisions, their reaction is completely sound. If Apple has to charge $3k for a new iphone instead of $1K b/c of tariffs, then Apple will sell far fewer iphones, and make much less money, making their stock worth less.

There's nothing crazy about it, it's how the economy has worked since literally the 1700s.

I'm fortunate I keep only a very small amount in the markets b/c I don't trust them, and this is why, but I know what happens to investor and consumer confidence when we have these situations, and that I do worry about b/c if people stop buying and investing we have recessions, and when they stop doing it a lot we have depressions. That's just the house of perceptual cards on which this is based, and why the POTUS must keep that confidence high if he wants a strong economy. Trump is doing the opposite of that right now.

[dan_bgblue]

If I had been dumb enough to sell about 1/4 of my holdings in panic mode when the crash was about 2/3 ds the way to the bottom, I would have when the market was near the bottom, I would have been about 25 to 30 thousand in the hole. At that time I was trying to figure out how to generate some cash so I could invest about 100 thousand.

[Catonahottinroof]

20 years ago I wouldn’t have cared near as much, but at my age and closeness to drawing those funds for my living, it means more, and I pay supreme attention to it.

[CitizenBBN]

20 years ago I wouldn’t have cared near as much, but at my age and closeness to drawing those funds for my living, it means more, and I pay supreme attention to it.

Exactly.

Over the course of decades the market returns pretty consistently, between 11%-14% depending on what study you use.

The problem is timing bc if it's down when you have to start pulling money out, or moving from equity to annuity streams, you can get jobbed very badly.

However, the actual value of the market is only part of the equation. The bigger part is the fear and uncertainty that the market indexes reflect, not cause. That means consumers hold their money instead of spending, businesses don't invest.

The whole system works on confidence. If people believe the future will be good, then the future is good. If they think it will be bad it will be bad. IT's that simple at a macro level.

This makes people think it will be bad, whether you agree with it or not. Doesn't matter, that's how it works.

This was using a chainsaw to conduct surgery, as Trump always does. He has the potential to do great things and he f***s it up by going so over the top with everything he does.

[VirginiaCat]

Then call me a grumpy old man, b/c there is a real chance it will disappear, or be greatly reduced.

The Market prices of stocks are transitory. Yes you are seeing a short term drop. maybe even midterm. But I am willing to be the 10 year avg. return for Stocks will stay 10% from the 5 years before March 2025 through the 10 year period through Feb 2035.

[VirginiaCat]

20 years ago I wouldn’t have cared near as much, but at my age and closeness to drawing those funds for my living, it means more, and I pay supreme attention to it.

Darrin, so do I. I know my date. My contract expires June 30 2029 (and I hope my daughter is out of college by that time...). But that is my last paybheck at current employer and no plan for an employee job after that (may do some consulting).

But I am building 2-3 year market downturns into my cash projection needs going forward. That is part of our fiscal planning with our financial planners (or in my case myself)

[CitizenBBN]

The Market prices of stocks are transitory. Yes you are seeing a short term drop. maybe even midterm. But I am willing to be the 10 year avg. return for Stocks will stay 10% from the 5 years before March 2025 through the 10 year period through Feb 2035.

Long term the market will return between 11% and 14% depending on the study you do. As I said.

So yes, long term the markets respond and adjust to these transitory swings.

But if you had your money in the market in 1929 or 2008 and you were trying to retire, you were still screwed.

Did the markets recover? Did businesses close during those downturns? Yes. Did people lose their jobs? Yes. Did people suffer even if after 10 years the markets returned to average? yes.

As I said, it all depends on what you are playing for. My retirement money I didn't worry about, I can't touch it for at least 10 years, so yes it shoudl be fine.

But my short term investments all got converted to cash prior to Trump's "liberation day". I liberated my money from the capital markets.

Guess what? So will every business, every investor. Businesses hate uncertainty, it freezes them from borrowing and making capital investments. They will hold cash.

Pretending this doesn't have a big negative impact that businesses have to plan to survive in the short term just b/c in 10 or 20 years it will all be OK is just misleading. Sure it will be OK on average in a decade, but I'd rather my business not be one of the ones that is driven to closure and a distant memory in 10 years, which is exactly what happens in downturns.

The market averages will recover, which is why I suggest investing in the broad indices barring inside information, but the devil is in the details, and in the short term every business and consumer will shift to holding more cash and reserves, and that's just how economies work.

The way this was implemented was Trump's usual chainsaw approach to surgery, and in fact I can prove it b/c the relented very quickly when they found out they were going to create a recession that we wouldn't be out of before the midterm elections, thus the 90 pause, etc.

Yes the markets long term are a sound investment, but that doesn't mean that short term collapses and recessions are not to be worried about and that PResident's can freely ignore them, politically or economically.