Trade, Tariffs, Globalization, Strategic Mercantilismm and Globalism itself

[ya]

The below might still occur.

1. Implementation of a Tiered Trade System
Miran’s vision includes a tiered system for global trade partners, where countries are categorized based on specific criteria:
Criteria for Tiers: Countries would be evaluated on:
Currency Behavior: Whether they manipulate their currencies to gain trade advantages (e.g., keeping their currency undervalued to boost exports).

Intellectual Property (IP) Protection: Their commitment to protecting U.S. intellectual property, a longstanding issue with countries like China.

Market Openness: The extent to which their markets are open to U.S. goods, services, and investments.

Security Alignment with the U.S.: Their geopolitical alignment, particularly in supporting U.S. security interests (e.g., military cooperation, support for U.S. foreign policy goals).

What to Expect:
Formal Tier Assignments: The U.S. might publicly classify countries into tiers, with each tier facing different tariff rates. For example, close allies like Canada or the UK, who align on security and IP protection, might be placed in a lower-tariff tier, while countries like China or those with poor IP records might face higher tariffs.

Negotiation Pressure: Countries in higher-tariff tiers would face economic pressure to meet U.S. conditions (e.g., cracking down on IP theft, opening markets) to move to a lower-tariff tier. This could lead to a wave of bilateral trade negotiations, with the U.S. leveraging its market access as a bargaining chip.

Global Realignment: Some countries might align more closely with the U.S. to secure better trade terms, while others might deepen ties with alternative powers like China, potentially leading to a more fragmented global trade system.

2. Escalation of Geopolitical Leverage Through Trade
Miran’s paper emphasizes using market access as a tool of foreign policy, tying economic benefits to security alignment. This could lead to:
"Fair Trade Umbrella" Enforcement:
Countries seeking U.S. military protection (e.g., NATO allies, partners in the Indo-Pacific) might be required to align economically with the U.S. For example, nations like Japan or South Korea, which rely on U.S. defense support against China or North Korea, might face pressure to adopt U.S.-friendly trade policies, such as reducing trade with China or joining U.S.-led tariff regimes.

This could manifest as formal agreements linking trade benefits to defense cooperation, such as requiring countries to sign onto U.S.-led anti-China trade blocs to maintain low tariffs.

Sanctions and Trade Restrictions:
Countries that refuse to align with U.S. interests might face not only higher tariffs but also secondary sanctions. For instance, nations that continue to trade heavily with China despite U.S. tariffs might be excluded from U.S. financial systems or face restrictions on dollar transactions.

This could lead to a broader use of economic coercion, where the U.S. uses its control over the dollar and its market to enforce compliance.

3. Measures to Depreciate the Dollar
Miran’s paper highlights the overvaluation of the dollar as a core problem for U.S. competitiveness and proposes unconventional measures to address it. While universal tariffs are a first step, the following might still be implemented:
Mar-a-Lago Accord:
Miran suggests a coordinated effort with trading partners to intervene in currency markets to weaken the dollar. This could involve a formal agreement—dubbed a "Mar-a-Lago Accord"—where countries like Japan, the EU, and others agree to sell dollars or buy their own currencies to reduce dollar appreciation.

What to Expect: High-level summits or negotiations where the U.S. pressures allies to participate in currency interventions. This might lead to tensions with countries that benefit from a strong dollar (e.g., those holding large dollar-denominated reserves).

User Fee on Foreign Holdings of U.S. Treasuries:
Miran proposes a "user fee" on foreign holdings of U.S. Treasuries to discourage excessive dollar hoarding, which contributes to dollar appreciation.

What to Expect: The U.S. Treasury might introduce a policy taxing foreign central banks or investors for holding U.S. Treasuries, potentially causing a sell-off of Treasuries and a decline in the dollar’s value. This could roil global financial markets, as countries like China (a major holder of U.S. debt) might retaliate by diversifying away from dollar assets.

Lengthening Treasury Maturities:
Miran suggests pressuring foreign governments to shift their Treasury holdings to longer maturities, reducing short-term demand for dollars.

What to Expect: Diplomatic efforts to convince countries like Saudi Arabia or Japan to buy longer-term U.S. bonds, potentially paired with incentives like tariff relief. This could lead to shifts in global bond markets and affect interest rates.

4. Further Isolation of China
Miran views China’s mercantilist policies as an existential threat, and his strategy aims to isolate China economically. While universal tariffs have already started, the following steps might follow:
Forcing a Binary Choice:
The U.S. might intensify pressure on third countries to choose between trading with the U.S. or China. For example, countries like Vietnam or Mexico, which have been used as conduits for Chinese goods to bypass U.S. tariffs, might face ultimatums to crack down on such practices or lose access to the U.S. market.

What to Expect: A wave of trade disputes as countries caught in the middle (e.g., ASEAN nations) try to balance relations with both powers. Some might align with the U.S., while others might deepen ties with China, potentially leading to rival trade blocs.

Expansion of Tariffs and Trade Barriers:
Beyond universal tariffs, the U.S. might target specific Chinese industries (e.g., tech, clean energy) with additional restrictions, such as export controls or investment bans, to further limit China’s global economic influence.

What to Expect: Escalation of U.S.-China trade tensions, potentially leading to retaliatory measures from China, such as restrictions on rare earth exports or further decoupling of supply chains.

5. Rebuilding U.S. Industrial Capacity
A core goal of Miran’s plan is to reverse the hollowing out of the U.S. industrial base. While tariffs aim to protect domestic industries, additional steps might include:
Industrial Policy Initiatives:
The U.S. might implement subsidies, tax incentives, or direct investments to rebuild manufacturing in key sectors like steel, semiconductors, and clean energy technologies.

What to Expect: Legislation or executive actions to fund domestic production, such as expanding programs like the CHIPS Act for semiconductors or creating new initiatives for critical minerals (as suggested in the Carnegie Endowment web result, web ID: 3). This could lead to a resurgence of U.S. manufacturing but might also increase costs for consumers if domestic production is less efficient.

Supply Chain Realignment:
The U.S. might encourage "friendshoring" or "nearshoring," incentivizing companies to move supply chains to allied countries or back to the U.S. rather than relying on China.

What to Expect: Trade agreements with allies that include supply chain provisions, such as joint investments in critical minerals or manufacturing hubs in North America (e.g., with Canada and Mexico).

6. Global Trade Fragmentation
Miran’s shift from multilateralism to conditional bilateralism could lead to a more fragmented global trade system:
Decline of Multilateral Institutions:
The U.S. might further distance itself from organizations like the World Trade Organization (WTO), which Miran sees as ineffective in addressing modern trade challenges like China’s mercantilism.

What to Expect: A weakened WTO, with the U.S. focusing on bilateral deals or small coalitions (e.g., a U.S.-led trade bloc with allies). This could lead to competing trade systems, with China potentially leading an alternative bloc through initiatives like the Belt and Road.

Regional Trade Blocs:
Countries might form regional trade blocs to counter U.S. pressure. For example, the EU might deepen its own trade integration, while China could expand influence through agreements like the Regional Comprehensive Economic Partnership (RCEP).

What to Expect: A more polarized global economy, with increased trade barriers between blocs and potential disruptions to global supply chains.

7. Economic and Geopolitical Risks
While Miran’s plan aims to strengthen the U.S., its implementation could lead to unintended consequences:
Market Volatility:
Measures like a user fee on Treasuries or currency interventions could cause volatility in financial markets. A sudden drop in the dollar’s value might lead to inflation in the U.S. as imports become more expensive, or it could trigger capital flight from dollar-based assets.

What to Expect: Increased market uncertainty, potentially leading to stock market fluctuations or a rise in U.S. interest rates as investors demand higher yields on Treasuries.

Retaliation from Trading Partners:
Countries facing higher U.S. tariffs might retaliate with their own tariffs or trade barriers, as seen in past U.S.-China trade disputes (e.g., China targeting U.S. agricultural exports). The EU, Canada, or others might also push back if they feel unfairly targeted.

What to Expect: Trade wars that disrupt global commerce, potentially harming U.S. exporters (e.g., farmers, tech companies) and raising consumer prices.

Geopolitical Backlash:
Forcing countries to choose between the U.S. and China could alienate key partners, especially in the Global South, where nations might resent U.S. economic coercion. This could drive some countries closer to China or other powers like Russia.

What to Expect: A decline in U.S. soft power, with potential diplomatic fallout in international forums like the UN or G20.

Timeline and Triggers
Short Term (2025-2026): Expect the formal rollout of the tiered trade system, with the U.S. announcing tier assignments and negotiating with key partners. Measures to depreciate the dollar, like the Mar-a-Lago Accord or Treasury user fees, might also be introduced, potentially causing market turbulence.

Medium Term (2026-2028): The U.S. might intensify efforts to isolate China, with more countries forced to choose sides. Industrial policy initiatives to rebuild U.S. manufacturing could gain momentum, supported by government funding and incentives.

Long Term (2028 and Beyond): The global trade system might fully fragment into competing blocs, with the U.S. leading a coalition of aligned nations and China heading an alternative system. The success of Miran’s plan will depend on whether the U.S. can rebuild its industrial base and maintain global influence without triggering widespread economic or geopolitical instability.

Conclusion
Miran’s paper outlines a transformative agenda, and while universal tariffs have already begun, the full scope of his vision—tiered trade systems, dollar depreciation measures, and a reorientation of global trade around U.S. interests—has yet to unfold. These steps could strengthen the U.S. economically and geopolitically, but they also risk trade wars, market volatility, and global fragmentation. The coming years will likely see a mix of aggressive U.S. policy moves, international pushback, and significant shifts in the global economic order.

[Body-by-Guinness]

Trump's advisor Miran, has laid out the plan all along. You can plug this pdf into an AI engine to get the bullet points as to whats still to come.

https://www.hudsonbaycapital.com/documents/FG/hudsonbay/research/638199_A_Users_Guide_to_Restructuring_the_Global_Trading_System.pdf

Ye gods, Ya, what a comprehensive and revealing piece!

[Crafty_Dog]

The Trade Secret of Intellectual Trumpism
The goal of all these tariffs for avowed protectionists is to make Americans less able to purchase things.
Joseph C. Sternberg
April 10, 2025 2:28 pm ET

President Trump’s sudden reversal this week is unlikely to mark the beginning of the end of his adventures in tariff-land, alas. Two details about this month’s trade fiasco argue for pessimism: Mr. Trump insists on maintaining a 10% base tariff globally despite the “pause” he announced Wednesday. And the administration seems unconcerned about the costs these policies will impose on American households. Both are clues to the true magnitude of Mr. Trump’s trade ambitions.

It’s time to dig into the intellectual version of Trumpism—and yes, there is such a thing. Mr. Trump’s justifications and objectives for his trade policies keep shifting. But it’s becoming clearer that tariffs for him aren’t simply a matter of negotiating leverage, or revenue raising, or protecting a few strategic industries. The policy that’s coming into effect manifests the views of a circle of economists whose understanding of U.S. trading relationships is systematic but unconventional and whose policy prescriptions will come as an unpleasant surprise to many Americans.

The core of Intellectual Trumpism runs as follows: The global economy is characterized by large, policy-induced imbalances in both trade and capital flows. These are caused at root by the decisions of some large economies—Germany, Japan and especially China are the usual suspects—to subsidize production by suppressing consumption in their domestic economies. This creates “surplus” output that they foist on the U.S.

This view isn’t wrong, so far as it goes. Those economies and others historically deployed a range of policy tools to boost exports. In China, the most egregious manifestations are direct subsidies for exporting companies. Less visible to foreign eyes is the financial repression: the deliberate suppression of domestic interest rates and political control of credit to subsidize businesses (which benefit from cheap borrowing) at the expense of consumers (who receive less income from their saving and investment). Such policies can take many forms. In Germany, extensive subsidies shield large companies—meaning exporters—from the worst energy-price consequences of Berlin’s dumb net-zero climate policies. Households pay full freight for electricity.

The net effect of all these policies is a massive transfer of resources in these countries from households to producers, in the expectation that the U.S. will absorb all the products that domestic consumers can’t.

Trump-adjacent economists say we gobble up those products because we must. This is the core argument of Michael Pettis, a Beijing-based finance professor (who has contributed to these pages) whose work popularizing various earlier trade theories appears to have become influential in Mr. Trump’s circle. Because other economies underconsume, the argument runs, they accumulate excess savings. They recycle these savings into the U.S., where we transform foreign claims (in the form of equity investments or purchases of American debt) into consumption of the foreign country’s excess production. Hey presto, a trade deficit.

An oddity of this argument is how little agency the U.S. is said to exercise. Once Washington had made the first mistake of opening our economy via tariff reductions and the free flow of capital, it was off to the races.

The truth is much more complex, and politically challenging: While some other economies suppress domestic consumption and subsidize export production, Americans choose to do almost exactly the opposite. Through political choices such as suppressing energy production and distribution, or permitting red tape and the like, or any number of other policy foibles, we make it much harder than it otherwise would be to produce things in the U.S. Meanwhile, you can’t take a step in America without tripping over a consumption subsidy.

To cite a few: Fannie Mae and Freddie Mac stimulate overconsumption of housing. Subsidized student loans stimulate overconsumption of higher education (which, given the poor lifetime earnings prospects of many degrees, should indeed be understood as consumption rather than as an investment in human capital). The earned-income tax credit creates complex distortions that at the margin subsidize consumption while discouraging additional productive work.

Most glaring, though, are our entitlements. Social Security, Medicare and Medicaid, not to mention a raft of other benefit programs, funnel vast quantities of money into consumption. The trick here is that we’re able to finance these via chronic fiscal deficits funded by foreign investors, meaning at the margin Americans borrow from the rest of the world at ultralow interest rates and funnel the cash into consumption at home.

In this sense, the U.S. trade deficit is a policy choice—and a popular one, for obvious reasons. This explains better than globalist-corporatist conspiracy fantasies why this state of affairs has persisted for so long. The root-causes solution to the perceived problem of the trade deficit would be to rebalance the American economy away from such heavy consumption subsidies and such steep penalties for production.

Some elements of such an agenda can be popular, as Mr. Trump is discovering with his deregulation and cheaper-energy drives. But the entitlement half is a minefield. Republicans are reluctant even about dialing back Medicaid benefits for able-bodied working-age people. The last time anyone tried to reform Social Security, President George W. Bush backed allowing a portion of payroll tax payments to flow into individual investment accounts. The existing system creates a consumption subsidy by transforming tax payments into transfers to recipients; the reform would have created a form of investment subsidy. That bit of good sense degenerated into a traumatic political fiasco for the GOP.

It’s easier instead to fall back on the notion that the U.S. is a victim of foreigners’ decisions to distort their own economies. This opens the door to tariffs as a more politically plausible solution. The U.S. can deploy protectionism to thwart foreign attempts to force us to absorb Chinese, German or Japanese overproduction. Maybe we can even create our own excess production, protectionists hope, if tariffs transfer money from households to companies (in the form of higher prices) and companies use that windfall to expand production.

Note that the end result is in one way the same as entitlement reform: less U.S. consumption, only via the demand suppression of higher import prices. But beyond that, the two policies diverge—and not to Intellectual Trumpism’s advantage. Among many other problems, protectionism risks depressing domestic production, a warning emerging from industries across America whose supply chains are imperiled by tariffs. It certainly doesn’t help domestic productivity. Entitlement reform, by contrast, tends to be an enormous supply-side spur to future economic growth that benefits households as inflation-adjusted wages rise.

This explains the recent startling admission from Trump trade adviser Peter Navarro that tariffs could cost the U.S. economy $6 trillion over 10 years, and the more startling fact that he wasn’t apologetic about this. The Trump bet is that trimming American consumption via higher prices is a more politically palatable way to rebalance U.S. trade than paring back entitlements would be. Hundreds of millions of American voter-consumers will decide in coming months whether they agree.

[Crafty_Dog]

second

April 11, 2025
                                               
                                       Southeast Asia Heeds Trade Warnings
                                       Though the tariff delay was a welcome surprise, regional states know they need to diversify trade partners.
                                                  By: Victoria Herczegh
                                       
                                          
When they were first announced, U.S. President Donald Trump’s “Liberation Day” tariffs brought panic and confusion to markets all around the world, perhaps nowhere more so than in Southeast Asia. Those hardest hit – Cambodia, Laos, Vietnam and Myanmar – have close economic and diplomatic ties with China, which itself is facing monumental tariffs, but none were spared. Though Trump has since announced a 90-day pause in tariffs to allow countries to plan and negotiate, many regional countries, including the poorer ones already reeling from the cuts to the United States Agency for International Development, are convinced that the U.S. is withdrawing from the region, and that they are increasingly left to their own devices.

It’s unclear what they’ll do in America’s absence. Beijing may seem like a more reliable partner, and indeed, closer cooperation seems to serve the interests of both sides. But there are obstacles that will prevent Southeast Asian nations from meaningfully pivoting to China in the long term.

(click to enlarge)
Though the Association of Southeast Asian Nations, which comprises most of the major economies in the region, may be one bloc, its members have different levels of exposure to the U.S., and even the blanket 10 percent tariffs planned by Trump hold risks for everyone. Even the Philippines, which is less exposed than most, is compromised. Though U.S. exports accounted for just 2.6 percent of its gross domestic product last year, some 40 percent of Philippine textile exports end up in America. But Manila at least has some room to maneuver. For one thing, its trade relationship with the U.S. is more symmetrical than those of its neighbors; U.S. imports from the Philippines were valued at $14.2 billion in 2024, up 7 percent from 2023. The Philippines can – and will – reduce tariffs on its main export products in exchange for a similar move by the United States. Moreover, the Philippines can take advantage of its membership in the Regional Comprehensive Economic Partnership, a trade agreement that removes at least 90 percent of export tariffs for member states, including ASEAN, Australia, China, Japan, South Korea and New Zealand. Additional trade within the bloc could help alleviate economic stress in certain sectors brought on by U.S. tariffs. Manila is meanwhile considering renewing negotiations for a free trade agreement with the EU, which, if completed, will also blunt potential tariff damage.

Indonesia is in slightly worse shape. It has a comparatively larger domestic consumer market, and its export-to-GDP ratio is close to 25 percent, about 9 percent of which is due to U.S. exports. The country has had an annual trade surplus with the U.S. since 2019, peaking at $18.9 billion in 2022 and falling to about $16.8 billion last year. Some sectors are about to be hit hard. Roughly one-third of the respective labor forces of Nike and Adidas, for example, are stationed in Indonesia, putting the apparel and shoe industry in peril. Indonesia’s crucial furniture industry, which exports about 50 percent of its products to the U.S., is also highly likely to suffer a downturn. Electronics and electrical equipment, its top export to the U.S. at $4.8 billion, will also feel the effects of tariffs. Accordingly, Jakarta is prioritizing dialogue with Washington in hopes of a “fair and good relationship.”

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This marks a shift from Indonesia’s previous position on the U.S. and China. The government in Jakarta seemed to be moving closer to Beijing, wanting beneficial trade deals so much that at one point it even seemed amenable to acknowledging China’s claims on Indonesian territorial waters. Now, if Indonesia wants the U.S. to consider its needs, it will likely have to distance itself somewhat from China. It will likely look to get closer to its fellow ASEAN members. In fact, it recently (and surprisingly) struck a deal with Vietnam on trade that also resolved overlapping claims on exclusive economic zones. Moreover, Indonesia could, in theory, intensify trade with other markets like Egypt, Nigeria, South Africa and Kenya that are potentially interested in buying electronics, motor vehicles and palm oil. It could also, in theory, goose trade with South America, particularly Chile, its biggest regional trade partner, sending broadcasting equipment, footwear and automotive products. The Comprehensive Economic Partnership Agreement it signed with Canada last year gives Indonesia yet another option for diversifying its exports.

Of all the countries in Southeast Asia, Cambodia is possibly in the worst position. Over the past few years, this small, poor country’s manufacturing industry grew steadily, spurred by the production and exports of textiles, apparel, footwear and furniture. Exports to the U.S. increased to nearly $10 billion from January to December 2024, up 11 percent compared to 2023, and it currently has a $12.3 billion export surplus. Cambodia has emerged as a preferred destination for Chinese manufacturers seeking to lower their production costs and, more recently, to avoid tariffs. More than half of the country’s factories are, in fact, owned by China, and of all ASEAN members it is the closest to China politically and diplomatically. It is therefore likely that the U.S. will use Cambodia to “punish” China. The country is already prone to unrest, and with 17 percent of the population still living in poverty, it cannot afford to lose any export revenue.

Unsurprisingly, Phnom Penh immediately asked Washington for relief after “Liberation Day,” and its leaders expressed a willingness to both diversify its clients and give the U.S. preferential trade treatment. And, like its neighbors, Cambodia seems poised to diversify its trade partners. For the past five years, Cambodia has expanded its reach in European markets, and there is interest on both sides to expand it further. Notably, it has grown disillusioned with the slow progress and underperformance of China-backed infrastructure projects, so it has decided to mend ties with fellow ASEAN members in the hopes of upgrading diplomatic and trade status with the likes of Vietnam and Laos. While Cambodia has some options, its ability to find new partners will be undermined by additional tariffs, should negotiations fail.

Vietnam is in a similar but more enviable situation as Cambodia. Its economic growth was driven by the manufacture and export of electronics, textiles, footwear and agricultural products, but unlike Cambodia, it has a more developed economy and a more diverse export portfolio. After the tariff announcement, the government in Hanoi established a “rapid reaction force,” requesting ministries to work on ways to effectively implement cooperation mechanisms and agreements with Washington in an effort to encourage U.S. businesses to invest in strategic fields and products where they have advantages and where the both nations have demand. So, while Vietnam is looking to strike with the U.S. first, it is likewise pursuing other options in Europe and in ASEAN.

China, meanwhile, will be affected by ASEAN's responses, but it’s hard to see any of the bigger players moving more into China’s orbit, especially if doing so compromised their stated goal of enhancing inter-ASEAN trade. The Philippines is a close U.S. ally and the least likely to align with Beijing. For Indonesia, making concessions to Washington is one thing; abandoning Beijing is something else entirely. Cambodia is already close to China, and though Vietnam has made efforts to diversify its alliances to avoid getting caught in the U.S.-China trade conflict, it is still overwhelmingly dependent on trade with China, which accounted for 26 percent of Vietnam’s trade turnover in 2024. Yet, Cambodia and Vietnam both know how constrictive a relationship with China can be, whether through Beijing’s reneging on funding or through confrontations in the South China Sea. China’s unreliability is an advantage to Washington, the on-again, off-again tariffs notwithstanding, especially since China is facing steep tariffs of its own. If it is to weather the storm, Beijing needs to achieve economic self-reliance, especially in tech, and make sure its people don’t get too restive. The bottom line is that most of these countries would rather negotiate a deal with the U.S. than cast their lot in with China.
Even so, Beijing will try to capitalize on Washington’s apparent disregard for Southeast Asia. Later this month, President Xi Jinping is embarking on a rare three-nation visit to Vietnam, Cambodia and Malaysia in hopes of appearing as a stabilizing force and strengthening trade and defense ties. (Malaysia got off lucky on Liberation Day, seeing as how the U.S. is its third largest trading partner, buying 11 percent of its exports, but then Malaysia is also set to lead ASEAN negotiations with the U.S. on tariff remediation.)

So long as China prioritizes its domestic economy over its regional economy, and so long as ASEAN nations still have a chance to persuade the Trump administration to lower its tariffs, we don’t expect a mass exodus of Southeast Asian countries from the U.S. camp into the welcoming arms of China. The likelier outcome is that Beijing will continue to have good relations with the countries it already has good relations with, and it will maintain its influence in small, weaker economies like Laos and Myanmar. Still, that ASEAN members have been forced to diversify their trade partners, to include each other, is no small thing.

[Crafty_Dog]

April 9, 2025
                                 
                                           

                                    

                                    
                                       Oil in the Trade War
                                       OPEC’s plan to increase production actually has little to do with tariffs.
                                                  By: Ekaterina Zolotova
                                       
                                          
Immediately after U.S. President Donald Trump announced his slew of tariffs last week, OPEC+ members, led by Russia and Saudi Arabia, announced a significant increase in oil production for May. At 411,000 barrels per day, up from a planned 135,000 bpd, this is the group’s highest output since 2020. The move has little to do with the trade war; Russia was not targeted by tariffs at all (the sanctions regime against it practically brought trade down to zero), and the tariffs levied against Saudi Arabia, few as they were, excluded oil so as not to disrupt the U.S. energy market. In fact, OPEC’s announcement was almost certainly made in concert with Washington, given their close interaction in recent weeks. Indeed, it may well be the beginning of concessions and mutually agreed actions meant to create a market that will suit everyone involved.

That’s not to say the new policy won’t be disruptive – even for Russia, Saudi Arabia and the U.S. The sharp increase in OPEC production and the tariffs from the U.S., especially against the backdrop of lowered demand from major oil importers in Asia, are shocks to the energy market. Prices for Brent crude and WTI crude fell by $10 to $60-$65 per barrel over the weekend. Riyadh needs oil to be over $90 per barrel to cover government spending, so the current rates will force it to cut spending on several of its flagship projects. Moscow needs all the money it can get to fund the war in Ukraine and to triage its economy. And the U.S., despite increased exports in recent years, needs oil revenue to reduce its trade deficit and maintain drilling (which $60-per-barrel prices allows it to do).

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The only reason they would agree to goose production is that they see indirect benefits from lower prices. Immediately after starting his second term in office, Trump demanded that Saudi Arabia and OPEC reduce the cost of oil, in part to put pressure on Russia in Ukraine. Because this necessarily comes at the expense of long-term benefits, it’s likely that the call for low prices was meant to ease near-term inflationary pressure on U.S. consumers. Lower oil prices could, in theory, help offset the growth of domestic food prices by reducing transport costs. And though it’s difficult to predict whether commodity prices will fall or how much savings will be generated if tariffs remain in place, the calculus U.S. leaders are making is that less money on gas means more discretionary income for consumers.

For Saudi Arabia, OPEC+ is the vehicle through which it manages global supply and demand, so it’s in Riyadh's interests to keep it buoyant and relevant. But more important, temporarily lowering oil prices can help eliminate competitors and rogue actors that ignore its oil dictates. In Kazakhstan, for example, producers have recently increased production as part of a new expansion project for the Tengiz oil field, exceeding targets by as much as 300,000 barrels per day. And in Iraq, the government has no sign of implementing compensatory cuts for past overproduction. But the bigger target here is Iran, which Washington and Riyadh are clearly targeting. Washington warned in February that it intends to dramatically reduce Iranian oil exports as part of the maximum pressure campaign against Tehran’s nuclear program. As always, what hurts Iran tends to help Saudi Arabia – economically and geopolitically.

Of the three, Russia's position in the oil market is the most shaky, though Moscow seems to be better prepared for price fluctuations this year than last: In the 2025 budget, oil and gas revenues was set at 10.9 trillion rubles ($126 billion), projecting an average annual oil export price of $69.70 per barrel. More, sanctions prevent Moscow from fully enjoying the benefits of high oil prices, and any major deviation from its projections will hurt its bottom line.

And the government will probably be unable to offset the drop in price with increased supplies since that, too, is constrained by sanctions. India, for example, has been a reliable oil buyer despite sanctions, but even it recently refused to accept a tanker carrying 767,000 barrels of Russian oil ostensibly for inadequate documentation. And in late March, the vice president of Chinese company Sinopec Shanghai Petrochemical, which had also frequently defied sanctions, said the firm had reduced its oil purchases from Russia in the first quarter of 2025 after more than doubling purchases in 2024.

Despite the drawbacks, Moscow has had to become more accommodating to both OPEC and the U.S., thanks to the still unresolved conflict in Ukraine, the prospect of economic slowdown and the investment flight out of Russia. It seems as though Moscow agreed to more significant concessions in the oil market in exchange for, among other things, the return of several banks to the SWIFT system, the U.S.-Russia reconciliation and the negotiations on Ukraine.

Meanwhile, Russia is also interested in maintaining dialogue with Saudi Arabia. If sanctions are ever lifted, Russia will be able to sell oil freely again. Keeping the momentum toward negotiation and peace, then, requires market considerations for the Middle East. With prices as low as they are, Asian buyers will have no reason to open themselves to sanctions by buying Russian oil at a discount. Indeed, India's largest refineries recently announced they would look to the Middle East instead of Russia for raw materials. Yet Moscow is confident it will maintain its share of the market because Arab countries can produce only so much before doing so contravenes their own imperatives. And in any case, Moscow has in place several long-term oil contracts that will continue to pay out, and it believes it will be able to make enough headway in Asian markets to stay afloat.
In fact, for the Kremlin there are several short-term benefits to lower oil prices. Its budget accounts for not only the price of oil but also the ruble exchange rate at which oil is traded – the average annual dollar exchange rate is 96.5 rubles. The recent strengthening of the ruble to 83 rubles per dollar reduces oil and gas revenues for the Russian budget. In this case, the weakening of the ruble, which is very sensitive to changes in the main export market, may actually work in Moscow's favor because it could soften the decline in oil prices and exports. Since OPEC’s announcement, the exchange rate has risen by only 2 rubles.
The U.S., Russia and Saudi Arabia believe whatever pain the announcement may cause will be short-lived. Gradual increases can always be suspended or canceled, depending on market conditions, to maintain oil market stability. Oil exporters likely expect this to be a typical bear market lasting at least two months and with a price drop of at least 20 percent. This could be long enough for the U.S. and Saudi Arabia to eliminate competitors but not long enough that they will suffer significant losses. It’s not without risk, but OPEC and the U.S. probably suspect that demand will, in turn, rise.

And in this regard, there is room to maneuver. The U.S. and Russia both expect domestic demand to grow, especially within the framework of an import substitution policy, which Moscow is forced to carry out in light of sanctions, and which the U.S. is trying to stimulate through protectionist policies. And despite the prevailing pessimism over reduced industrial production in China, the world’s largest oil buyer, exporters believe the rest of Asia will make up the loss in demand. After all, China will likely rebound in some form or fashion, and India alone is buying more oil at a colossal pace. And it’s not out of the question that both India and China take advantage of low prices by increasing their imports.

The oil market has already begun to recover from the initial shock of the OPEC announcement, and Brent and WTI futures have begun to grow. In general, the oil market remains uncertain amid the brewing trade war and slowed demand. However, the actions of the U.S., Saudi Arabia and Russia suggest that they have reached some understanding about prices. As negotiations continue, expect more concessions for favorable geopolitical outcomes.

[DougMacG]

https://cowboystatedaily.com/2025/04/11/australia-sells-29b-in-beef-in-america-wont-allow-one-hamburger-in-from-u-s/

Australia Sells $29B In Beef In America, Won’t Allow ‘One Hamburger’ In From U.S.

The previous president never mentioned it but the New York Times, Washington post, AP are all over it, oops they don't care. This international news comes from Wyoming.

To steal a line, the mainstream media covers stories like this, that vindicate Trump, with a pillow, until they stops breathing.

[DougMacG]

National Economic Council Director Kevin Hassett said today on CNN’s “State of the Union” that the Trump administration was negotiating trade policy with 130 countries.

[Crafty_Dog]

Can't say the WSJ is making an unfair point here:
==============================

The Lessons of Trump’s Tariff Exemptions
It’s good to be Apple’s Tim Cook but not to be a small manufacturer that can’t afford a K Street lobbyist.
By The Editorial Board
Updated April 13, 2025 4:07 pm ET

Tariffs are advertised in the name of helping American workers, but what do you know? They turn out to favor the powerful and politically connected. That’s the main message of President Trump’s decision to exempt smartphones and assorted electronic goods from his most onerous tariffs.

Customs and Border Protection (CBP) late Friday issued a notice listing products that will be exempt from Mr. Trump’s so-called reciprocal tariffs that can run as high as 145% on goods from China. The exclusions apply to smartphones, laptop computers, hard drives, computer processors, servers, memory chips, semiconductor manufacturing equipment, and other electronics.

The CBP notice takes the tariff rate on these products down considerably. Barron’s calculates that the exceptions cover $385 billion in 2024 imports. That includes $100 billion from China, or 23% of U.S. imports from that country. The tariff rate falls to 20% on the newly exempted Chinese exports.

These exemptions are good news for consumers who were facing much higher prices for smartphones that are a staple of modern life. How would you like a $2,400 iPhone? But the big winners are the giant companies that assemble these products abroad and now get a reprieve, at least for as long as they remain in Mr. Trump’s good political graces.

Apple CEO Tim Cook is a big winner, as are Dell Technologies’ Michael Dell, Jensen Huang of Nvidia, and the executives and shareholders of Hewlett-Packard and TSMC. This is no rap on them, since their job is look out for the best interests of shareholders and that means getting tariff carve-outs when they can. Some of the companies may not even have sought exemptions, though the opacity of the process for getting one is the Beltway Swamp’s dream.

The Trump exemptions carry several lessons that vindicate tariff critics. One is a rebuttal of the fantasy pitched by Commerce Secretary Howard Lutnick to CBS News that an “army of millions and millions of human beings screwing in little, little screws to make iPhones, that kind of thing is going to come to America” and be automated.

Guess not. As CEOs and these columns have argued, there aren’t nearly enough American workers who could do that work. And even if there were, most of the economic value-added doesn’t come from final-stage assembly. It comes from design and higher-end component supply. It is no credit to the Trump Administration to have a Commerce secretary who knows so little about modern commerce. Oh, and on Sunday Mr. Lutnick said the tariffs on electronics could go up again in the coming months.

The exemptions also expose the fiction that foreign exporters pay the bulk of tariff costs. If that were true, China would absorb the cost and U.S. consumers wouldn’t pay more. No exemptions would be needed. Mr. Trump wants the exemptions to avoid the political blame for rising prices on high-profile products.

This is also a tacit admission that tariffs will make American companies less globally competitive, especially in the artificial intelligence race. That explains the exemptions for ASML’s chip-making equipment and Nvidia’s graphic processing units. Mr. Trump first makes U.S. companies less competitive, then he and his Administration, in their unerring wisdom, pick exceptions worthy of help to remain competitive. Politicians, not success in the marketplace, pick business winners and losers.

The exemptions also undermine the Administration’s legal justification that his tariffs are needed to meet a national “emergency.” Imports of glassware and umbrellas from China are an emergency but imports of electronics aren’t? What are the Chamber of Commerce and other business groups waiting for to sue to block this presidential overreach?

***
All of this exposes the arbitrary political nature of tariffs. Some industries benefit but others don’t. Too bad if you make shoes, or clothing, or thousands of other consumer products that must pay the tariffs but lack the political or market clout to win exemptions. Too bad, too, if you’re a small manufacturer that relies on a component from China but can’t afford a high-priced K Street lobbyist.

Welcome to the new tariff economy, where you still pay onerous taxes, endure punishing regulation, and now must also navigate the political minefield of arbitrary tariffs.

[Crafty_Dog]

https://www.politico.com/news/2025/04/12/china-trade-war-exports-00287123

And Trump looks to counter:

FO:

(3) CHINA ECON CONTAINMENT STRATEGY REVEALED: According to people familiar with the matter, the Trump administration is preparing to ask foreign trade partners to levy tariffs on Chinese imports, to stop China from finding trade avenues around U.S. tariffs. The Trump administration is also considering asking foreign trade partners to impose secondary tariffs on countries with close ties to China.

[Body-by-Guinness]

This piece contains its share of woebegone spin, but shares enough metrics and ways of framing shipping volumes and concerns to be useful:

https://www.cnbc.com/2025/04/16/trade-war-fallout-china-freight-ship-decline-begins-orders-plummet.html

[Crafty_Dog]

They needed to get the president alone.

On April 9, financial markets were going haywire. Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick wanted President Trump to put a pause on his aggressive global tariff plan. But there was a big obstacle: Peter Navarro, Trump’s tariff-loving trade adviser, who was constantly hovering around the Oval Office.

Navarro isn’t one to back down during policy debates and had stridently urged Trump to keep tariffs in place, even as corporate chieftains and other advisers urged him to relent. And Navarro had been regularly around the Oval Office since Trump’s “Liberation Day” event.

So that morning, when Navarro was scheduled to meet with economic adviser Kevin Hassett in a different part of the White House, Bessent and Lutnick made their move, according to multiple people familiar with the intervention.

They rushed to the Oval Office to see Trump and propose a pause on some of the tariffs—without Navarro there to argue or push back. They knew they had a tight window. The meeting with Bessent and Lutnick wasn’t on Trump’s schedule.

The two men convinced Trump of the strategy to pause some of the tariffs and to announce it immediately to calm the markets. They stayed until Trump tapped out a Truth Social post, which surprised Navarro, according to one of the people familiar with the episode. Bessent and press secretary Karoline Leavitt almost immediately went to the cameras outside the White House to make a public announcement.

“We needed everyone singing from the same song sheet,” a person familiar with the matter said.

President Trump signing executive orders in the Oval Office with Commerce Secretary Lutnick and Treasury Secretary Bessent.
Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick behind President Trump. Photo: nathan howard/Reuters
The stock market had cratered after some of Trump’s tariffs started to go into effect on April 2. The next week, an even more troubling sign had emerged: a selloff in Treasury bonds, normally a safe haven when markets are turbulent.

The Truth Social post sent the stock market soaring and helped stabilize the Treasury market. Later that day, Trump said he made the decision because financial markets were “getting yippy” and because he was keyed into warning signs from the bond markets. Just hours earlier, he had told people in a separate Truth Social post to “stay cool,” suggesting he might stay the course.

A spokesperson for Bessent said “the president’s team is working hard to implement the America First Trade Agenda for the American people. Those who aim to divide the president’s team on trade seek to undermine our administration’s goal of uplifting hardworking Americans.”

“More mischief from anonymous sources seeking to divide and conquer the trade team,” Navarro said in a text message in response to a request for comment.

SHARE YOUR THOUGHTS
What is your view of the process around the rollout and subsequent pause in Trump’s tariffs? Join the conversation below.

White House spokesman Kush Desai said, “President Trump has assembled an all-star trade and economic team to implement his America First agenda and finally address our country’s national emergency of persistent trade deficits. Every member of the Trump administration is playing from one playbook, President Trump’s playbook, to level the playing field for our workers and industries and restore American Greatness.”

The alliance between Bessent and Lutnick illustrates how fast things can change inside Trump’s White House. Bessent and Lutnick were locked in a messy public battle during the presidential transition when they were both vying for the Treasury secretary job. Bessent ended up winning out, over the objections of Elon Musk, but Lutnick was given the hefty “trade” portfolio as part of his consolation prize running the Commerce Department.

On trade, however, there are numerous White House officials who have opinions and strategies, including Navarro, who learned much about White House maneuvering during his time in serving in Trump’s first term.

Navarro has proven a singular force in Trump’s orbit—a longtime adviser who has channeled Trump’s pro-tariff instincts and often annoyed his colleagues. He served a prison sentence last year but returned as a trade adviser when Trump won, and Trump has told others that Navarro went to prison for him, The Wall Street Journal has reported.

Navarro was a polarizing figure inside the White House during Trump’s first term, often clashing with National Economic Council Director Gary Cohn and Treasury Secretary Steven Mnuchin. At one point, Mnuchin and Navarro went together on a trip to Beijing to discuss trade with Chinese officials, and tension between the two men became so heated that they engaged in a heated back-and-forth outside the talks.

Trump has long been fond of Navarro, though, as they share a maximalist view on trade policy that calls for more dramatic changes. Navarro co-wrote a book, “Death By China,” which shares many of Trump’s views on Beijing.

Navarro’s hard-line views on China have helped him win the support of large parts of Trump’s base, many of whom are anti-Wall Street. But it has made him a pariah with many financial executives and business leaders.

[Crafty_Dog]

https://americanwirenews.com/receipts-included-trump-wasnt-kidding-when-he-promised-7-trillion-in-investments/

[ccp]

great news
I have to read it hear as will not see on cable.

maybe on Fox after they reiterate the same stuff we already read the day prior.

[Crafty_Dog]

https://www.youtube.com/watch?v=o0YJSEMy0sc

[Crafty_Dog]

(4) DHL SUSPENDS U.S. SHIPMENTS OVER $800: Logistics multinational DHL said it will suspend global shipments to the U.S. worth more than $800 due to new customs rules requiring formal entry processing for all shipments over $800 in value. DHL said business-to-business shipments will also be delayed.

[Crafty_Dog]

https://oilprice.com/Energy/Energy-General/Resource-Wars-China-and-America-Battle-for-Antimony-as-Prices-Surge-200.html?utm_medium=paid&utm_source=fb&utm_id=120217085622630211&utm_content=120225077918380211&utm_term=120217096634690211&utm_campaign=120217085622630211&fbclid=IwY2xjawJ1BTFleHRuA2FlbQEwAGFkaWQBqyAShqCRc2JyaWQRMWJXa29RR21oZ1pFU0U0SWoBHoHDJr12i6aTzDkv3BlGqk3JIPsr-4rckDZP2BjwsiDqS5xtvD_ilKt0fPuz_aem_RV4j7lXIkz3KQoSJ7ycCpw

[Crafty_Dog]

This makes a very interesting and disconcerting point:

https://www.zerohedge.com/news/2025-04-22/china-has-officially-deployed-its-digital-arsenal

[Crafty_Dog]

Is This Trump’s Mitterrand Moment?
The French President saved his government by giving up socialism. It’s a precedent for tariffs.
By
The Editorial Board
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April 23, 2025 5:39 pm ET




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President Donald Trump and China’s President Xi Jinping in Osaka, Japan, June 29, 2019. Photo: kevin lamarque/Reuters
President Trump continues to walk back his original tariff assault, and markets are pleased. They rose again Wednesday after Mr. Trump said he won’t fire the Federal Reserve Chairman and is likely to retreat from his highest China tariffs. Is this Mr. Trump’s François Mitterrand moment?

Readers of a certain age will recall how the French Socialist President swept into power in 1981 promising a far left agenda of government control over the private economy. The market reaction was brutal. Within a year he had put socialism on pause and by 1983 he had abandoned most of it. He went on to serve two terms.

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That historic U-turn comes to mind as we watch Mr. Trump execute a reversal by stages in his tariff agenda. First he carved out space for Mexico and Canada from his reciprocal tariffs. Then he put his reciprocal tariffs on everyone except China on a 90-day pause. Then the Customs bureau gave exceptions to Apple, Nvidia and big electronics companies. Now comes word that Mr. Trump may substantially cut his 145% tariff rate on China.

That’s a long way in three weeks from the declarations by White House aide Peter Navarro and Commerce Secretary Howard Lutnick that there would be no tariff-rate changes. It’s hard to see this as anything other than a retreat amid the harsh reaction of financial markets, worries about recession and price increases, and a sharply negative reaction from the rest of the world—friend and foe.

The good news is that at least Mr. Trump is finally listening to reality. The CEOs of Walmart, Home Depot and Target paid a visit to the White House this week and told Mr. Trump prices would soon rise and store shelves might soon be empty as the tariff impact grows. This would be more than the “little disturbance” Mr. Trump warned about when he first unveiled his tariff barrage.

Financial markets have also had an impact, as they rise or fall based on the latest news about tariffs and Mr. Trump’s plans for Fed Chair Jerome Powell. There couldn’t have been a clearer market test in the last three weeks about the economic damage these columns warned about. The MAGA media echo chamber that praised Mr. Trump’s tariffs as strategic genius looks foolish.

Another harsh reality is that China called Mr. Trump’s bluff and seems to have won this round. When Mr. Trump imposed his tariffs in the first term, President Xi Jinping retaliated with some restraint and sent a delegation to negotiate a trade deal.

This time he retaliated in tit-for-tat fashion and pushed all of his anti-U.S. economic and diplomatic levers. He has cut off U.S. access to crucial rare-earth minerals, stopped the delivery of Boeing jets, looked elsewhere for food and natural-gas imports, and unleashed regulators against American companies.

Beijing has also warned countries not to do trade deals with the U.S. that exclude China—or else. With even U.S. allies facing Mr. Trump’s tariff assault, Beijing’s threat has resonated in a way that it never previously did. U.S. diplomatic sway is ebbing.

The question going forward is whether Mr. Trump is internalizing these economic and political lessons or merely pausing to fight his trade war another day. We doubt even Mr. Trump knows the answer, since so much of his decision-making is ad hoc. He’ll keep his universal 10% tariff in any case.

But if the President is looking for political advice, he could do worse than check out the polling cited nearby by Mark Penn and Andrew Stein. It shows that the public largely opposes his tariffs, whose damage poses the single biggest threat to his Presidency. Better to heed the polls and the verdict of Adam Smith, and take the Mitterrand path to political survival.

[Crafty_Dog]

https://www.msn.com/en-us/money/companies/trump-calls-on-boeing-to-default-china-over-aircraft-returns/ar-AA1Dy7GW?ocid=msedgntp&pc=HCTS&cvid=69b4aa62319e4e39a825f12d4e6f22bd&ei=12

https://www.msn.com/en-us/money/companies/massive-blow-to-trump-as-japanese-car-giant-moves-manufacturing-out-of-us-in-tariff-twist/ar-AA1DzZ4y?ocid=msedgntp&pc=HCTS&cvid=d44bcd657d5d48eabc4f21112523e89b&ei=9

https://www.msn.com/en-us/money/companies/china-cancels-massive-pork-order-amid-trade-tensions/ss-AA1DApQl?ocid=msedgntp&pc=HCTS&cvid=d44bcd657d5d48eabc4f21112523e89b&ei=18#interstitial=1

[DougMacG]

I read this thinking Gordon Chang reads the forum, but maybe it's vice versa.  )

https://www.gatestoneinstitute.org/21576/china-trade-war

"the tariff waivers underscore that not only does Beijing need access to the American market far more than Americans need the China market but also that the United States makes vital products that simply aren't Made in China, and won't be for years at best." — Alan Tonelson, trade expert

" When Trump has to raise the temperature, Beijing has just shown him which U.S. products China believes it cannot do without."

[Crafty_Dog]

https://www.washingtontimes.com/news/2025/apr/29/senate-vote-ending-emergency-declaration-gives-trump-tariff-powers/?utm_source=Boomtrain&utm_medium=subscriber&utm_campaign=newsalert&utm_content=newsalert&utm_term=newsalert&bt_ee=tL2NhBczQaYfvsyXZ1iAY1jqIOiUKO8jQWMLuZedG41eRMWMriva%2F3gpUF1gwhwk&bt_ts=1745973660277

[Crafty_Dog]

Question: Why/how does the system of free trade harm the USA or cause costs?


Response: Free trade emerged as a principle after World War II.  It emerged as a tool for containing the Soviets.  Free trade allowed Europe to economically revive, because while there was no internal demand for goods, with Europe was shattered, the ability of the US to absorb European exports, with low cost European products, revived the European economy and fit the American geopolitical interests.  The free trade principle was based on the need to revive Europe, at some cost to the United States economically, but of great value geopolitically.  The principle of free trade, coupled with foreign aid, continued as Europe’s empires collapsed and they were renamed the third world. The US and Russia fought proxy wars throughout the cold war, with the US gaining massive advantage by allowing free trade to flourish, and providing foreign aid, both of which helped block Soviet power, since it did not have economic power to match the US.  But this was the norm only in the last 80 years of the Cold War. And it has allowed imbalances that the US no longer needs to bear geopolitically as the Russians weaken. 

Free trade can also be dangerous.  Having relatively free trade with China, allowed low cost Chinese labor to export critical elements needed by the industrial base for low costs.  But it created a grave danger. If you recall in the 1970s, there was an Arab Oil Embargo which for a time shattered the American economy.  With free trade decreasing cost of goods in America, if the goods we need to run our industries are embargoed, or there is unrest in a country we depend on, the US is vulnerable to disaster.  So free trade existed while the geopolitical interest of the US required it. But it also created great risks. Today, the relatively free trade system has created a dependency on foreign nations that can collapse if China would choose to embargo shipments for geopolitical reasons, or unrest in China would make production there decline—or there may be an earthquake in Shanghai.  Free trade gives economic benefits as well as geopolitical ones, but as times change they can be traps. Obviously the shift away from free trade, to the norm prior to the last 80 years, is financially painful in the extreme, and Trump’s engineering is maximizing the pain, but I think his intention is to impose short term chaos for a long term increase in national security and wealth.  So the value of free trade depends on the circumstances. I am not sure of the wisdom of his method, but the dangers of free trade are as clear as their benefits, but it depends on the risk.  Tariffs in the long run mitigate the risks balancing them against the advantage.

[DougMacG]

Trump has blamed the economic retraction (that is not a retraction) on Biden, driving the Left crazy.

He actually set out loud, 'I blame all the bad on Biden and I'll take credit for all the good'.

(The market already recovered.)

In this awkward period where Biden's policies (and budget) are mostly still in place and Trump's new agenda is mostly not in place yet, we wait for things to change, hopefully for the better. In the meantime, Trump is giving the Democrats  time to declare themselves (time and again) on the 20% side of 80/20 issues.

If Trump sticks with it and he will, new trade agreements will be coming in from across the globe. (Also the tax plan and budget reform must happen, one way or another) .

Is there any doubt that of the people who know about it, 80% oppose the us being treated unfairly on trade? Yet Democrats are becoming 100% on record as opposing Trump's efforts to level the playing field, which inevitably will be what happens.

In a related matter, I would imagine that 80% don't want the largest tax increase ever to hit the US economy right now, yet Democrats are locking in 100% in favor of that.

On a third front, Democrats are expressing universal disapproval of Trump's efforts to end the war in Ukraine. But those efforts will pay off soon and there will be peace and one president in particular taking credit.

 Back to trade, it was Trump who flipped the parties.

I just heard a New York Times podcast with Bret Stephens and Gail Collins. The so-called conservative is a 'free Trader',  hates Trump and says the (R) party has moved away from him. (Funny that his views mostly flipped with his employment.)

I am a free trader, but what we had was not free trade.

Trump won the presidency by running against both parties. Now he is keeping his promises. No one else had the strength to do this.

When success comes and it will come, all the political opponents are on record as opposing it.

I hope the end game is free trade - with everyone except adversaries.

One point I heard on globalization, if it had a name and a face it would be that of Mark Carney, new liberal leader of Canada. Today he is meeting with Trump.

Trump can be WAY tougher on him than if the conservative had won.

In dollars per capita, they rely on US 10 times more than we rely on them. Trump never has to cave, and certainly not cave first.

Unlike Xi and Putin, Carney does not need just to save face, he needs to save his country.

[F.Danconia]

Here's my take.  This is not light reading.  It's the product of applying a methodology called the Analysis of Competing Hypotheses, or ACH - a technique developed by the CIA to predict what Soviet Russia might do during the Cold War.

When analyzing the intentions behind public policy - especially one as controversial and sweeping as President Donald Trump’s trade and tariff strategy - emotions and politics often cloud the discussion. Too often, especially where Trump is concerned, political partisanship takes the place of careful reasoning, and conclusions are made before questions are even asked. But there is a better way: an intelligence analysis method known as Analysis of Competing Hypotheses (ACH).

President Donald Trump’s tariff policies, relaunched in his second term as of April 4, 2025, challenge easy labels. Are they a throwback to protectionist failures like the Smoot-Hawley Tariff of 1930, a geopolitical power play, or a populist stunt? Traditional takes often pigeonhole tariffs into economic silos—trade wars or free-market betrayals—missing the layered statecraft Trump wields. His approach fuses economic pressure, diplomatic coercion, and domestic messaging, driven by a dealmaker’s pragmatism rather than rigid ideology. To cut through this complexity, I’m going back to my early training as an intelligence analyst and applying the methodology and rigor of ACH to President Trump and what might be the most emotionally charged and controversial policy agenda in modern times.

Fair Warning! This “Special Edition” isn’t a quick read—it’s a deep dive. We’ll unpack ACH, root it in its predictive intelligence context, and apply it step-by-step to Trump’s tariffs, from a baseline snapshot to a final synthesis enriched by his personal traits and global relationships. Expect detailed hypotheses, evidence breakdowns, and a tabled wrap-up, not a punchy op-ed. This one isn’t about the rhetoric of the issue, it’s about substance. My aim: illuminate Trump’s likely motives, risks, and outcomes, offering readers a predictive lens on a strategy that defies conventional wisdom without all the reactive, emotional bullshit that clouds the discussion.

What Is ACH? A Tool for Clarity in Uncertainty

Before diving into Trump’s tariffs, let’s have a look at the method and why I’ve chosen it for this task. The Analysis of Competing Hypotheses, crafted by CIA analyst Richards J. Heuer Jr. in the 1970s, is a structured approach to sift through ambiguity. Heuer developed ACH while addressing analytical blind spots within the CIA—specifically to combat confirmation bias and overconfidence in Cold War assessments. Intelligence analysts today use it the same way they did in the Cold War, to predict outcomes - think Soviet troop movements or terrorist plots - by testing multiple explanations against hard data and evidence. It’s designed to counter human biases, like latching onto a favored theory, and force a broader view. Here’s the process in plain terms:

1. List Hypotheses: Brainstorm plausible reasons for what’s happening (e.g., “Trump’s tariffs aim to boost American jobs”).

2. Collect Evidence: Gather facts—actions, words, results—that apply across all possibilities.

3. Score Consistency: Rate each hypothesis against the evidence (+ for a match, - for a mismatch, 0 for neutral), spotlighting contradictions.

4. Rank and Refine: Tally scores to see what holds up, adjusting as new insights emerge.

In the intelligence community, ACH has a storied track record. During the Cold War, it helped distinguish Soviet bluffs from threats; post-9/11, it parsed terrorist chatter. For Trump’s tariffs—25% on Canada and Mexico, 20-54% on China, a “reciprocal” framework hitting $1.4 trillion in imports—it’s a perfect fit. His moves carry multiple motives, and partisan noise (heroic nationalist or reckless disruptor) muddies the picture constantly. In this Special Edition, I’ll run ACH three times—baseline, pragmatic tweak, and final cut—mirroring how analysts refine predictions as the puzzle clarifies. A word about “evidence” before we go further. What we’re looking for here is not supporting evidence for each hypothesis. While it’s important to note where supporting evidence exists, there’s a twist. If evidence supports more than one hypothesis, it must either be weighted and scored based on how well it actually relates to that hypothesis, or it must be discarded as “non-diagnostic.” I know I’m getting into the weeds a bit here, but it’s important. Why? Because I might find pretty compelling evidence that the sun rises each morning because birds sing. There’s evidence of it everywhere, right? Birds singing, and pow! Sunrise! The failure to examine the relationship between that “evidence” and the hypothesis creates a trap of mistaking correlations for causes. For that reason, every data point will be weighted according to its relationship to the hypothesis. This is dense work, and it often takes months with a team of analysts, so to get this out to all of you in a timely fashion, I leveraged both Grok AI and ChatGPT to run these scenarios, collect data, run analyses, and assess the results. I wanted to use more than one AI engine to further mitigate any biases. Ok, enough set-up. You guys are all smart, sharp thinkers, so let’s get to it.

Baseline ACH: Mapping the Terrain

Why Start Here? Trump’s tariffs, kicking off in February 2025, echo a pretty troubled history for some, and some important changes and lessons for others. Smoot-Hawley’s economic collapse, Reagan’s subtle export restraints, etc. But President Trump’s use of tariffs depart in both scope and style. Unlike past failures fixated on trade alone, Trump links tariffs to border security, illegal immigration, other countries sending their worst offenders, and of course fentanyl, suggesting a broader game. President Trump doesn’t seem to use tariffs the way other presidents have, so we need to establish a baseline of behaviors and possible agendas for President Trump personally, not just reflecting the ways other presidents have used tariffs. We begin with this baseline ACH to establish what’s driving him, using early 2025 data and observations from his last term in office as our foundation. The idea here is to define mutually exclusive and collectively exhaustive hypotheses. That means they must be different from one another and cover the broadest possible range of plausible explanations.

Hypotheses: Five Possible Drivers

We crafted five hypotheses based on Trump’s actions and rhetoric, each reflecting a distinct goal:

1. H1: Economic Nationalism as Core Goal - Tariffs shield U.S. industries, accepting pain for self-reliance, akin to Bush’s 2002 steel tariffs but broader.

2. H2: Geopolitical Leverage Play - Tariffs coerce non-economic wins (e.g., immigration control), a departure from Kennedy’s trade-for-allies focus.

3. H3: Revenue Generation for Domestic Agenda - Tariffs fund policies like tax cuts, a practical twist on historical revenue tariffs (e.g., 1890 McKinley).

4. H4: Political Theater for Base Support - Tariffs rally his base with toughness, echoing first-term bravado but scaled up.

5. H5: Global Trade Realignment - Tariffs reshape trade for U.S. dominance, beyond Reagan’s targeted restraints.

Evidence: What We See

I am going to assume a high degree of political literacy among the readership for this section, because I’ll need to shorthand these in the interest of space. I’m aiming to make my shorthand descriptions of evidence points clear to anyone who’s up on current events, but I may be shaving too much information for some. If you want to see my actual unedited ACH work-through, please send me a message or drop a comment and I’ll send you the full 40-page analytic workup. For our purposes here, my hope is that this shorthand will make things a little more digestible. In terms of evidence, I’ve gathered nine pieces of evidence from Trump’s 2025 moves, first-term patterns, and public reactions that I can weigh against each hypothesis and which are diagnostic:

• E1: Specific Tariff Targets - 25% on Canada/Mexico (border/drugs), 20-54% on China, broad “reciprocal” tariffs. Why I Considered This Important: Shows intent—economic, geopolitical, or both—unlike Smoot-Hawley’s blanket approach.

• E2: Legal Mechanisms - IEEPA/NEA use, framing “emergencies” (border, fentanyl). Why: Bypasses Congress, a power grab hinting at leverage or theater.

• E3: Concessions Gained - Mexico’s 10,000 troops, Canada’s $1.3 billion border plan. Why: Early wins suggest coercion, not just trade.

• E4: Economic Impacts - Price hikes (toys up $10), Canada’s 25% retaliation. Why: Pain tests tolerance, key to all hypotheses.

• E5: Rhetorical Framing - “Make America rich again,” “pain worth it.” Why: Shapes perception, relevant to theater and nationalism.

• E6: Exemptions and Adjustments - USMCA goods, Canadian energy (10%). Why: Flexibility departs from rigid past failures.

• E7: First-Term Precedents - Steel jobs (3,200), USMCA via threats. Why: Past informs present intent.

• E8: Advisors’ Influence - Navarro ($600 billion claim), Miller (border). Why: Advisors signal priorities.

• E9: Public Reaction - 55% back tariffs if jobs rise, 60% oppose 20% price hikes. Why: Public mood constrains pain tolerance.

Scoring: First Pass

I understand this can get a little confusing, so a brief explanation is probably warranted. Here, I’m looking at each piece of evidence collected and assessing it against the various hypotheses for relevance, diagnostic value, and whether or not it supports the overall hypothesis in context. I give these a numerical score and assess what the length of time Americans would need to be tolerant to the economic pain of this course of action at the end. I’ve chosen to add the “Pain Tolerance” metric as there is nothing quite so impactful (apart from money, of course) as public support when it comes to political agendas. I’ve expressed the analytical findings parenthetically beside each hypothesis number, followed by the points of evidence I used for diagnosis. Hopefully that’s enough context to make this next pass a little more clear.

• H1 (+4): Jobs (E7) and targets (E1) fit, but border wins (E3) don’t; pain (E4) offset by exemptions (E6). Pain: 1-3 years—jobs take time.

• H2 (+7): Concessions (E3), rhetoric (E5), and IEEPA (E2) align; pain (E4) a bargaining chip. Pain: 6-18 months—quick wins.

• H3 (-2): Broad tariffs (E1) aim for revenue, but exemptions (E6) and retaliation (E4) hurt; Navarro (E8) pushes it. Pain: 2-4 years—revenue lags.

• H4 (+3): Rhetoric (E5) and base (E9) fit, costs (E4) a tension. Pain: 1-2 years—midterm cycle.

• H5 (+6): Broad scope (E1) and USMCA (E7) fit, pain (E4) a hurdle. Pain: 3-5 years—structural shift.

Baseline Insight

Hypothesis #2 (H2) leads—"tariffs as leverage, not trade war,” with Mexico’s troops as supporting evidence that’s directly related to the hypothesis. That’s an interesting place to start, since tariffs are nearly always used in an economic and protectionist manner. H5 and H1 follow, suggesting strategy and jobs matter, while H4 and H3 lag. But this assumes a static Trump, not the flexible dealmaker history reveals. That would be a mistake, so let’s adjust our analysis to reflect a more realistic view of Donald Trump the man.

Pragmatic Adjustment: Trump the Negotiator

Why Adjust? Well, because that’s what we do in ACH. Each pass presents an opportunity at new insights, a chance to factor in new variables. Trump’s business past—conceding equity in Atlantic City to keep control, flipping on tax breaks - shows he’s no ideologue. He is a deal maker, and ultimately, a pragmatist. He is far more concerned with winning than with ideological purity. He’ll tweak tariffs (e.g., Canada’s delay) if outcomes—legacy, power—win out. This departs from Smoot-Hawley’s rigidity, prompting a second ACH to reflect his pragmatism.

Updated Hypotheses

• H1: Jobs as a win, but adjustable if pain threatens support.

• H2: Leverage via deals, pain short if concessions flow.

• H3: Revenue as a means, flexible if it falters.

• H4: Theater with base, softened if costs bite.

• H5: Realignment via deals, not dogma, pain tied to progress.

New Evidence

• E10: Historical Deal-Making - Trades losses for control. Why: Past shows he’ll bend, relevant to all but H3.

• E11: 2025 Adjustments - March delay based on concessions, China tweaks based on engagement. Why: Flexibility in action, key to pragmatism.

Revised Scoring

• H1 (+7): Jobs (E7) and exemptions (E6) fit, border (E3) doesn’t; tweaks (E10, E11) boost it. Pain: 1-2 years—pivots if needed.

• H2 (+11): Concessions (E3), flexibility (E10, E11), and rhetoric (E5) align perfectly. Pain: 6-12 months—deals shorten it.

• H3 (+1): Revenue (E1) weakened by exemptions (E6); pivots (E10, E11) help slightly. Pain: 1-3 years—shifts if funds lag.

• H4 (+9): Rhetoric (E5), base (E9), and adjustments (E10, E11) fit; pain (E4) manageable. Pain: 1-2 years—midterm flex.

• H5 (+9): Broad scope (E1), USMCA (E7), and deals (E10, E11) align; pain (E4) adjustable. Pain: 2-4 years—progress-driven.

H2 leaps ahead with this new variable added. “Tariffs as leverage” match Trump’s deal-making core philosophy, with pain shrinking as he adjusts according to how our trade partners respond. H4 and H5 tie, blending optics and strategy. H1 gains a little, but still lags overall. H3 struggles maybe more than I would have initially suspected. Revenue’s not looking like it’s his hill to die on.

Additional Intangibles: Global Stage and Rhetorical Edge

Why Go Further? Because looking at his deal-making past shows that Trump’s tariffs don’t operate in a vacuum. Relationships with leaders (Trudeau, Xi) and his “51st State” rhetoric shape outcomes. Unlike Reagan’s diplomatic finesse, Trump uses rhetoric and provocation, possibly to trap critics on what he sees as hypocritical or purely political stances and undermine their credibility in resisting his efforts. President Trump, whether you love him or hate him, does understand power. He understands power intuitively, not theoretically, and he’s spent his entire life very comfortably using it. This final ACH adds these layers.

Final Hypotheses, shaped by the iterations above

• H1: Jobs as a win, adjusted for broader goals.

• H2: Leverage via power and rhetoric, pain is deal-driven.

• H3: Revenue secondary, flexible.

• H4: Theater with rhetoric and pressure, pain midterm-tied.

• H5: Realignment via deals and power, pain progress-based.

Final Iteration Evidence

• E12: Leader Relationships - Trudeau bends, Xi parries, EU talks. Why: Power asymmetry drives concessions, key to H2, H5.

• E13: Rhetorical Tactics - “51st State” pressures, traps critics. Why: Amplifies leverage and theater, departs from diplomatic norms.

Final Scoring

• H1 (+7): Jobs (E7), exemptions (E6), tweaks (E10, E11) fit; border (E3) and relationships (E12) dilute. Pain: 1-2 years—shifts if pain bites.

• H2 (+13): Concessions (E3), power (E12), rhetoric (E13), and flexibility (E10, E11) align fully. Pain: 6-12 months—quick wins.

• H3 (+1): Revenue (E1) hurt by exemptions (E6); tweaks (E10, E11) help, relationships (E12) unrelated. Pain: 1-3 years—flexible.

• H4 (+11): Rhetoric (E13), pressure (E12), base (E9), and adjustments (E10, E11) fit. Pain: 1-2 years—midterm flex.

• H5 (+11): Broad tariffs (E1), relationships (E12), rhetoric (E13), and deals (E10, E11) align. Pain: 2-4 years—progress-driven.

Final Synthesis: What It All Means

ACH is definitely an iterative process, and it’s common for one pass through the evidence and hypotheses to reshape even your baseline. What you’re seeing in this Special Edition is a vastly condensed version of what was a 40-page exercise. I’ve tried to make sure I’ve showed enough of my work to be transparent and open to outside analysis. That said, I’ve also tried to keep this tight enough to be engaging for you, the reader. Ultimately, the goal is to provide you with an example of how one might look at this sort of emotionally charged, politically divided issue and apply structured, intellectual rigor to your predictive analysis. Here’s how it all shakes out:

D’Anconia’s Rankings

1. H2: Geopolitical Leverage (+13) - Tariffs as coercion, powered by deals and rhetoric. It seems far more likely that President Trump is using tariffs as a means to re-position America as a leader in areas we’ve seen some decline, and to shore up our positions of strength across our most critical strategic alliances and relationships. This means it would be an error to view tariffs simply as tools within a Trump Trade War. In all likelihood, trade is the tool, not the goal.

2. H4: Political Theater (+11) - Optics and pressure, pragmatically tuned. President Trump needs support, and the support he garners has to go beyond just charging up the MAGA base. He also needs to expose his critics, undermine his opponents, and score some real results along the way to overcome the anti-Trump narratives.

3. H5: Global Realignment (+11) - Strategic shift via power and flexibility. This has been a President Trump drumbeat since the 1980s. It’s no surprise it ties for second place among the competing hypotheses we’ve looked at here.

4. H1: Economic Nationalism (+7) - Jobs matter, but are secondary. Given the way this hypothesis shook out, I will likely be subjecting President Trump’s approach to jobs and revenue to a stand-alone ACH process. Nationalism, while being a powerful and common rhetorical tool in the President’s public communications, this process reveals the possibility that Nationalism is just the sales tool for achieving meaningful strategic strength (H2).

5. H3: Revenue Generation (+1) - Funds lag, a tool not a goal. President Trump is, ultimately, a pragmatist and he realizes that the use of tariffs as tools of statecraft will come with some pain, especially where revenue is concerned. This is a big potential weakness, so it’s interesting to note how much more important achieving strategic strength seems to be in his policy calculus.

Table: Final ACH Breakdown


The Big Picture

After this process, I’d assess with moderately high confidence that President Trump’s tariffs are pure Geopolitical Leverage at heart—using U.S. market clout and provocative rhetoric to extract concessions like Mexico’s troops, with pain capped at 6-12 months by making deals. Political Theater and Global Realignment tie for second, blending base support with a longer trade reset, both fueled by his pragmatic flex tendencies. Jobs and revenue seem to play supporting roles. They are not drivers. This shows an astute body of lessons learned from our past trade wars and applications of tariffs: it departs from Smoot-Hawley’s economic tunnel vision, learns from Reagan’s coercion, and innovates with what might emerge as a holistic, deal-driven form of statecraft. There are obvious risks—China’s escalation is a big one, base fatigue (especially nearer to the mid-term elections) looms, but Trump’s past behavior suggests adaptability. In my final assessment, I’d say watch for deals, not dogma, to define President Trump’s 2025 tariff agenda.

And I know I mentioned it before, but if anyone would like to pore through the 40-page ACH workflow process that resulted in this Special Edition, drop a comment or a message and I’ll send it to you, unedited. If you’re curious and committed enough to have read this far, you’ve definitely earned it!

[Crafty_Dog]

This is the most intensive intelligence review of China's responses to the Trump Tariffs I think anybody has published anywhere.  It took me over 200 pages of analysis and refinement to get to this final report, and even though I tried to keep it digestible, it's pretty info-dense.  Would love some feedback here!



https://danconiajournal.substack.com/p/special-report-chinas-next-move

[Crafty_Dog]

(3) MERRILL: REORDERING OF GLOBAL TRADE “LONG OVERDUE”: In a recent note to clients, Merrill Lynch’s Chief Investment Office said that after 50 years of running trade deficits, a “reordering of global trade… will be painful and disruptive” but is also “long overdue.”

“Since the mid-1970s, America’s cumulative trade deficit with the world tallies $22 trillion, a staggering transfer of cross-border wealth that has had harmful economic consequences for U.S. workers and communities.”

“[A]t its peak in 2000, the U.S., with just 4.7% of the world population, accounted for a staggering 19.1% of world imports… America’s willingness to run trade deficits underwrote the export-led growth of Japan, then the newly industrialized nations of Asia (Hong Kong, Taiwan, South Korea and Singapore), then Southeast Asia, and, ultimately, China. As a net energy importer, U.S. demand for crude oil and other commodities fueled the growth in the Middle East and Latin America.”

“Fast forward to today, and the year 2025 will mark the fiftieth straight year—a half century—America has run a merchandise trade deficit with the rest of the world… Japan has run a goods trade deficit with the world just 14 times [of the last 50 years] more than China (11) and Germany (0).”

“And now with the U.S. competing neck and neck with China in many cutting-edge technologies that affect national security, and in lieu of the rise of modern mercantilism, there is basically zero tolerance for massive trade imbalances in America. The rules-based, free-market-led interdependent world of the past is fading; in its place, a new global trading regime that emphasizes where things are made no matter the cost is taking shape.”

Why It Matters: Americans have given the world a surplus of $22 trillion in exchange for some things we need and many things we don’t. As Merrill points out, this is a net outflow of money from American households that has made the world richer. From 1820 to 1950 – before the trade imbalance – global economic growth was 1.6% annually. From 1950 to 2020 – when trade imbalances worsened – global economic growth was 4% annually. America’s insatiable appetite for imports was a large driver of that global growth. As Treasury Scott Bessent has said, in order to reduce this imbalance, Americans will need to consume less and produce more. But this goes past economic security because it’s a national security issue: American consumption has in part financed the rise of the Chinese military. The Chinese are paid to lend money to the U.S. Government (through interest on buying Treasuries) and then are paid again when Americans buy Chinese goods. And some of that money “comes back” to the United States when the Chinese invest in U.S. markets (they are buying stakes in U.S. companies), real estate (driving up prices), and mines and farmland (they are buying our productive land). We cannot maintain the status quo with our primary adversary while they hollow out key domestic industries and take control of critical supply chains, and then expect to maintain global economic and military dominance. For all the faults of the “Western-led rules-based international order,” Americans will not want to live in a world where China makes the rules – yet that’s where we’ve been headed. - M.S.

[DougMacG]

"after 50 years of running trade deficits, a “reordering of global trade… will be painful and disruptive” but is also “long overdue.”

“Since the mid-1970s, America’s cumulative trade deficit with the world tallies $22 trillion, a staggering transfer of cross-border wealth that has had harmful economic consequences for U.S. workers and communities.”
-------------

"painful, disruptive and long overdue", isn't that something people from all parts of the political spectrum can agree on?

[Body-by-Guinness]

As a small “l” libertarian—neo-antifederalist would be a better tag, but most don’t understand American history well enough to know what that means—I generally oppose trade barriers as they inevitably turn into grist for lobbyist cabals, but that disdain assumes a level playing field. These days it most certainly is not, w/ China eating our lunch on that front. This piece explains, moreover, that free trade and traditional conservatism have not generally been bedfellows, which makes MSM handwringing over supposed irony, hypocrisy, or whatever that day’s talking points have them lip syncing has them peddling:

Free Trade Has Never Been a Right-Wing Principle

MAY 2025BY PAUL GOTTFRIED

There is nothing intrinsically conservative or essential to capitalism about free trade. In the 19th century, Western countries that were struggling to modernize their economies enacted tariffs to protect their infant industries. The exception to this rule was Great Britain, which was then the economic front-runner. Even Britain embraced tariffs before World War I as it began to fall behind other countries in its industrial might. Of course, even when England was still a free-trade country, its leaders acted not in the name of a purist capitalist principle but in pursuit of the best interest of their people.

Those 19th-century Britons who turned free trade into dogma did not typically belong to the political right. More often, they were men like John Bright and Richard Cobden, who identified with the political left. Both these mid-19th-century British free traders accepted the designation “radical” to describe their politics. In the United States, a progressive Democratic senator of the 1960s, Paul Douglas, and more recently the socialist Bernie Sanders, have been strong partisans of what they’ve understood as free trade—a position that neither has regarded as inconsistent with a largely state-controlled economy.

English Tories in the 19th century, by contrast, favored grain tariffs to protect their agricultural production, which was likewise the position taken by landed aristocracies on the continent. The nationalist wing of England’s Liberal Party began to advocate for tariffs by the late 19th century, as its politicians came to believe that free trade no longer served the English people.

German unification in the 19th century began with a customs union, which the Prussian government organized in 1819 and which was gradually extended to other German states over a 30-year period. A major advocate for this program was the political economist Friedrich List (1789-1846), who spent several years in Pennsylvania, incidentally not far from where I live. During his stay here, List expressed admiration for how the American government protected its developing industries and trade with national tariffs. Not surprisingly, List favored using the same device for the benefit of his own people.
Although he is usually described as a German liberal, List’s program for a modern industrial economy recommended tariffs as a vehicle for ensuring both material progress and the strengthening of national bonds. List believed that modern nations like 19th-century America prospered under a tariff regime.

List was undoubtedly right about the American situation. In the U.S., tariffs have been an integral part of our national economic history, going back to the presidency of George Washington. Washington’s Secretary of the Treasury Alexander Hamilton managed to introduce three tariffs in the first three years of his administration, all of which the new American Congress approved. Hamilton’s “Report on the Subject of Manufactures” in 1791 called for the protection of American industries and boldly outlined what became the American approach to capitalist development.

Not only the Federalists Washington, Hamilton, and Adams, but later the Whigs of Henry Clay then the Republicans from their founding as a party in the 1850s, were ardent supporters of tariffs. Abraham Lincoln and all his Republican successors were advocates of high tariffs and labored to increase them to protect their party’s growing industrial base.

Significantly, in the 19th century the Democrats, who could hardly be characterized as free traders, pursued this practice as well. Tariffs were then the major source of revenue for the federal government and remained so until the passage of the 16th Amendment and the advent of the income tax in 1913. In fact, tariffs produced revenue equal to between 50 and 90 percent of what came as a result of the income tax when it was first introduced.

President Trump has praised William McKinley, who, like other Republicans of his era, advocated for high tariffs. Trump’s favorite president, however, would have had to compete with many other American leaders for the status of liking tariffs the most. The American free enterprise economy prospered in an age of unapologetic protectionism; and the two were viewed, except by some intellectuals, as entirely compatible. The U.S. surpassed both England and Germany as an economic powerhouse in the late 19th century, in an age of high American tariffs.
The American free enterprise economy prospered in an age of unapologetic protectionism; and the two were viewed, except by some intellectuals, as entirely compatible. The U.S. surpassed both England and Germany as an economic powerhouse in the late 19th century, in an age of high American tariffs.

The Washington Post warns us that Trump’s tariffs are carrying our economy back to the Smoot-Hawley Tariff Act of 1930, which supposedly set off the Great Depression. Trump is laughably accused of repeating the sin of interwar Republicans by imposing tariffs on our trading partners. Supposedly, this disastrous mistake led to a tariff war that spread worldwide depression. This narrative, which amounts to an urban legend, was repeated by Ben Stein in his cameo as an economics teacher in the 1986 film Ferris Bueller’s Day Off.

In reality, the Great Depression started well before Smoot-Hawley was enacted; it began with a 1929 stock market crash and banking crisis here and in Europe. Moreover, Congress had passed two other tariff bills during the roaring and prosperous 1920s, neither of which set off an economic collapse. It is one thing to claim that Smoot-Hawley did nothing to relieve the economic problems of the 1930s. It is another to insist that it created the Great Depression or rendered it much worse.

Although I would never argue that tariffs are always, in all situations, economically beneficial, it is hard to see how they are extraneous to the development of capitalist countries. The two have usually gone together, except in abstract libertarian theories about what capitalism should be in an alternate universe. Also contrary to The Wall Street Journal’s sacred doctrines, there is nothing “unconservative” about tariffs, although they may not fit into the plans of neoconservative plutocrats who favor globalist, “free trade” agreements arranged by government leaders.

The late Milton Friedman was known to be a free trade absolutist who opposed tariffs even when our trading partners imposed high tariffs or engaged in dumping their wares on the American market. Although one can ascribe to Friedman consistency in upholding his principle, and perhaps the forensic skill to show how his principle would benefit us in a hypothetical long run, in a less hypothetical world things seem quite different. In the here and now, one can easily demonstrate the value of a judicious use of tariffs as a longstanding American tradition.
Allow me in closing, however, to cite the view of a truly principled, insightful defender of the free market, Murray Rothbard, who made the cogent case that “free trade agreements” typified by NAFTA have nothing to do with free trade properly understood:

In the first place, genuine free trade doesn’t require a treaty (or its deformed cousin, a “trade agreement;” NAFTA is called a trade agreement so it can avoid the constitutional requirement of approval by two-thirds of the Senate). If the establishment truly wants free trade, all it has to do is to repeal our numerous tariffs, import quotas, anti-“dumping” laws, and other American-imposed restrictions on trade. No foreign policy or foreign maneuvering is needed.

If authentic free trade ever looms on the policy horizon, there’ll be one sure way to tell. The government/media/big-business complex will oppose it tooth and nail. We’ll see a string of op-eds “warning” about the imminent return of the 19th century. Media pundits and academics will raise all the old canards against the free market, that it’s exploitative and anarchic without government “coordination.” The establishment would react to instituting true free trade as enthusiastically as it would to repealing the income tax.

Rothbard argued vigorously and effectively in his essay “The Myth of NAFTA” that what were sold as “free trade” agreements negotiated by the Clinton and Bush presidencies were just government deals that favored certain political actors. These deals lowered or removed tariffs while also making concessions to those doing the negotiating, for example, introducing affirmation action programs into Mexican factories and imposing detailed environmental regulations on the signatories.

The major effect of NAFTA, it seems, was the relocation of American factories to Mexico to take advantage of cheaper labor there. This move had a devastating impact on American workers, who required higher salaries than their Mexican replacements to maintain a decent living standard. In any case, this was not free trade, as Rothbard wisely reminded us.


About author

Paul Gottfried
PAUL GOTTFRIED

Paul Gottfried is editor in chief of Chronicles: A Magazine of American Culture. He is also the Raffensperger Professor of Humanities Emeritus at Elizabethtown College, where he taught for 25 years, a Guggenheim recipient, and a Yale Ph.D. He is the author of 14 books, most recently Antifascism: The Course of a Crusade and Revisions and Dissents.