Please save us, Pres Trump! Please!
Our needless trade war gets worse by the day.
Hello, everyone! Good news today! More minor progress on our godawful trade war. China has created a list of exemptions — a move Pres Trump could conceivably use to declare victory and back off. Meanwhile, yesterday, Pres Trump continued his own rollback by throwing car companies a bone. The more of this mutual caving the better. The tariffs are clobbering American companies and Americans, and they won’t help us “beat China” or “re-shore” manufacturing. Even Trump voters think he’s blowing it on the economy. So he should just declare victory and postpone all the tariffs.
(And thank you for reading Regenerator! A different kind of post this morning — an update on the big story — the trade war — with commentary. I’m thinking maybe you don’t have time to read everything I do, and developments are coming so fast it’s hard to keep up. Like/don’t like? Prefer stuff like this analysis of the extraordinary hopes and dreams of Tesla investors ? Please let me know. Thank you! hblodget@regenerator1.com.)
Please save us from your trade war, Pres Trump! Please!
The trade war is beginning to bite. Big companies are cutting costs like travel and consulting, slowing hiring, and postponing infrastructure investments (Chip Cutter, WSJ). 80% of executives are worried, and they’re pulling their financial estimates (Chip Cutter, Bob Tita, Stephen Wilmot, WSJ). Small businesses are getting clobbered (Daisuke Wakabayashi, NYT).
Also, Americans are noticing. The President’s polling on the economy — normally an area of strength — has fallen sharply and is now the lowest it has ever been (Steve Liesman, CNBC). Consumer confidence is dropping, and fears of recession are rising. And the real impact of the trade war hasn’t even hit yet.
Also, the new way of doing business in America — personally kowtowing to the President — appears to be taking hold. Yesterday, after a report that Amazon planned to make the cost of the tariffs clear to consumers (Diego Areas Munhoz and Ben Brody, Punchbowl), the White House denounced the move as “a hostile and political act.” Then Pres Trump called Jeff Bezos. Then Amazon promised it would never do such a thing. Then Pres Trump praised Bezos as “a good guy.”
Some people may prefer this new way of doing business in America, but I confess I’m nostalgic for the less-obvious-fealty of the old way. It seemed fairer and more scaleable. The old way wasn’t perfect and came with plenty of headaches, but it also had advantages over the “if you please, emperor” approach. And, yes, I know, Russia’s oligarchs might disagree. At least when they aren’t getting sent to gulags or falling out windows.
Meanwhile, Treasury Secretary Scott Bessent, who has the unenviable job of trying to keep his boss happy while assuring Wall Street and other Americans that the President won’t blow up our economy, said yesterday that he “wouldn’t think” the tariffs will cause future product and material shortages. Alas, Bessent holds this view not because import volumes are normal — they’re not — but because retailers stockpiled inventory ahead of the trade war. (Courtenay Brown, Axios). Most analysts think these stockpiles will soon run out.
In the meantime, shipment bookings from China to the U.S. are already dropping (Peter Foster, Chan Ho-him, Patricia Nilsson, Rafe Uddin and Patrick Temple-West, Financial Times):
Bessent also repeated the logic that the U.S. can “win” the war because China is getting hurt worse than America — namely that the US buys 5X as much stuff from China as China buys from the US. But China has other leverage, such as a near-monopoly on refined rare earths elements, which America needs. Also, we started the war. Also, we didn’t need to fight it this way or decouple our economies overnight. So China is justifiably pissed. Also, we attacked our allies, too, so we can’t band together and put pressure on China as a united world.
Meanwhile, the hurdles to “re-shoring” U.S. manufacturing in any meaningful way won’t be solved by a trade war (The Economist). For that, we’ll need a comprehensive, long-term re-industrialization plan that will involve major investment in strategic industries, modern manufacturing, and training. If the White House has such a plan, they’re not telling anyone about it.
Our best hope is still that Pres Trump declares victory and postpones all (or at least most) of the tariffs while the trade negotiations go on. Real trade deals take a long time to negotiate — sometimes years. And as Noah Smith observes, the real pain from the trade war hasn’t even hit yet. (“If you think Americans are mad now, just wait a few months.”)
Alas, Pres Trump has loved tariffs for 40 years. And he has great confidence in his “gut,” no matter how many people respectfully suggest he talk to more people about it. So even if Pres Trump rolls back the China tariffs to a reasonable level — and let’s all hope he does that soon, before all hell breaks loose — I think we’ll be stuck with some tariffs for a while.
(Thank you for reading Regenerator! We’re the publication for people who want to build a better future. My inbox and mind are always open: hblodget@regenerator1.com.)