The Art of the Steal. Simplicity itself. Set tariffs high enough to make it difficult for any producer outside the tariff wall to sell into the protected, lush American market. Invite the world’s new factories, jobs and businesses to set up inside the wall by offering a low corporate tax rate of 15 per cent and a “gold card” path to citizenship for a mere $5 million. Presto: you Make America Great Again, ending decades in which “we’ve been ripped off … by nearly every country on earth … They … steal our money … our jobs … our factories … our businesses…”. If Art of the Steal de-industrializes myriad countries, too bad for them. They didn’t complain while China was doing just that to America’s industrial base.
Three Leaders Waiting To Get Even
Thus plans Donald Trump, one of three national leaders who will shape the future of the global economy, and the only one term-limited. All are grievance-collectors, easily offended, all nuclear-armed. In addition to Trump, we have Vladimir Putin and Xi Jinping. Putin believes the collapse of the Soviet Union “was the greatest geopolitical catastrophe of the century”, and would reconstruct it by completing the conquest of Ukraine, regaining the Baltics and other lands in Russia’s “near abroad”, and cementing relations with former rival China.
Xi believes China has faced centuries of humiliation at the hands of western democracies, and aims to make China once again the most powerful nation in the world by investing in infrastructure from Africa to South America to the EU, and by building a military so powerful that America will be unable to prevent forceful reunification of Taiwan and the communist mainland.
A Recession While America Detoxes
Such is the geopolitical landscape on which Trump is erecting his tariff-based MAGAland, the road to which is proving to be a rocky one. Fears mount that the American economy is teetering on the brink of a recession. “A little disturbance…. It won’t be much…. A period of transition” says the President, to cheer up the over-regulated, over-taxed, over-woked billionaires whose animal spirits he awakened after a four-year sleep. “The first quarter is going to squeak into the positive category rather than fall into recession…”, adds Kevin Hassett, White House economist-in-chief, in a failed effort to reassure investors who are dumping shares. We are in “a detox period” following addiction to government spending, contributes treasury secretary Scott Bessent, refusing to deny that he has discovered a new euphemism for recession.
After “a little disturbance”, “a squeak” and a “detox period”, the American economy will no longer be part of an economically integrated, relatively efficient global trading order. Instead, it will be protectionist, thumbing its Presidential nose at the rest of the world. It will have taken Panama, Greenland, Canada, just as Trump’s idol, President William McKinley, annexed Puerto Rico, Guam, the Philippines and Hawaii, while raising average import duties in 1890 from 38 per cent to 50 per cent.
A plausible description of a post-Trump America runs something like this. Tariffs galore. When the victims of Trump’s Art of the Steal retaliate, Trump counter-retaliates. Not for him the warning of Tevye, the poor milkman in the musical, Fiddler On The Roof, that if we practice an eye for an eye and a tooth for a tooth “the whole world will be blind and toothless.”
Price Pop
Prices of most tariffed goods will pop. As will stuff produced by domestic companies protected by tariffs from lower-cost foreign competitors. Consumers will have less to spend on non-tariffed goods. Enduring inflationary pressure will come from deficit spending, for which there is no end in sight. The government will be forced to pay lenders – the bond vigilantes – higher interest rates to compensate for the risk that they will be repaid in depreciated dollars. By then the third shoe will have dropped, and Moody’s will have joined Fitch Ratings and Standard & Poor’s in downgrading America’s credit rating from AAA to AA+. The dollar’s role as a reserve currency will come under question.
The tariffed price of imported apparel will be higher, as will clothing made by domestic firms freed from the downward pressure of cheap imports. Cars, including Trump supporters’ beloved Ford’s F-150 pickup truck, will be more expensive. Tariffs on lumber from Canada and Mexico will drive up construction costs, changing lingering dreams of home ownership into nightmares. Consumers will have less discretionary income to spend on Doritos and air travel, as they are forced to devote a larger share of their paychecks to paying interest on the debt incurred by their foremothers.
Not All News Is Bad
There is good news. Woke has been put to sleep, borders closed, universities penalized for ignoring antisemitism. Government is shrinking as the staffing and missions of government agencies are put to a “common sense” test, and inefficient green policies are scrapped. The economic consequences of four more years of leftward drift and liberal-elite domination of trade policy and “the culture” are avoided.
Trump once used share prices to measure his success. Reality bites: even after Friday’s recovery, shares are 6 per cent lower than when he was inaugurated – wiping out some $2 trillion in wealth. Henceforth, success will be measured by using a far lower bar – Better-than-Biden.