Autoeconomic Asphyxiation
A twist on the rule of holes goes something like this: If your opponent is in a hole and digging, why would you take away his shovel? As the Trump tariff plot is digging holes in our stock portfolios, it’s also grievously damaging America’s status as a trusted partner and financial leader around the globe (see the bond market for details). After a series of self-inflicted wounds, an economy that a few months ago was the envy of the world is being turned into a giant meme stock. That’s why, although I’m no expert in international economics, I wonder why we’d expect China (the country most likely to fill the economic leadership vacuum) to cave to Trump when Trump’s tactics are so harmful to the United States. To really establish fair trade with China, we’d need to work with allies. Treasury Secretary Scott Bessent explained: “We can probably reach a deal with our allies. They’ve been good military allies, not perfect economic allies. And then we can approach China as a group.” But at this point, one has to wonder, “What allies?” We’ve deeply offended our closest friends and hit potential negotiating partners with heavy tariffs. Bessent can’t even make a prediction about working with allies without offending them in the same sentence. But all that implies there’s some sense to be made of this strategy, when there isn’t. Basically, the market just wants the craziness to stop. And thus, when Trump announced that there would be a pause on some of the tariffs today, the market surged. I’m as happy as anyone about that. But I worry that the market (like many Americans) is in denial about how dangerous this instability is; when the whims of a guy who just bragged, “I’m telling you, these countries are calling us up, kissing my ass” can post on Truth Social and literally move world markets. Not to mention that fact that anyone who knows those posts are coming could make a hell of a lot of money. Money and politics aside, if one were a malignant narcissist, being able to control the fate of the entire world economy would definitely get one off.
+ After tanking the market for a week and backing off today, here’s how Scott Bessent described his boss’s behavior. “It took great courage, great courage for him to stay the course until this moment … This was his strategy all along … No one creates leverage for himself like President Trump.” That sounds like a treasury secretary the world can really trust, eh? (BTW, a president is supposed to create leverage for America, not himself.) Here’s the latest from CNN and CNBC. Full disclosure: Everything could have wildly changed between the time I sent this and the time you got it. After all, it did while I was writing it.
