We had a lively exchange on FB last weekend regarding tariffs and trade wars. Since then, the Admin “paused” (read: capitulated) the reciprocal tariffs for 90 days on everyone but China. The market rebounded a bit, but the full depth of the losses already sustained have been a bit stickier. The market has had the tremors since then as investors try to figure out what the hell might happen next. More recently, the Admin exempted from its China tariffs (read: capitulated again) personal electronics like cell phones and computers. It is too soon to tell how the markets will react to this latest move.
We Need To Take Inventory
There will be trade deals at some point, no doubt, and the Admin will trumpet that their strategy worked. When that happens, we will need to look beyond the pageantry to understand how we really fared in the negotiations. Keep in mind that the EU offered zero-for-zero tariffs on industrial goods in February, so the EU was already trying to negotiate. Canada and Mexico also announced publicly their willingness to negotiate long before the Admin started this trade war. If those trading partners were already willing to negotiate, then the tariffs seem like a solution looking for a problem.
China Is The Thing
The real target here has always been China. Only this version of China can go toe-to-toe with us on most fronts and has some cards of its own to play, like rare earth minerals and holding $760 billion worth of US debt. If we were going to enter a trade war with China, it sure would have been nice to have some allies. But the Admin has depleted our goodwill, undermined our credibility, and otherwise worn out our welcome with most of our allies. Don’t expect anyone other than Israel to stick its neck out for us now.
This Still Looks Like A Bluff
Maybe it wasn’t a bluff, but this tariff gambit sure does look, walk and quack like a bluff. And if it wasn’t a bluff, then that means this Admin is willing to burn it all down every time it has a temper tantrum. That’s not good for any of us. Plus, we are counting on our friends and foes to act rationally in the face of our own irrational actions. The whole “I’m crazier than you are” bit works better in the Lethal Weapon movies than it does in matters of international trade and diplomacy.