The trade war is only intensifying as time goes on and it’s important to know what’s happening

So this trade war is really happening, and the first question on many people’s minds is: What did voters expect? Trump has long been an advocate for broad tariffs, often touting mercantilist and protectionist policy ideas. Now he has the ability to put those policies into effect, largely thanks to a law Congress passed in 1977, and he’s taking the opportunity. That brings us to the second question: Why?

There are a few explanations for why Trump has initiated this whole thing, and some of them directly contradict each other. For one, the president himself has said that it’s a negotiation tactic to bring other countries to the table. He has also said that it is a way of getting even with other countries that have supposedly treated the U.S. unfairly in trade. On the other side of things, there is the economic theory that increasing tariffs will incentivize manufacturers to bring their industry back to the U.S. The issue here is that if it’s a negotiation tactic, it is necessarily temporary. However, if it is trying to revive American industry, the tariffs would have to be long-term. The policy just cannot do both at once.

The thing that really tanked the stock market was Trump’s “reciprocal” tariffs that he announced on “Liberation Day,” apparently liberating U.S. citizens from being able to afford foreign things. In addition to a blanket 10 percent tax on imports from every U.S. trade partner, the idea was that all tariffs on U.S. exports would be reciprocated with roughly half the amount of those tariffs on that country. Since then, Trump has paused reciprocal tariffs on every country but China, turning around right before hitting complete stock market failure. Economists generally agree that reciprocal tariffs are a bad idea, even if they were executed in good faith, which they were not — the White House’s calculations counted any kind of trade barrier as a tariff, even trade surpluses. A trade surplus is defined by Oxford dictionary as “the amount by which the value of a country’s exports exceeds the cost of its imports,” in this case specifically with regard to imports from and exports to the U.S. So, basically, countries that export a lot to but don’t buy much the U.S. are calculated to be levying massive “tariffs” on the U.S., and Trump has retaliated with real, actual tariffs proportional to that number.  In reality, these so-called reciprocal tariffs are much, much higher than any real tariffs on U.S. exports in almost every case. Although those tariffs are mostly paused at the moment, they could always come back, essentially giving Trump the power to steer the stock market up and down.

Trump has been waging this trade war for a while, but this latest move and its partial reversal has mystified the most people out of everything he’s done. It was the most aggressive, it was the most extreme, and it was the most likely to cause a recession in the too-near future, which would be disastrous for Trump’s reputation. In fact, the Senate, probably realizing how bad things are getting, recently went against Trump and voted to cancel the state of emergency that he’s been using to put tariffs on Canada, specifically importation of fentanyl over the Canadian border. Although it’s unlikely to pass the House, symbolically it’s a bit of a warning shot—Congress gave Trump the power to levy tariffs, which is Congress’s job according to the Constitution of the United States, and they can take it away too. If he doesn’t start standing with his party a little more, he might finally become the first president to ever be removed from office, a goal he’s been striving to achieve since his first term.

Now, it is easy to get depressed about all of this, and that is valid. Look at it this way—Trump is pushing the boundaries of executive power further than they have been pushed since World War One. Much of what he’s doing, including levying tariffs, is being sued as unconstitutional, and many of those lawsuits are succeeding. Congress still has the power to remove him––he’s no dictator, however much he wants to be. The courts can still legally order him to do things, whether or not he wants to listen. And the novelty of Trump himself is rapidly wearing off in the face of spiking costs, a stooping stock market, and crumbling foreign relations. 

If you like Trump and his tariffs, there’s still the possibility that he really is smarter than almost every economist in the world. Make no mistake––there are people who still like Trump. He won the election, after all. Many of the people who voted for him did it on issues that weren’t the global economy––perhaps they are vehemently opposed to abortion, or they wanted to get the southern border under control. Instead of addressing those issues, Trump has mainly focused on mass deportations, which don’t secure the border, and doing almost nothing about abortion to focus instead on sparking perhaps the largest trade war the world has ever seen. It’s not a smart or even logical move. Even if he does get rid of the 22nd Amendment so he can run for a third term, would he even be elected? Homegrown food for thought.

Article by William Reynolds