Question on the tariffs: Four dimensional chess or a fool's errand?

Answer: A fool's errand or worse.

Global economics is not my forte, so when the news broke today about Trump’s tariffs, I asked a particularly bright and plugged-in friend what he thought. His response is below. He doesn’t want attribution. I’ll only say he voted for Trump with reservations and has White House experience even though he’s still quite young.

I think reshoring [bringing manufacturing back to America] other than for critical national security components is a fool’s errand. Adam Smith is rolling over in his grave. Trump is beholden to United Auto Workers and other unions who are waging an unwinnable battle against global forces and basic economics. Massive wallet injury—effectively a tax on Americans. We know that generally speaking tariffs are inflationary and simply pass the cost on to the ultimate consumer. I thought I voted for a president who would lower taxes and steward the economy responsibly.

That being said, in his classic instinctual sense he’s on to something important. The reciprocal tariff acknowledges that the U.S has been getting “taken advantage of” on the global stage. There’s a certain undeniable justice to an even playing field. I’m not sure I believe the numbers on his chart, but on that account we’re only imposing half the tariff rate we have accepted inflicted on us for years. I hope it will be a useful bargaining tool to ultimately lower the overall level of global tariffs. They are only a drag on trade. I fear Trump views them as an end in themselves or useful revenue raising mechanism, when they should be an unhappy negotiation measure.

My own tongue in cheek view is that reshoring will only work if we have open borders, abolish the minimum wage, and abolish welfare. That is because we cannot compete with the conditions of the developing world where 14 hour days are routine and hunger is in their belly. Americans simply do not want to—nor have to—do those jobs. I’m all for getting a fair shake, but if overall economic well-being declines it will be a pyrrhic victory. Then again, some interests are more important than the wealth of the nations. Trump may be right that many Americans would rather be strong and poor(er) than wealthy and weak.

As I say, my friend is very sharp and tends to look at the world, including Trump, without rose-colored glasses. My own view is even less optimistic.

First, I have my doubts that Trump’s chart, comparing previous American tariffs on other nations’ products with theirs on ours, is correct. A number of honest people I know have questioned it; no source has been given for it that I know about; and intuitively it seems way, way off. At the minimum, it needs more scrutiny.

Second, even if the huge increase in tariffs is aimed to create the predicate for one of Trump’s “deals,” there is no assurance about what such deals will look like assuming they come into existence at all. The predictable reaction of other nations has been, for the most part, not to make a deal but to retaliate. Yes, that’s a first reaction and it might abate — but it might not. It seems like a big gamble with other people’s (i.e., the American public’s) money. How many billions in stock market losses were piled up just today?

My third source of unease is considerably darker. Trump’s action can be looked upon as one more component of his forfeiture of American leadership in world. Discounting or leaving NATO? Letting Putin have his way with Ukraine (and then what else)? Making the complaint that America has been “taken advantage of”? That might well be true, but is that what a leader says? To lead is, in a sense, by nature to be “taken advantage of”: You have to be strong while others, weaker or poorer or merely less courageous, get the advantage of your being in front — in front where it’s at a minimum costly, often dangerous, and sometimes mortally dangerous.

But that is the America that saved the world. It saved it first by beating the Nazis and then the Soviets. It was Ronald Reagan’s Shining City on a Hill. And we didn’t ask how much.

Did the country really elect Trump to so casually say goodbye to that America?

There is more than our wealth at stake here, although certainly that too. About 160 years ago, Lincoln told us, “We shall nobly save, or meanly lose, the last best hope of earth.” Starting a trade war with the entire world — long-time friends and allies as well as our enemies — strikes me as unwisely heedless of Lincoln’s warning.