The 20th century economic order died yesterday. It’s gone forever. Sacrificed in Trump’s attempt to drag us back to the 19th century. Anyone who thinks we can ever go back to the economic paradigm before dear leader stood up there with an oversized Excel spreadsheet is in deep denial. This is trade war, not trade policy. Our largest trading partners are actively realigning their trade policy away from the United States—forever. This is happening and there’s nothing we can do to stop it. The only question now is to what degree.
No one who considers themselves informed should be surprised by yesterday’s broad-based tariff announcement. Trump has been very clear about his desire to reorganize the American economy around a protectionist racket since at least 2023. He views trade imbalances as inherently bad and simply does not see the economy the way many Wall Street analysts deluded themselves into believing he did. Trump has publicly lamented how the United States is allegedly getting screwed since at least 1987 when he took out full-page advertisements in the New York Times, Washington Post and Boston Globe, demanding that the foreign countries our troops were stationed in should pay for that supposed privilege. Wall Street traders are fond of using the term smart money as they are typically and justifiably characterized as such, but what’s the term for an analyst who loses a trade because they didn’t consider publicly accessible information from a primary source?
That said, even the elements of Wall Street who do have subscriptions to America’s major newspapers were taken aback by the degree of this announcement, for good reason. This tariff regime is alarmingly excessive.
Trump’s Treasury Secretary Scott Bessent said these so-called retaliatory tariffs (which they aren’t, more on that later) were imposed on top of existing ones, and his press secretary also confirmed that tariffs on China are now a whopping 54 percent. The scale and breadth of these are staggering, even to my Cassandra-tinted glasses. The headlines from the financial world about Trump’s economy-destroying tariffs today are incredibly alarming, and devastatingly accurate. The path we are on is clear as day.
Tough language from JPMorgan tonight:
“.. we view the full implementation of these policies as a substantial macro economic shock not currently incorporated in our forecasts. .. these policies, if sustained, would likely push the US and global economy into recession this year.”
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— Carl Quintanilla (@carlquintanilla.bsky.social) April 2, 2025 at 5:44 PM
We will never be the same again after this. We are breaking a century of trade alliances to serve the delusions of a cable news-addled despot who thinks that if I pay you to do a service for me, that I’m getting screwed because there’s supposedly a trade imbalance between us (but not if you build something for me). This is an entirely different economic language that Trump speaks, rooted in 19th century conceptions of the world. That’s not me saying it, that’s the stodgy old Economist saying “Trump takes America’s trade policies back to the 19th century.”
Sure, this is also about Trump trying to force countries and companies to pay him patronage to get exemptions from these tariffs, but if you think these tariffs are likelier to go away than get reduced when dear leader is paid his favors, you are again, completely discounting everything Trump has said since 1987 to believe a fairy tale with no basis in reality. He already imposed tariffs in 2018, and the market was down on the year. He calls himself the Tariff Man! There’s no mystery here. This is very clearly an ideological crusade.
Tariffs are heavily regressive taxes, meaning that they hit the poorest people the hardest, and Trump’s trade war has the potential to devastate low-income families across the country. Don’t be surprised to see homelessness spike in the coming months and potentially years as this tariff ring around the U.S. economy is constructed while we still refuse to build adequate housing that could address our homelessness crisis.
• All 2025 tariffs implemented to date raise $3.1tn over 2026-35, with -$582bn in negative feedback effects.
Tariffs are regressive taxes: the April 2nd policy & all 2025 tariffs hit the lowest income-decile families 2-3x as much as the highest, relative to income.
5/7
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— Ernie Tedeschi (@ernietedeschi.bsky.social) April 2, 2025 at 8:44 PM
Trump is calling these retaliatory tariffs, and they’re not because what he is retaliating against is not a tariff and is instead an invention of his rotted brain. On his big stupid Excel sheet, Trump listed supposed tariff rates that are imposed on the United States, but they’re all lies. Vietnam is not imposing 90 percent tariffs on us. Nike would not exist in its current form if that were true. The Trump team released their methodology behind that column, and they say themselves that they view trade imbalances—after removing services where we have a trade surplus—as tariffs.
This is their “methodology.” ustr.gov/issue-areas/…
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— Catherine Rampell (@crampell.bsky.social) April 2, 2025 at 7:42 PM
This is of course, staggeringly naive, but also par for the course of MAGA’s understanding of the world outside the safe space they have constructed for themselves. They are used to imposing their distorted view of reality on a weakened American empire whose opposition party and political elites are crippled by their own cowardice. Trump and company have been playing on easy mode for years, but now with this trade war they are forced to operate in the realm of grown-ups where trillions of dollars are at stake, and the childishness of their broader worldview has been unambiguously revealed for the whole world to see.
And the whole world is scurrying away from the United States because we have proven ourselves to be a fundamentally unserious country. Canada, Mexico and the European Union are rapidly constructing a USMCA-style trade bloc without the first two letters, because who can trust America anymore? You can’t just undo Trump’s policies and convince the rest of the planet that the man who won two out of the last three elections is an aberration. Whatever world is built from the ashes of this one is still very much to be determined, but it is clear as day that it will not be a U.S.-centric one the way the 20th century was, and at this rate, we will be lucky just to have a seat at the adult’s table.
These people are so fucking stupid they’re taxing themselves.
This is true: The Trump administration said it has imposed a 10% tariff on the British Indian Ocean Territory, whose only inhabitants are the U.S. and U.K. service members at the military base on Diego Garcia.
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— Brad Heath (@bradheath.bsky.social) April 2, 2025 at 5:47 PM
Penguins too.
The Trump tariffs hit Antarctic islands inhabited by zero humans and many penguins: www.wired.com/story/trump-…
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— Zoë Schiffer (@zoeschiffer.bsky.social) April 2, 2025 at 5:49 PM
All so they can strip 2025 household purchasing power by $3,800 on average according to the Yale Budget Lab. These calculations are done before the actual retaliatory tariffs from other countries, and per Citi, China’s could be much larger where the “hard decoupling scenario…looks more plausible now.”
This is not some spur of the moment thing. It is not something that Trump is likely to back down from in a week. This is war. It’s the culmination of a lifetime of crusading on this subject, and countries are reacting accordingly. Tourism to the United States, by far the globe’s largest tourist market and nearly double the size of the second largest in China, has collapsed in a country snatching up people off the streets without due process. Tourism is one of the three largest employers in 29 states. If this dynamic endures, this is yet another way that Trump has fundamentally reoriented the American economy forever in a way that hurts working class Americans.
And this is clearly Trump’s show. His Treasury Secretary’s televised appearances do not make it seem like he is in the loop, and his Commerce Secretary Howard Lutnick is out here pleading with the world to give up its autonomy so Trump can drag it back to the era that preceded the Great Depression. In fact, what Trump is doing is actually much larger than the Smoot-Hawley tariff regime that economics 101 classes will tell you had a large hand in the Great Depression, as Dartmouth College trade and economics history professor Douglas Irwin told Bloomberg.
“This is going to be much bigger than Smoot-Hawley,” @douglasirwin.bsky.social told Bloomberg
www.bloomberg.com/news/feature…
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— EconReporter (@econreporter.bsky.social) April 1, 2025 at 7:20 AM
Back then, Trump’s predecessor Herbert Hoover made a more isolationist-leaning economy more protectionist, and now we are making a globalized and interconnected economy more protectionist. This is a much larger economic disruption than Smoot-Hawley. By at least an order of magnitude.
The market is puking its brains out today, but honestly that was to be expected. Bloomberg’s homepage headline as Trump walked into the Rose Garden yesterday was that no one knew what he was about to do. By definition, these tariffs could not be priced into the market, so “worse than the worst case scenario” is what you are seeing priced into markets today. The Nasdaq is down over four-and-a-half percent, the S&P down a little over four percent, and the Dow Jones is down a little over three-and-a-quarter percent as of this writing. The yield curve is collapsing as the five- and seven-year Treasury yields get closer to joining the inversion at the short end. The dollar is down big. Everything today is screaming recession.
But one day does not make a trend, and as much as recessionary fears are driving today, stagflation is and has been the much bigger theme around Trump’s trade war. We are likely in or near the most intractable problem for an economy right now, according to the actual smart money on Wall Street that has been betting on this exact scenario at least since Joe Biden’s brain fell out of his head on national TV last year. A recession is actually kind of simple and straightforward for policymakers, as growth turns negative and the Fed can lower interest rates to make borrowing cheaper to spur growth and hiring, like after 2008.
Stagflation brings slow to negative growth too, but the combination that makes it so toxic to policymakers is the addition of high inflation that keeps interest rates high (which will come thanks to tariffs) while persistently high unemployment creates a further drag on economic growth. The easiest lever to pull, to make borrowing less expensive and spur companies to hire, is less accessible to the Fed under stagflation, as policymakers get boxed in with a limited set of options to try to ameliorate a combination of factors that was once thought to be impossible until the 1970s proved otherwise.
Whether the economy tanks, or we just muddle along in misery like the entire 1970s until we reach a modern Volcker shock, are now the two chief concerns around an economy Trump was elected to fix. Instead of addressing people’s problems, he has inflamed them by making everything even more expensive with what will amount to an estimated $6 trillion tax increase on Americans. In Trump’s bid to reorganize the U.S. economy around a protection racket, he has undoubtedly achieved one goal of the isolationists: the 21st century is guaranteed to see a global economy less dependent on America than the 20th century did.
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