It’s better to be right inadvertently than wrong deliberately. While escalating his trade war against Canada (and the rest of the world), Trump stumbled on an incontrovertible truth.
“The only thing that makes sense is for Canada to become our cherished Fifty First State,” he wrote. “This would make all Tariffs, and everything else, totally disappear.”
Trump loves his capitals so much, he must know what the capital of Canada is, educated fellow that he is. It’s Ottawa, but what would happen if that status were transferred to Washington DC?
Trump put his finger right on it: everything would “totally disappear”. Canada’s sovereignty. Her position in the Commonwealth and NATO. Her national pride. Above all, whatever residual affection Canadians have for America.
Since neither the Canadian nation nor its government shows the slightest inclination to be incorporated into the US, the only way to achieve that result would be by military invasion. Is that what Trump has in mind? He has pointedly declined to rule out a military solution.
For the time being, Trump has hit Canada with additional tariffs and again regaled us with his elegant prose: “Based on Ontario, Canada, placing a 25% Tariff on ‘Electricity’ coming into the United States, I have instructed my Secretary of Commerce to add an additional 25% Tariff, to 50%, on all steel and aluminum coming into the United States from Canada, one of the highest tariffing nations anywhere in the world. I will shortly be declaring a National Emergency on Electricity within the threatened area.”
Quotes around ‘Electricity’ suggest that there is in fact nothing electrical about it, while capitalising Tariffs confers on them a sort of divine status. I feel strongly that any candidate for public office must pass an English test, command of language being a reliable indicator of intellect. As for a National Emergency, Trump is it.
Swinging like a yo-yo between imposing madcap tariffs and removing them, Trump has injected uncertainty and panic into the markets. Alas, he is finding them harder to bully than even Zelensky.
Markets react to personalities but they have none of their own. They respond in a dispassionate manner typical of computers. When they detect instability, their inner switch is flicked, they go down, and you can’t even send the boys over to make them toe the line.
Thus the stock market has dropped over 500 points, and there is (possibly premature) talk of recession. Especially worrying is the plight of the Nasdaq, a tech-focused index. It fell an impressive four per cent in one day, the first such drop since Covid.
Markets all over the world followed the US on its way down. They plunged in Europe, Asia and Britain, wiping trillions off the world’s wealth. China, Canada and the EU have retaliated with tit-for-tat tariffs, which among other things creates strong inflationary pressures.
Wall Street analysts are predicting that the US inflation rate may soon climb to as high as eight percent, followed by a similar rise in unemployment, with economic growth going in the opposite direction. Four out of five experts have a grim view of America’s economic prospects under Trump.
The latter relies on that time-honoured trick, blaming the previous administration. As Trump’s press secretary, Karoline Leavitt, explained: “We are in a period of economic transition … from the mess created under Joe Biden”.
The first part of the statement is irrefutable: economic transition is indeed well under way. From what to what, however, is open to debate.
Yet the second part of Leavitt’s explanation is simply wrong, but then we don’t expect any members of the Trump administration to be responsible for what they say. “Like priest, like parish,” as the Russians put it.
Biden’s administration was indeed abysmally, some will say criminally, poor, but its economic performance was surprisingly not so bad. At almost three per cent, last year’s GDP growth in America was by far the greatest in the G7 group. Inflation stood at three per cent, and unemployment at four. The subsequent – and forthcoming – debacle in all these indicators is Trump’s doing and no one else’s.
The US president has been called all sorts of things over the past few weeks: “unprincipled charlatan”, “Putin’s agent”, “gangster”, “bully”, with many of these epithets accompanied by unflattering and variously unprintable modifiers. I’m sure he is all those things, although I think he is Putin’s agent only de facto, not de jure.
Yet none of those pejorative terms explains Trump’s concerted effort to destroy the US economy. I’m sure he’ll fail in this undertaking because America has many underlying economic strengths that can prop her up at a time of crisis. However, there is little doubt that a crisis is exactly what Trump is brewing.
Moreover, anyone with a modicum of economic education could have predicted the chaos into which Trump’s policies would plunge the economy. Incidentally, Trump’s fanatics point to his wealth as proof of his profound understanding of economics.
That’s a category error. A midwife doesn’t have to understand the origin of life. A car mechanic may not necessarily be well-versed in the nuances of thermodynamics. A cleaning lady doesn’t necessarily know the chemical composition of detergents. And a property developer, especially in Atlantic City, needs a grasp of economics much less than he needs the kind of interpersonal skills immortalised in The Godfather.
I’m a rank amateur in economics and investment, but I’ve read serious books by the yard. Yet even one inch, the thickness of Smith’s Wealth of Nations, would have sufficed to know that a trade war never claims any winners. Everyone loses, especially the aggressor.
Unlike me, Warren Buffett isn’t just a professional but one of the best in the business. Correctly anticipating that Trump’s ignorant bungling would crash the shares market, Buffett has quietly but resolutely moved much of his wealth into cash.
In the process, he presciently got rid of such blue chip assets as shares in Apple, Bank of America and Citigroup. And sure enough, the stock market plunged, with the only silver lining provided by a 44 per cent drop in the value of Tesla owned by hideous Musk.
(While Trump commendably attacks climate-change madness, his right hand has a vested interest in people driving not cars but electric appliances. I smell a contradiction.)
Trump’s pronouncements on economics show a primitive mind untouched by any educational, intellectual, cultural or civilising influences. However, he does vindicate Ralph Waldo Emerson’s aphorism, “A foolish consistence is the hobgoblin of little minds.”
For Trump is nothing if not consistent. The ignorant idea that all the world’s economies conspire to “screw” America has been cherished by him for decades. Thus in 1987, following his first visit to Russia, Trump began to toy with the idea of running for president.
To dip his toe into water, Trump took out full-page ads in The New York Times, The Boston Globe and The Washington Post. Written as an open letter to the American people, the ads criticised the Reagan administration for wasting money to protect allies who “can afford to defend themselves”.
“There’s nothing wrong with America’s Foreign Defense Policy that a little backbone can’t cure,” wrote Trump, implicitly accusing Ronald Reagan of lacking such spinal strength. Putting aside Reagan’s unwavering steadfastness that led to the collapse of what he correctly called the “evil empire” (you know, the one Trump is desperately trying to bring back to life), that view is economically illiterate.
No sensible person will argue against European countries arming themselves sufficiently to repel any aggression. It’s foolhardy to rely too much on the US, which Trump proves by leaving Europe to its own vices and devices. However, contrary to what he claims with his cracker-barrel public appeal, America’s investment in NATO isn’t a net loss — quite the opposite.
Her post-war position as the leader of the free world has entrenched the dollar (now being weakened by Trump’s policies) as the world’s reserve currency. This has allowed the US to run up a 34-trillion debt, which is after all denominated in the currency controlled by the Federal Reserve.
In plain terms, this has enabled America to consume much more than she produces. Hence it would be just as accurate (or rather just as inaccurate) to say that America is “screwing” the rest of the world, not the other way around.
All this is the economic primer, and it’s worrying to see the world’s greatest economy falling into the hands of an ignoramus who apparently hasn’t read even that book. Five gets you ten Trump played truant throughout his time at Wharton.