Hall of the Tariff King, Part 2

No one is happy

Angry storms hit the US overnight; we’re not just talking about the weather (a different article). Countries around the world are understandably angry about the tariffs that President Felonious Punk announced yesterday, and no one, not even the penguins, is rolling over and quietly accepting the news. Except for the Penguins, we all saw this coming. Every economist worth their salt warned that raising tariffs was not a good plan. The economy is about to get very messy.

What’s up with the Penguins? One of the most notable blunders on the tariff charts the administration handed out yesterday is the inclusion of the uninhabited Heard and McDonald Islands, remote external territories of Australia in the sub-Antarctic Indian Ocean that have more penguins and seals than people and no apparent trade activity. That’s right, the President is attempting to tariff penguins. There’s no word as to exactly what the penguins are exporting, or how one might attach a monetary value to that much cuteness.

What this demonstrates is the lack of detail and attention the administration paid when assessing these tariffs. The tariffs are more about stomping around in big boots, trying to scare everyone into submission rather than considering the consequences that these tariffs might hold. This is not the sign of a carefully prepared plan. This reeks of that kid who waited until the last minute and tried doing his homework on the bus to school.

Who did do their homework? Every other country in the world. These tariffs were telegraphed well in advance, surprising no one except, possibly, the penguins. As a result, world leaders were ready with some statements of their own. Here are a few that we’ve found so far this morning.

• Prime Minister Mark Carney said Canada was “going to fight these tariffs with countermeasures” and would “act with purpose and with force.”
• President Claudia Sheinbaum said on Wednesday that Mexico would not pursue a “tit-for-tat on tariffs” but would rather announce a “comprehensive program” on Thursday.
• Prime minister Keir Starmer said Britain would continue to work on a trade deal with the U.S. and that a trade war was “not in our national interest.” Starmer is scared shitless and it shows.
• Prime Minister Anthony Albanese said Australia would seek to negotiate with the U.S. to remove the tariffs without resorting to a dispute resolution mechanism in the two countries’ Free Trade Agreement. “We will not join a race to the bottom that leads to higher prices and slower growth,” Albanese said.
• The government of Latin America’s largest economy, Brazil, which Trump slapped with a 10% tariff, said it was “evaluating all possible actions to ensure reciprocity in bilateral trade, including resorting to the World Trade Organization.”
• Israeli Finance Minister Bezalel Smotrich said he was convening ministry officials to formulate a course of action to protect Israel’s economy from impending 17% tariffs.
• Denmark’s industry minister, Morten Bodskov, said the country was ready to “stand firm” in response to Trump’s tariffs and that the European Union “is ready with responses that are proportional but also robust.”
• EconomieSuisse, Switzerland’s main business lobby, denounced the tariff as “unfair” and said it was “excessively high” compared to a 20 percent levy on the European Union and 10 percent for the U.K.. The tax will deal “a severe blow” to the Swiss economy, the group said.
• India’s commerce ministry said it was “carefully examining the implications of the various measures” announced by the United StatesBernd Lange, chair of the European Union Parliament’s International Trade Committee, called President [Punk’s] tariff announcement a “mess” and “unfair” to E.U. and American producers. “[Punk] called it ‘liberation day’; I call it ‘inflation day,’” he quipped.
• Prime Minister François Bayrou of France said that the tariffs were “a catastrophe for the economic world.” He added that while the levies would create “an immense difficulty for Europe,” they would also prove “catastrophic” for the United States.
• Prime Minister Giorgia Meloni of Italy said President [Punk’s] tariffs were “a measure that I consider wrong.” In a Facebook post, she said Europe would “do everything we can to work a deal with the United States, aiming to prevent a trade war that would inevitably weaken the West in favor of other global actors.”

Sadly, we could go on with the list, but everyone essentially says the same thing: Tariffs are wrong and unfair, and we’re not putting up with it. Some are willing to negotiate, but most are ready to fire back some tariffs of their own.

Meanwhile, already bad stock prices are taking yet another hit. Stock markets across Asia fell upon opening Thursday after Trump imposed huge tariffs on all the region’s leading economies, although they recovered some of their losses during the trading day, while analysts warned the measures risked strengthening China’s hand in the region.

“This decision, which is so unprincipled, so abrupt, so profound in its impact, calls into question what kind of partner the U.S. will be,” said Susannah Patton, the director of the Southeast Asia Program at the Lowy Institute, an Australian think tank. “It will play into China’s narrative that the U.S. is an unreliable, distant partner that can come and go.”

This raises the question of whether the US tariffs are playing into China’s hands. We already know that China is involved in economic strategy talks with Japan and South Korea. As frustrated politicians look around for a country whose policy remains stable, China looks good on the surface. Of course, the long-term small print is a bit terrifying, but no one reads the small print, including politicians.

“We are bewildered,” said Thitinan Pongsudhirak, a senior fellow of the Institute of Security and International Studies at Chulalongkorn University in Thailand, an American treaty ally.

“It’s worse now to be a U.S. ally than to be an adversary. As an adversary, at least you know what you’re getting,” Thitinan said. “To be an ally and then be treated like an adversary … that is not expected; it’s not nice.”

The head of the E.U. executive branch, European Commission President Ursula von der Leyen, said, “There seems to be no order in the disorder. No clear path through the complexity and chaos.” Von der Leyen also warned of possible spillover from other markets, as industry leaders worry that a U.S.-China trade war could prompt Beijing to divert cheaper goods to the continent, creating unwelcome competition. “We will also be watching closely what indirect effects these tariffs could have. Because we cannot absorb global overcapacity, nor will we accept dumping on our markets,” she said.

Are you getting the feeling that this whole tariff thing isn’t going over well? Join the club.

Sure, there are a few people trying to put a positive spin on the whole mess, but those people are few and far between. The reciprocal tariffs don’t take effect until April 9, which leaves “the door open to back-tracking and further delay,” Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, writes. “The speed with which tariffs can be removed also bolsters the case for thinking that a slowdown, rather than a recession, lies ahead,” Tombs adds.

Understand, Pantheon Macroeconomics isn’t exactly at the top of anyone’s list of economists. Finding someone with anything positive to say was a struggle.

There is no question in any rational mind that Punk has started a global trade war and that the end result is most likely a global recession at best. Prices are going to go up and consumers are going to have little choice but to pay them or do without. “Liberation Day” heralds America’s total abandonment of the world trading order and embrace of protectionism. The question for countries reeling from the president’s mindless vandalism is how to limit the damage.

One key factor that Punk pushed yesterday was that the tariffs would bring a boom in US manufacturing, creating new jobs and new wealth. That raises the question of whether that level of development is even possible.

“The funny thing about finance and economics is that we don’t really advance or learn anything over time; we just cycle through the same things, over and over, in different ways,” argues Brent Donnelly, the president of Spectra Markets, a market research firm. “We vilify mercantilism and lionize free trade but are forced to rethink these religions when income inequality shatters social cohesion and decades of unreciprocated tariff cuts create an unlevel playing field.”

Abby Samp, a global industry analyst at Oxford Economics, said that “while the tariffs will likely have the effect of transferring some automotive production to existing U.S. plants, it will also raise the cost to U.S. manufacturers and households.”

Oh, and don’t forget that new manufacturing plants are likely to be highly automated and require fewer human employees in order to operate. Every car sold in the US could be made entirely in America and it still wouldn’t make up for the loss in trade coming from the tariffs.

The full effect of the fallout remains to be seen. Countries are just now starting to wrap their heads around the size of the tariffs and how they will affect their domestic economy. Punk has caused unparalleled anger among our allies, a matter that is likely to spread into other areas of presumed cooperation. The potential for a global meltdown is serious, and at this point, no one is quite sure how to stop it.

We are in a trade war. Punk’s trade war. He is solely responsible for pushing the global economy off a ledge. Yes, the US Senate narrowly passed a resolution last night that would end Punk’s emergency declaration on fentanyl trafficking that underpins tariffs on Canada. But that resolution has no real power. It will take a lot more effort for Congress to reign in a President who has yet to realize that he’s in over his head.

We’re going to need a good distraction to get through this.