The Tariffying Tale of Trump's Incompetence
Mar, 2016. As Donald Trump’s election campaign begins to pick up steam, Trump asks his son-in-law, Jared Kushner, to do some economic policy research on China. So Kushner does what any serious, meritocratically selected special adviser would do: he browsed a few book covers on Amazon, found one with an edgy title (“Death By China,”) and cold-called the author, Peter Navarro, inviting him to become the then-sole economic advisor for the Trump campaign.
Navarro, well-known for his protectionist approach to foreign policy, put together a plan that hundreds of economistspublicly opposed, with Simon Johnson, a Nobel laureate in Economics, claiming it was “based on assumptions so unrealistic that they seem to have come from a different planet.”
May, 2018. Despite writing several books on China, Navarro, now Trump’s Director of Trade and Manufacturing Policy, visits the country for the first time. Navarro is part of a delegation tasked with easing trade tensions between China and the U.S.
It doesn’t go well.
Having already imposed tariffs on Chinese steel and aluminium, and assured Americans that trade wars were “good and easy to win,” Trump placed further tariffs on Chinese goods, prompting China to hit back with tariffs worth $75 billion on U.S. goods. Navarro was the only one of Trump’s advisors who thought the escalation was a good idea.
October, 2019. The Chronicle of Higher Education publishes an article about a Harvard-educated economics professor named Ron Vara, who Navarro cites Vara repeatedly in Death by China and several other books. Vara’s name even starts popping up on memos in Washington, advocating for further escalation of trade tensions in the form of yet more tariffs.
Yet strangely enough, they can’t find any record of Vara at Harvard or anywhere else. And that’s because Ron Vara didn’t exist. Navarro made him up to make the ideas in his books seem more legitimate and his policy proposals seem more popular than they were.
But hey, I’m sure nothing bad will come of putting America’s economic policy in the hands of a guy who lied about his expertise. What could possibly go wrong?
Unless you’ve been hiding under several financially insulated rocks for the past week, you’ll know that on April 2nd (just so everybody could be sure it wasn’t an April Fools joke), Donald Trump offered us a glimpse of what could go wrong.
Trump invoked the International Emergency Economic Powers Act (allowing him to act without Congressional approval), announced “reciprocal” tariffs on imports from 185 countries (as well as additional tariffs on cars and various automotive parts), and promptly wiped $2.4 trillion off the stock market, the largest single-day fall since the last time Trump was in office and the fourth largest fall in history.
Even the Heard and McDonald Islands, a group of Antarctic islands populated entirely by seals and penguins, weren’t safe from Trump’s tariffying wrath.
After all, according to Trump, trading partners around the world have been treating America “horribly” for years. The European Union charges a 39% tariff, Thailand charges 72%, Madagascar charges 93%!! And if they do it to him, why shouldn’t he do it to them?
The problem is, these figures, based on Navarro’s work, are so unrealistic that they also seem to have come from a different planet. In the real world, the European Union’s average tariff rate is just 1.4%, Thailand’s is 3.1%, Madagascar’s is 7.1%, and even Bermuda, which has the highest tariff rate in the world, falls short of most of Trump’s claims at 23.8%.
And the reason for this discrepancy is that Trump’s tariff figures are not tariffs at all. They’re the amount the U.S. spends on a given country’s products minus the amount that country spends on U.S. products, divided by the amount the U.S spends again. In other words, the trade deficit.
For example, Madagascar’s population is a tenth the size of the United States, its GDP is 500 times smaller, and its military expenditure is nearly 1,000 times smaller. But one area where it has the United States beat is vanilla production. In fact, Madagascar is the world’s largest vanilla exporter by an order of magnitude.
And because most Americans can afford to buy vanilla ice cream and spiced lattes, but most Madagascans can’t afford to buy iPhones and Ford F150s, America spends around $733 million on Madagascan products every year, while Madagascar only spends around $53 million on products from the U.S.
$733 million minus $53 million gives a trade deficit of $680 million (divide that by $733 million again to get 93%).
This shortfall isn’t Madagascar taking advantage of the United States, it’s Madagascar being far smaller and poorer than the United States.
But now, thanks to “Liberation Day,” American companies will pay an additional 47% fee to import vanilla from Madagascar. And they’ll pass the extra cost on to American consumers. Because, as economists have been warning for several months now, tariffs are a tax on consumers. And the more recklessly and arbitrarily they’re applied, the worse they are for everyone.
Well, almost everyone.
Because Trump and his billionaire friends won’t be affected by a 25% hike in car prices or a 20% heftier grocery bill. Trump barely knows what groceries are!
He doesn’t have to worry about the impact his incompetence is having on his investments or his retirement fund. He thinks anybody who is worrying is “weak” and “stupid.”
He can afford to wait for as long as it takes for the pain his trade war will cause to subside.
Sadly, millions of others don’t have that luxury.
As the MAGA propaganda machine tries to persuade Trump’s base that losing all your money is “character building,” it’s become painfully clear that some people have decided that every one of Trump’s horse-in-a-hospital blunders is part of some grand, 17-dimensional chess negotiaating strategy, that any criticism of Trump is evidence of “Trump Derangement Syndrome.”
But what if, as some of his supporters are beginning to suspect, Trump is just a moron?
What if believing you can Dunning-Kruger your way through everything from the pandemic response to geopolitics is a sign of immense stupidity, not intelligence?
What if hiring people for critical government positions based on whether your son-in-law likes the title of their book or you saw them drinking champagne out of a hot tub on Fox News, is a sign of objectively terrible judgement?
What if crashing the stock market every time you get near power, is a sign that you’re not the man to “make America great again”?
Because as of this writing, the stock market is down $9.6 trillion since Trump’s inauguration, Canada has abandoned its relationship with America and in favour of security and defence agreements with Europe, Japan, South Korea and China are teaming up to fight Trump’s trade war, and the reputation of stability and leadership that America has spent the past eighty years cultivating is in shambles.
But hey, I’m sure nothing bad will come of trusting a guy who bankrupted six of his businesses (including the singular feat of bankrupting a casino), to guide America’s economic future.
👏🏾👏🏾👏🏾 Brexit was stupid because people voted yes for an impossible and nonsensical delusion where no-one knew the actual outcome. This is even stupider because he told them what he wanted to do, experts explained why it would hurt ordinary people, he had shown his priorities the first time around and they STILL voted for it and are now pretending there was no way to know this would happen… 🙄
Trump is the physical epitomy of representation of America, the modern day Babylon. For of Babylon it is written, "On the outside it was a golden sceptor, but inside it was filled with filth and abomination."