A Trump recession? You heard it here first.
If Trump loves tariffs so then why doesn’t he use them to try to alter Chinese behavior? I don’t mean this piddling 10 percent increase either. China is a bad actor. It is rattling its swords in the South China sea. It continues to threaten Taiwan. Trump’s actions toward Ukraine may have emboldened the Chinese to become even more aggressive towards Taiwan. Trump is not going to come to Taiwan’s rescue militarily. So what is there that will slow them down? Tariffs. If Trump told China that he was going to impose a 1000 percent levy on all Chinese imports if they didn’t quit the threats in the South China Sea and toward Taiwan. I bet that would get their attention. For good measure, I would tell them to stop all the hacking and quit harassing the Uyghurs. Do it.
Stop with the Trump worship already! One lawmaker wants Trump’s face chiseled into Mount Rushmore. Another wants to make his birthday a federal holiday. Still another wants to change the name of Washington Dulles Airport.
Tennessee’s Andy Ogles wants to amend the Constitution to allow only presidents who have served nonconsecutive terms to seek a third term. Hello Donald Trump. Hello Grover Cleveland. What about adding his likeness to Mount Rushmore? What about renaming Greenland as “Red, White and Blue land?” Mark Alford (R., Mo.) has proposed Feb. 9 as “Gulf of America Day.” Some have even talked about renaming their state as “The State of Donald Trump”! How about Trump City, Tennessee? One of my granddaughters is named Reagan. Pity the poor child who is named “Trump”. Good grief! Want to bet that all this will change as Trump wears out his welcome?
All this embarrassing – but not to Trump – hero worship will quickly vanish if Trump’s policies result in this country going into a recession. Trump’s tariff war is not confined to Mexico, Canada and China. It is with the entire world. He has threatened Europe, the BRICs countries and anyone that trades with America with tariffs. Increased tariffs in the past have led to job loss in the United States and in our trading partners. He is ignoring the Smoot-Hawley Act and ignoring what happened during his first term. This time the impacts will be magnified and will be Smoot-Hawley on steroids. He wants the Fed to ward off any recession by lowing interest rates and goosing up the money supply. This is a toxic mix that will lead to an inflationary recession. When, not if, all of this occurs then even the biggest Trump apologists will regret all the adoration that they are lavishing on him.
My next lectures will be on the stock market being overvalued. Irrational exuberance anyone? The P/E ratios all point to an overvaluation. On the S&P 500, its P/E ratio is around 37 which is 80 percent above its long term average of 20. A P/E ratio is a measure of how many years of profits will be required to recoup one’s initial investment in the stock. Tech stocks are all above the S&P average of 37. Tesla’s P/E ratio is 161. This is greater fool territory. No longer are buyers expecting that when they purchase a stock that they will recoup the cost with the anticipated flow of dividends. Rather they can only profit by selling the stock at an even higher price hoping that there is a bigger fool out there that is willing to buy it at a higher prices. This is dangerous territory and is ripe for a correction that will shave trillions of dollars off of wealth. Will it trigger a recession is the question. Losing two trillion dollars in the dot.com bubble of 2000 triggered a major recession – P/E ratios were over 100. A similar plunge by Amazon, Apple, Meta and the rest of big tech coupled with Trump’s tariffs would be recessionary and lead to democrats coming back into power in the midterms.
Canada is gearing up to match Trump’s tariffs and Trump has caused the polls in Canada to swing wildly. A month ago the conservatives were 20 points ahead of the liberals with elections coming due to Trudeau’s resignation. Now the liberals are 2 points ahead. Trump saying that he was going to use tariffs to force Canada to become the 51st state has engendered latent patriotism and a massive pushback. Trump saying that “Tariffs will make it impossible
for them to sell cars…lumber or anything else into the U.S.” and “If we don’t support them they don’t subsist as a nation.” Mark Carney, the favorite to lead Canada’s liberals has said that Trump’s threats are “one of the greatest crises in our history. I know how to manage crises, I know how to build strong economies.” So thank Trump for the resurgence of the liberals. One observer said “If the next election is about who’s best able to handle all the turmoil that Trump is creating, then the Liberals can win that election.” All this means is that Canada will retaliate. It will impose retaliatory tariffs. It will cut off the flow of oil and electricity to the U.S. The conservatives have tried to counter the liberals with a Canada first agenda and its leader saying “Let me be clear: We will never be the 51st state. We will bear any burden and pay any price to protect our sovereignty and independence.” However, this may be too little, too late.
And mind you, these are our friends. Or should I say, these used to be our friends. Remember the bitter hockey game between the US and Canada where the Canadians booed our national anthem? Almost immediately after the puck dropped so did the gloves as a brawl ensued. Trump taunted Trudeau before the match and when the Canadians won in overtime, Trudeau tweeted “You can’t take our country—and you can’t take our game.”
Then what about our trading partner to the south? All the forecasts are for Mexico to go into a significant recession if hit by Trump’s tariffs. Trump obviously expects them to knuckle under but their socialist president is adamant that they won’t. Trump wants Mexico to do more to stop the illegals and to stop the flow of fentanyl. If not then Pete Hegseth is reported to have told Mexico’s military leaders that the United States is prepared to take unilateral military action. What! I thought that Trump was no neocon. Is Hegseth said that Trump will use the US military to go into Mexico to deal with the cartels? He can’t be serious. There is no way that Mexico will stand to see its sovereignty threatened by a US invasion. Will this be Trump’s Afghanistan and will the American people stand for it? What in the wide world of sports is going on? OK Andy Ogles, still want to kiss Trump’s ring?
Anyway I thought China was the source of all things fentanyl? That’s even more reason for a 1,000 percent tariff.
haroldblackphd.com 