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Trump’s billionaires, Wherefore art thou?

Much has been written about all the billionaires in Trump’s cabinet. But there are actually only three and one wonders if any of them knows anything about running a business. They are Howard Lutnick, Secretary of Commerce, net worth: $3.2 billion, source of wealth: finance CEO of Cantor Fitzgerald, a financial services firm; Linda McMahon, Secretary of Education, net worth: $3 billion, source of wealth: wrestling; and Kelly Loeffler, Head of the Small Business Administration, net worth: $1.3 billion, source of wealth: wife of Jeff Sprecher, CEO of Intercontinental Exchange;

Note that none of the above built their wealth in manufacturing. The Wall Street Journal remarked regarding Lutnick, that it is too bad that the secretary of commerce knows so little about commerce. Scott Bessent, Treasury Secretary has a net worth of “only” $500 million. His source of wealth is Key Square Group, a macro hedge fund destroys wealth as often as it enhances it. Only Doug Burgum, the Interior Secretary whose net worth is a paltry $100 million started a small business, a software firm, Great Plains Software which Microsoft bought for a billion dollars in 2000. (What happened to the other $900 million?) Burgum then ran a real estate development firm and venture capital company. The one influential Trump advisor who is involved in manufacturing, Elon Musk, has been the only one who has publicly strayed from Trump’s obsession with tariffs. But Musk is not in the cabinet.

BTW, a macro hedge fund is one that places bets on wide swings in the market rather than picking individual firms and stocks. So these funds short or go long in stocks to take advantage of political upheaval or movements in economic activity. One such fund had taken positions in anticipation of a Trump-induced market crash and was rewarded with a 6% gain in the market downturn following “Liberation Day.” However, that same firm lost some of its gains when the market bounced back when Trump suddenly rescinded his “reciprocal” tariffs. Another macro hedge fund sold stocks in its highest volume in 12 years. The Wall Street Journal reports that the ratio of bets on asset prices rising to bets on asset prices falling is at a five year low. No doubt that all the sell offs by hedge funds contributed to the volatility in the market.  One fund is heavily into Treasurys and lost when investors dumped Treasurys as stocks plummeted. This is the world of Scott Bessent who probably advised Trump to cool it lest his hedge fund buddies take severe losses and upset their well heeled clientele.

I am not convinced that hedge funds add value. Yes they have made some of their managers like Bessent and Scott Ackerman very wealthy but most funds do not add value and collect high fees for churning portfolios. Nonetheless, their clients are generally wealthy and their hedge fund investments amount to little more than gambling money which constitute very little of their wealth.

If Trump had real businesspeople in his cabinet, maybe the path for the economy would be different than the haphazard zig zig route that we are now on. The MAGA crowd has been trying to convince me that Trump knows what he is doing. They have faith. Let’s hope that that faith is justified.

Erratic Trump. Erratic Iamaleava. Who?

I had wondered why congress would not assert its authority over tariffs and claw back Trump’s actions. The answer is that the republicans are afraid. First they are afraid of Trump and second they are afraid of the political ramifications of them opposing the leader of their party. The democrats in the House are content to sit back and see this play out. They probably know that if the tariffs go fully into effect then the result will be a recession and possibly inflation but surely chaos is global and domestic financial markets. In the Senate, Elizabeth Warren has introduced a resolution to claw back tariffs from presidential control and return them to the Senate. That may pass. Chuck Grassley, Mitch McConnell, Susan Collins, Thom Tillis, Rand Paul and Lisa Murkowski are all likely to support it. However, Trump will veto it.

Trump reminds me of the old saying that “the boss may be wrong but the boss is the boss.” I hope that Trump declares victory at some point and recalibrates his “reciprocal” tariffs. But he is just stubborn enough to leave in place his global 10 percent tariff. Let’s hope that he removes them from countries that have zero tariffs and those with a trade surplus with the US. It will be interesting to see the effect on prices of the 10 percent tariff given that the American average tariff was 2.5 percent. If the 10 percent has minimal impact on consumer prices and brings in a couple of billion dollars, will Trump be satisfied? 

Businesses are inclined to wait things out. Trump’s behavior has been erratic and seems to change on a whim. Markets like certainty and the volatility in money and capital markets speaks to the uncertainty caused by Trump’s actions. Maybe he is on an ego trip showing how he can roil markets and disrupt the world’s economies. Regardless, no major investments are likely to happen until there is some certainty back in the markets.

Speaking of erratic, Trump’s carve out exempting smartphones and other electronics from the tariffs is a bad look. Apple, Samsung and Nvidia are heavyweights with stacks of cash, high paid lawyers and lobbyists and direct access to the White House. Small businesses who sell stationery, socks and paper products do not. Small businesses which are the engine of employment and growth in this country are suffering with no relief in sight. I said during COVID that Trump was anti small business with his overt favoritism toward larger retailers while enforcing the closure of small ones. That bias is again evident.

Speaking of erratic, Trump was actually displaced in the Knoxville news by Nico Iamaleava, the erstwhile University of Tennessee quarterback who held out to get more money from his NIL deal and got fired. It may have been a relief to many Vol fans who had long given up on trying to pronounce his name and were reduced to just calling him “Nico” but the greatest surprise was the overwhelming support of Vol Nation to show him the door. The university or rather the booster group that finances NIL refused to renegotiate his deal when he became the first holdout of the NIL era. Tennessee coach Josh Heupel said that no player was bigger than the team or the program. Even though it leaves the Vols without a first line starting quarterback in the brutal SEC, the fans are going to do a first – actually support the team even if it suffers from a losing season. I think Nico and his people miscalculated his value. He will now go through the transfer portal and may find a home. But he has missed spring practice and will be not likely to be ready to start this season. I doubt if any school will be willing to pay $2+ million for Nico to sit on the bench. Also any team that signs him will have to deal with a fan base that will not likely embrace Nico. Some experts have linked him to a desperate UCLA which had a losing season and lost many of its best players to the transfer portal. Others have mentioned Colorado which only makes sense if Coach Prime decides that Liberty transfer Kaidon Salter and freshman Julian Lewis (from my home state of Georgia) aren’t good enough to compete in the Big 12 and at some level Iamaleava’s ability is close to that of his son Shadeur. Regardless, given the lack of demand, I would be surprised if Nico’s new deal was better than the one he walked away from at Tennessee. So with Nico, caveat emptor. 

Does Trump really want a return to the good old days?

I saw a recipe “Preparing poached lobster with morels and favas”. Shouldn’t it be illegal to poach lobsters?

Trump’s exempted smartphones from his Chinese tariffs. I’m sure that Apple’s Tim Cook’s $1 million donation to the inauguration had nothing to do with it. Right?

Here are the countries with whom we have a trade surplus. Why then are they still hit with Trump’s 10 percent tariff? Trump should immediately rescind his tariffs with these countries.

December 2023 Trade Surpluses ($ billions)

Rank	Country	Surplus
1	Netherlands	43.7
2	Hong Kong	23.6
3	United Arab Emirates	18.3
4	Australia	17.7
5	Belgium	15.8
6	Panama	10.7
7	United Kingdom	9.8
8	Dominican Republic	6.0
9	Brazil	5.7
10	Argentina	5.0
11	Guatemala	4.9
12	Bahamas	3.8
13	Peru	3.3
14	Chile	3.2
15	Qatar	2.6

On “Liberation Day” Trump said “For decades, our country has been looted, pillaged, raped and plundered by nations near and far, both friend and foe alike,” the president said on Liberation Day. “American steel workers, auto workers, farmers and skilled craftsmen—we have a lot of them here with us today—they really suffered gravely.” That, of course, is pure hyperbole. If Trump were correct then the states that “suffered” from manufacturing loss would be worse off. None of them are. In fact they are all better off economically with low unemployment rates.

Personally, I think that Trump imposed those tariffs to help him politically in Pennsylvania, Michigan and Ohio. Ironically, although those states suffered displacement under NAFTA they actually benefitted. Those who talk about job loss forget to mention the jobs gained. Studies find that job losses were offset by gains. Yes manufacturing jobs in the US have declined but trade caused only about 20 percent of the job loss while technology accounted for 80 percent. Michigan is estimated to have loss around 220,000 manufacturing jobs due to NAFTA. However, the Congressional Research Service finds that overall there has been a net gain in jobs. Michigan now has over a million jobs directly linked to international trade and workers in trade intensive industries earn 18 percent more than in other industries. A politician railing about job loss should first address why those jobs left in the first place. Mexico has more than 40 free trade agreements than the United States giving a company more duty-free access than if it were in the US. So the lack of free trade agreements is also costing the US jobs.

Trump hated NAFTA and replaced it with the US Canada Mexico Agreement. Then Trump reneged on his own agreement hitting Canada and Mexico with 25 percent tariffs under the guise of a national “emergency.” Why would any country believe that whatever deal Trump makes will be adhered to?

Yes trade causes disruptions in the labor force but accounts for only about 5 percent of the 20 million Americans who change jobs involuntarily yearly due to layoffs or plant closures. Technology imposes a larger threat to American jobs. Over 50 percent of American jobs are vulnerable to technology. I guess Trump should now start imposing tariffs on companies that displace workers due to technological change. Ned Ludd lives!

Trump may be a short timer but if JD Vance succeeds him – which I doubt – his industrial policy will continue. Vance, too, believes that free trade agreements destroyed middle class jobs in the Rust Belt and decreased wages. Again, this is not true. If the middle class decreased it was only because they moved up rather than down the economic ladder. Factory towns are gone because fewer workers are required to make the same output. American manufacturers now operate more efficiently, use fewer natural resources, require less backbreaking labor, produce less pollution and employ more highly educated people than ever. No tariff or trade restriction is going to reverse those trends. China and Mexico did not kill factory jobs, technology did. The share of households earning more than $100,000 has tripled over the past five decades, and the share earning less than $35,000 fell by 25%.

So do you think that there are bunches of unemployed people out there pining to work in factories? Apparently Vance and Trump think so, although in reality they probably don’t. The manufacturing workforce is typically men without a college education. Today domestic manufacturers cannot find enough workers to fill job vacancies. February’s jobs report from the Bureau of Labor Statistics showed 7.6 million vacancies. Is Vance – or more importantly Trump – going to admit more immigrants in to the country to fill those jobs? Not likely.

So all this posturing about job loss due to trade and bringing manufacturing back to the US is nothing but a ruse. Labor intensive manufacturing jobs left the US because of labor costs and the manufacturing that remained is mostly tech heavy. One firm just announced that in order to hire a person, managers have to document that the job could not be done by AI (no Linda McMahon, that’s not the steak sauce). The company is now going to use an AI system to automate the storage and retrieval of inventory. Instead of needing several facilities with 50 or so employees it will need only one with 4 people and they’re all technicians.

It is highly unlikely that either Trump or Vance will change their tune but as my father used to say “Harold that sounds good – if you are interested in sounds.”

More random thoughts

Wall Street, not congress, seems to have been the checks and balances for Donald Trump.

He still has support with the MAGA crowd but for how long?

Kamala Harris is exploring the possibility of “establishing an institute for policy and ideas” as a fund raising vehicle to finance her political future which makes sense given her deep knowledge of the issues and her ability to articulate complex thoughts.

Merchants are now putting a “Trump Liberation Tariff” on their bills. Much like some put a credit card usage fee on sales slips.

Trump says any pain in the U.S. from tariffs will be offset by long-term gains in jobs and investment. Does he really think the American public after a 24% rise in prices under Biden will stand for a similar or greater rise under Trump?

Trump says that manufacturing will miraculously reappear because of tariffs. But factories are not built in a day, companies say that even if they did they couldn’t find the workers. 

It doesn’t make sense for companies to rush to make big investments because of Trump’s tariffs because he is erratic and is a short timer. Case in point, he just exempted cell phones, computers, hard drives, memory chips, flat panel television screens and semiconductors from his “reciprocal” tariffs on China. So why should Apple, Samsung and the rest spend billions to move production and disrupt their supply chains? This time Trump really blinked. What’s next?

Southeast Asian economies are built on exporting goods – mainly to the US. Economists call this comparative advantage. Twenty million jobs in Chinese factories and the Vietnamese economy are geared towards making stuff for the US market: apparel, homeware, toys, the electronic and other consumer products.

China runs an almost $1 trillon goods surplus to the world. Given Trump’s logic this should mean that China’s economy should be humming along, vibrant, the biggest in the world and rapidly growing – none of which is true. Et tu Donald?

Howard Lutnick says that Trump’s tariffs will eliminate China’s “army of millions and millions of human beings screwing in little, little screws to make iphones” so they can be built in America by robots. Is this a racist comment? Regardless, Lutnick either knows better or is a fool. I guess the robots will be imported from China.

China is a bad actor.  It has admitted that Beijing was behind a widespread series of alarming cyberattacks on U.S. infrastructure. I would have hit them – and only them – with tariffs until they stop their sword rattling, stealing of intellectual property and cyberattacks.

Repeal the so-called Inflation Reduction Act. All it did was to hand out billions to the green industrial complex. The typically low original cost of $400 billion is now over $1 trillion. But of course some republicans want to keep those parts that give pork to their districts.

Didn’t Trump say he believes in fair trade? But to him, “fair” means a trade surplus with tariffs, not merely as a means to an end, but as an end in themselves. Again, Trump see China.

China has put its minerals on a watch list to limit their sale to the US. China makes 80 percent of EV batteries. If China stops exporting rare earths, what would be the impact on the US? China dominates 90% of the global rare earths markets which are essential to the defense, energy and electronics industries. Trump might say “mine, baby mine.” But It takes an average of 29 years to go from mineral discovery to production in the U.S while in China, with few environmental regulations and state subsidies it can take months rather than years to bring a factory on line.

Trump is now bragging that we are now raking in the money from tariffs. He is ignoring the firms that are laying off workers, firms that are delaying production and firms that are going out of business. He is also ignoring that the net impact of the first Trump deficits in his first term was negative. This time it will be worse unless of course he continues to blink.

JD Vance – Trump’s Hit Man

Has JD Vance been assigned a role by Trump? Currently the only specified duty of a vice president is to preside over the Senate. No wonder Vance went to Greenland. Imagine having to spend your days listening to Chuck Schumer. But it is clear to me that Vance is Trump’s hit man. First he went to Europe and chastised the Europeans at being wimps. Speaking at the Munich Security Conference Vance chided the Europeans. He was confrontational accusing the Europeans of censoring free speech. He said that they feared their own people. He dismissed the role of Russian interference in the politics of the continent. Rather he said that the greatest danger was from within rather than without. Vance said “The threat I worry the most about vis-à-vis Europe is not Russia, it’s not China, it’s not any other external actor. What I worry about is the threat from within, the retreat of Europe from some its most fundamental values, values shared with the United States of America.” Moreover, Vance said that Brussels had shut down social media over hateful content, criticized Germany for raids against its own citizens for posting anti-feminist comments, Sweden for convicting a Christian activist, and United Kingdom for backsliding on religious rights. 

Hum. Sounds like the Biden administration to me. Not surprisingly those in Europe hit back. “Vance’s attack on European democracy in Munich, perversely twisting the language of democracy itself should leave no doubt whatsoever that the aim of this administration is to destroy the EU and its liberal democracies.” Of course, Vance would not have said any of this without Trump’s blessing. 

Then came the meeting with Zelenskyy, Trump let Vance be the attack dog in provoking Zelenskyy to counter attack. Remember “Do you think that it’s respectful to come to the Oval Office of the United States of America and attack the administration that is trying to prevent the destruction of your country?” Vance said. “Have you said ‘thank you’ once?” “With respect, I think it’s disrespectful for you to come into the Oval Office and try to litigate this in front of the American media.” I don’t think that Zelenskyy – like any foreign leader – took too kindly to the impudence of only a vice president and reacted accordingly.

Then Vance proceeded to belittle the Chinese in the midst of the trade war by saying that the U.S. borrows “money from Chinese peasants to buy the things those Chinese peasants manufacture.”  Naturally, the Chinese were offended by the use of the term “peasants” much like black men take offense at being called “boy”. There is no doubt in my mind that Vance deliberately chose a racist term to intentionally provoke the Chinese. And of course they responded. “To hear words that lack knowledge and respect like those uttered by this Vice President is both surprising and kind of lamentable.” This was their diplomatic way of saying F-you. Again, Vance would not have uttered this insult without Trump’s approval.

Then Vance went to Greenland on an “unofficial” visit that was unwelcomed by either Denmark or Greenland. There he said “Its cold as s — here!” Then he proceeded to insult Denmark. He accused Denmark of failing to provide adequate security against “very aggressive incursions from Russia, from China and from other nations.” He said “Our message to Denmark is very simple: You have not done a good job by the people of Greenland. You have underinvested in the people of Greenland, and you have underinvested in the security architecture of this incredible, beautiful landmass filled with incredible people. That has to change.”  Neither the Danes nor the Greenlanders were thrilled. Greenland responded by saying “We’re afraid of being colonized again. We’ve been a colony for the past 300 years under Denmark, it still feels like it. Now another colonizer is interested in us.” Greenland’s prime minister said that Vance was not showing respect for an ally. The Danish Foreign Minister appealed for an end to the hostile messaging from Washington. “Many accusations and many allegations have been made. And of course, we are open to criticism. But let me be completely honest: We do not appreciate the tone in which it is being delivered.” He then added “Stop treating us like dirt.”

The commander of the US base in Greenland, Col. Sussanah Myers was apologetic and emailed “I do not presume to understand current politics, but what I do know is the concerns of the U.S. administration discussed by Vice President Vance on Friday are not reflective of Pituffik Space Base.” Not surprisingly, she was removed from command.

All this points to Vance’s unofficial role in the Trump Administration, he is the agent provocateur, Trump’s hit man Trump’s attack dog. Sic’ em.

Random thoughts #54

I made meat loaf yesterday and I remembered the first time I googled for a recipe and Meatloaf the singer was cited in a Wall Street Journal article that referred to him as Mr Loaf.

I was talking about the Supreme Court in class and called them “The Supremes.” Turns out that not a single student had heard of them – or Diana Ross.

Trump said that he wanted iphones to be made in the US, whereupon the company said that it could but they would cost $3,500.

There is a commercial on TV for a Nissan Armada that says it costs “only” $59,000. For some reason I was bothered by that because no country on the African continent has a per capita income equal to that amount. The highest is Libya at $24,196 while South Sudan’s is $433. I bet there are no ads for the Nissan in Africa – or for that matter pizzas at $9.99.

I really need someone to explain to me why if I buy something from someone then it’s bad but if they buy something from me, its good. In essence that is what Trump keeps saying. Trade deficits are bad (we buy more from them than they do from us) while trade surpluses are good (they buy more from us than we buy from them). Again we buy more from the world than they buy from us because we are bigger than most and wealthier than all. Surely Trump knows this.

The Chinese-Trump tit-for-tat tariff spat continues. Trump’s tariffs on China are now 145% while the Chinese countered with 125%. Maybe its over since the Chinese announced that further increases serve no purpose saying “Even if the U.S. continues to impose higher tariffs, it would be economically meaningless and would become a joke in the history of the world economy.”

The Chinese are banning US movies. Too bad we can’t do the same.

Trump however has been strangely quiet when it comes to Canada which said it would retaliate the 25% tariffs that continue on aluminum, autos and steel. Didn’t Trump threaten to impose additional tariffs on countries that matched his “reciprocal” levies? So why haven’t Canadian tariffs risen to 50%?

If Trump’s tariffs are “reciprocal” then why did his National Economic Council Director say that the global 10 percent baseline tariff is here to stay? Recall that previously the average US tariff was 2.5%. Maybe Trump thinks that a ten percent tariff is not enough to seriously affect American consumer prices and industrial production while adding to the Federal coffers. Maybe.

The dollar keeps falling while the euro keeps rising. What is wrong with this picture? But doesn’t Trump want a weak dollar so that exports are cheaper and imports are more expensive? Well its working.

Bitcoin is falling and gold is rising. Isn’t this strange too?

Is Maine still defying Trump on trans athletes? I expect that he will start levying tariffs on Maine lobsters.

Trump is undoing Biden’s green war on appliances. He repealed the regulations governing the water flow of showerheads. The tankless water heater rule is next and look for repeals of the restrictions on household appliances.

The democrats have tried to frighten the public by calling DOGE as an “oligarchical techno-state” and as a “dystopian nightmare unfolding before our eyes.” Wow. Way to install fear, guys.

It was a bit weird that when Trump did his thing on “Liberation Day” I had feeling of dread. That got me thinking that this was the first time I had felt that way due to the economy. I did not feel that way when the real estate market crashed in 2007, or the dot.com crash in 2002 or even with COVID. I only recall feeling that way when after 2011 it was eerily quiet when no aircraft were flying.

Don’t let them see you blink

Trump is probably enjoying flexing his muscles. First he imposes ridiculous tariffs on the entire world and markets crash losing $10 trillion in value. Then there is a rumor that he is going to backtrack and the markets rally. Then comes news that the backtrack news was fake news and the markets fall again. Then Trump, for real, announces a “pause” in most of the world’s tariffs and the markets roar back, gaining $5 trillion. For someone with such an ego, Trump must truly be in his glory. It is therefore, hard to imagine, as some have written, that Trump blinked.

But why did he backtrack? Some say it was the steep fall in the markets and Elon Musk’s displeasure at being a few billion dollars poorer. When Musk came out for zero tariffs – rather than Trump’s weird reciprocal tariffs – the commerce secretary Lutnick said that Musk was just an assembler. Musk then called Lutnick a moron and dumber than a sack of bricks. Temper. Temper. Some say that the fall in the markets spooked Trump and that his Treasury secretary, Bessent convinced him to a pause. Still others say that Trump really did not care what happened to the stock market – which I find hard to believe – because he really wanted a fall in the market that would lead to a fall in the 10 year Treasury. Weird? Here is the “logic”. When the market falls, investors run to safety and the 10 year Treasury is considered a safe haven. When the demand for treasurys rise, the price goes up and the yield falls. Since $9 trillion in US debt is maturing soon, the fall in the Treasury yield means that the maturing debt can be refinanced at a lower rate. Each basis point drop in the treasury rate translates to a savings of $1 billion a year. A basis point is one one-hundredth of a percent. And yes, initially the T-bond rate fell from 4.2% to 3.9% or a $30 billion savings if the bonds were refinanced at the lower rate.

But after the initial drop, the rate on the 10 year Treasury shot up to 4.5%. So investors did not run to Treasurys, rather they started to dump them indicating that no longer was the US considered to be a trustworthy safe haven. Also if tariffs sparked inflation, investors demand higher yields to protect the real value of their investments. Of course, Trump has been demanding that the Fed help him out by lowering interest rates, tweeting 

“This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates. He is always “late,” but he could now change his image, and quickly. Energy prices are down, Interest Rates are down, Inflation is down, even Eggs are down 69%, and Jobs are UP, all within two months – A BIG WIN for America. CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”

Trump sure loves caps and exclamation points. The Fed has resisted Trump’s entreaties. Its next Open Market Committee meeting is May 6-7 and there is no indication that they will lower rates. The expectation is that they will leave rates steady. In fact, the Fed is likely to resist overt political pressure from Trump to lower rates so that he can have the debt refinanced at a lower rate. So some say that Trump “backtracked” not because of the sell off in the stock market but because of the sell off in the bond market causing the 10 year Treasury to rise rather than fall. Regardless, Trump is now back to square one with the 25% tariffs on Canada and Mexico and his 10% tariff on everybody else – but China.

Trump’s tariffs may have cast doubt in investors minds about the wisdom of putting their eggs in the dollar basket. Central banks hold dollars as their reserve currency. Businesses transact in dollars across borders. This means that there is a demand to hold dollars and this generally means holding treasurys. However, if Trump is lessening the US’s participation in world markets by increasing US tariffs then there will be less demand for dollars. Thus, Trump’s tariffs will in effect reduce the dollar’s status as a reserve currency. In addition, less dollars flowing overseas also mean lower demand for treasurys which are used to finance deficit spending. So in the words of the old adage, be careful for what you wish.

Our Gutless Congress and Free Trading Penguins

I once wrote that our congressional politicians were gutless to let the republican AGs do the heavy lifting in confronting the excesses of the Biden Administration. Well it continues. Trump’s usurpation of Congress is apparent to all. Article I, the Constitution vests the “power to lay and collect taxes, duties, imposts and excises” in the Congress, not in the president. As a result, the president isn’t empowered to impose his “reciprocal” tariffs on all our trading partners. Yet Congress sits on its thumbs. Even the democrat AGs who are fond of suing Trump at every turn have not sued him on tariffs. Rather they seem content to try to defend their various constituents – LBGTQs, illegals, federal workers, bloated federal budgets and the green industrial complex. I know that the republicans in congress are afraid of Trump – except for Rand Paul, Mitch McConnell, Thomas Massie, Lisa Murkowski and Susan Collins – which is why they are letting the president abrogate their powers. But why are the dems – who hate Trump’s guts – not suing him? Jasmine Crockett, Al Green, Hakeem Jeffries, AOC in the House and Chuck Schumer in the Senate are doing absolutely nothing to stop Trump. I want someone to kindly explain to me why.

The venerable Art Laffer has suggested an exit strategy for Trump – assuming that he is looking for one. Laffer once said that Trump at a G-7 meeting offered to drop all tariffs and subsidies if the other countries would do the same and there were no takers. He is now suggesting the same thing. He says that Trump “should give a globally televised address announcing to the world that the U.S. is ready to drop its tariffs and industry subsidies to zero tomorrow on any nation that does the same.” The only problem is that Israel has done exactly that and still has a Trump tariff of 17 percent. Singapore which does not impose any tariffs period yet has the Trump global minimum tariff of 10 percent. Singapore’s prime minister says that this minimum global tariff doesn’t appear to be open to negotiation. Vietnam has gone to zero but their tariff stays at 46 percent. So Dr Laffer, zero does not mean zero in Donald Trump’s world if a country has a trade surplus with the United States.

Again this is lunacy. How will Vietnam get its tariff down to zero? It must refuse to sell any goods to US customers past what it buys from us, dollar for dollar. Never mind that its per capita income is only a tenth of ours. It cannot even sell the goods to a third party because that third party will be hit with tariffs when it sells to US customers. That is supposed to be the reason why Trump’s tariffs extend to every bit of real estate on the planet. The democrats and their media exploded with mirth over tariffs imposed on uninhabited islands with only penguins. Even though this was clearly an error by the administration, commerce secretary Lutnick had to lie, saying it was to prevent a transfer of goods through those islands as if we would not know that a place with zero inhabitants could not sell us goods. Sorry Art but Trump does not want zero tariffs and zero subsidies, he wants a zero trade deficit which is impossible unless he can make American stop buying foreign goods.

(And thanks Lynne for the penquin)

I have some bad news and some good news.

What’s the bad news?

Trump’s tariffs are now in place. Knowing that there will be disruptions in financial markets and in consumer confidence, Trump tweets that we should “hang tough” as markets crash. Trump said the tariffs “won’t be easy, but the end result will be historic” as consumer prices to rise and the world teeters on recession. His surrogates, who should know better, are forced to lie in order to keep their jobs. His press secretary Karoline Leavitt said there is “not going to be any pain” from the tariffs for American companies or workers, claiming Americans can “expect price stability.” Huh? Who believes this nonsense? Scott Bessent the treasury secretary said that there was “no reason” to expect a recession based on Trump’s tariffs. Of course, if Bessent were still in the private sector, he would be singing another tune. Bessent implied that the some of the tariffs might not stay in place very long when he said that over 50 countries had asked for negotiations citing some countries lowering their tariffs to zero. However, as I have pointed out, even a zero tariff does not mean a zero tariff in Trump’s world. Since his so-called reciprocal tariffs are based on other things such as “currency manipulation” and trade deficits, the Trump tariff will remain positive.

It does not take a genius to figure out that consumer prices will increase but by how much. Some estimates are that it will be the equivalent of $4,000 to $5,000 per household a year. The tariffs will decrease economic growth and increase unemployment. The crash in the market of now around $10 trillion will negatively impact retirement plans, pension plans and 401Ks.

Some U.S. retailers and other importers may eat part of the cost of the tariff, and overseas exporters may reduce their prices to offset the extra duties. But for many businesses, the tariffs Trump announced Wednesday — such as 20% on imports from Europe — will be too large to swallow on their own. I have pointed out that the tariffs on automobiles is greater than the profit per car.

The stock markets fell sharply. The Dow Jones Industrial Average dropped 1,679 points. The S&P 500 fell 274 points, or 4.8%, its biggest one-day drop since 2020. The Nasdaq dropped more than 1,050 points, or nearly 6%. All this also negatively impacted consumer confidence in the face of falling retirement plans and rising consumer prices.

What’s the good news?

Trump delayed announcing his tariffs until after the primaries in Florida. As it were, the republican margin of victory in both races was down from the precious election. If Trump had announced his tariffs earlier or if the elections had been later, both republicans would have likely lost. Things will get even worse for the republicans when consumer prices start to rise in a couple of months. Clothing prices will increase by more than the average given the high tariffs on Southeast Asian countries. Unless exempted, food prices and energy prices will also rise. Again many voted for Trump because of the Biden inflation. They have been thrown under the bus and since Trump is not on the ballot, republicans will feel the wrath of the electorate. I don’t think any republican seat is safe, including that of our Tim Burchett. Well maybe that of Rand Paul who has been the only republican brave enough to question the folly of Trump’s tariffs.

Trade deficit or investment surplus?

Are trade deficits bad? So says Donald Trump. Well I have a trade deficit with Kroger, Publix, Lowes, Amazon and Walmart. I have a trade balance with the University of Tennessee where I teach one class this semester. I trade them my services for payment for the class. However, I do not have a trade surplus with any other entity since I have retired from the boards of not-for-profits. There I supplied by service on their boards for no monetary compensation. As a consequence, for most of my retirement years I have been in a trade deficit. I have generated little if any income and live almost solely on my retirement accounts. My trade deficits with Amazon, Kroger, Publix, Lowes and Walmart have not made me worse off. As a matter of fact, they have made me better off. I am not hungry. I have been able to do home improvement chores and where else can I buy salsa, yogurt, light bulbs, rv antifreeze and jigsaw puzzles under one roof but Walmart?

So if my trade deficits have not made me worse off and to the contrary have made me better off, then why does Trump insist that trade deficits make the country worse off? The man is confused as evidenced by his wanting to increase foreign investment in the US while eliminating the deficit. Didn’t he crow that Taiwan Superconductor was investing $100 billion in the US? Where did they get the $100 billion? Trump loves to announce more foreign investment in the US and signed a National Security Presidential Memorandum (NSPM) aimed at promoting foreign investment. SoftBank CEO Masayoshi Son announced a $100 billion investment over the next four years with a promise to create 100,000 jobs focused on artificial intelligence and related infrastructure. Where did he get the money? The United Arab Emirates committed a 10-year, $1.4 trillion agreement with the U.S. that will sustain existing investments in AI infrastructure, semiconductors, energy, and American manufacturing. Where did it get the money? Trump announced a $500 billion private investment in AI infrastructure led by OpenAI, Oracle and SoftBank. Nvidia said it would invest hundreds of billions of dollars over the next four years in U.S.-based manufacturing operations. Total foreign pledges total over $1 trillion dollars. How did they get the $1 trillion? 

Trump is ecstatic and preening about proclaiming the success of his bringing business back to America. But his goals of attacking trade deficits as bad and encouraging foreign investments is contradictory. Pray tell where did the foreigners get the money from to invest in the United States? The answer: trade. When we buy foreign goods and services we pay for them with dollars. Some entities will accept dollars while with others we have to buy their currency by exchanging dollars. The foreigners are now in possession of dollars. What can they do with them? They can buy American. They can purchase US goods and services, US financial instruments, invest in US businesses, buy real estate or some other US product. But the point is, they must repatriate those dollars. So much of Trump’s touted $1 trillion in foreign investment in the US comes from the purchases of foreign goods by US customers. Some economists predict that the attack on trade deficits by Trump will lead to less foreign investment in US financial markets, causing stock and bond markets to fall in value. There would also be decreases in foreign investments in other sectors of the US economy. All this occurring while Trump is crowing about increased foreign investments caused by his tariff threats. Am I the only one who sees a contradiction here?

Maybe we should tell Trump that a trade deficit was really an investment surplus.