Alas, "Liberation Day" was Historic: Reactions and Responses

This month's news cycle began on a fast and furious note, so I set out to post tariff and tariff related news as timely as possible. Indeed, some events from two weeks ago feel as though they happened months earlier. While things are starting to settle down, there will doubtless be further tariff information for the April Wrap Up post, which I'll group together for easier reading. Like so many in the U.S., I am overwhelmed by what our government has set into motion. I can only hope other nations are faring better, so much is at stake. With a little luck we may eventually emerge from these trying times stronger and wiser. In other words, you go, world!

Some advance warning from Promarket at the end of March, "Breaking Trust in the Government Will Not Be Efficient in the Long Run".

To what extent are trade deficits responsible for the decline of U.S. manufacturing?

Decades earlier tariffs have left a lasting mark on the structure of some U.S. markets.

Consumers are trying to preempt rising costs due to tariffs, wherever possible. 

International trade is much more important now, than it was during the unfortunate Smoot-Hawley tariff.

"This is perhaps the worst economic own goal I have seen in my lifetime."

Anti-neoliberalism grew for decades before the MAGA movement got the chance to actually put it into practice.

There is little incentive for local generic drug production with pharmaceutical tariffs.

It's the end of the world (order) as we know it.

Government trade policy by Chatbot.

Not everyone is confident these tariffs will be scaled back. Oh well, it's only 2.5 trillion stock market wealth lost.

This approach to restoring in U.S. production capacity is strictly wishful thinking.  There has been no strategic preparation or planning.

What, specifically, makes this set of tariffs so bad? 

More manufacturing is needed in the U.S. but Trump's tariffs are the wrong approach.

Might seventies style stagflation be the ultimate result of "liberation day"?

The Trump administration made a major mistake in its tariff calculations. But are they willing to fix it?

The historical Smoot-Hawley example for our times.

In this instance, Donald Trump could be compared with Liz Truss.

Tariffs lead to increased domestic costs: a textbook example.

I regret not visiting Canada when I could have, and now people there no longer welcome U.S. citizens. Understandably so. They are quite fortunate to have Mark Carney as their new prime minister.

Will the withdrawal of the U.S. from globalization "set the tone for the rest of the world"? While I certainly hope not, it remains to be seen. At the very least, the U.S. "has not been the key driver of global trade growth for two decades".

The model for the "reciprocal" tariff plan is completely incoherent. Its entire premise doesn't take the basic foundations of monetary economic exchange into account.

What radical uncertainty looks like.

Tariffs are the wrong approach for much needed improvements in manufacturing capacity.

Rules make things predictable, which makes planning possible. And when rules are broken, uncertainty also means less growth.

Multinational companies have few good options for tariff arbitrage this time around.

There is plenty of ego involved in this tariff episode.

Wait a minute, how do you have this great surge of manufacturing jobs in the U.S. if you're automating all the manufacturing this time around?

The bond vigilantes are not easy to ignore. Monetarily the U.S. could ultimately pay, especially if the rule of law continues to be set aside.

If it were to happen, a Treasury market unwind would be more serious than what happened in 2008.

A visual of China's growing global trade dominance since the year 2000.

By no means are we out of the big tariff era yet. Parts of the threat may be delayed but this is far from over.

Inflation is no longer the main concern.

As of April 9, which tariffs are still in effect?

Tariffs are also still coming for pharmaceuticals. Which of course is on top of other recent cuts on medical innovation. Nevertheless, many have run out of patience with drug companies despite what happens.

However people may feel about it now, debt has been the greatest U.S. export for some time. Indeed, our "capital account surplus" is the mirror image of the trade deficit. So, "If our trade deficit falls, our ability to get the rest of the world to finance our growth will also fall". 

The world has changed in the last nine days.

In this moment of relative calm, how far are we from the potential storm of politicized financial markets?

Tariffs are also on top of what was already declining consumer activity.

Some charts and a timeline for tariff changes.

When it comes to trade wars, China is playing a longer game this time.

This could be a trade diversion like no other. Until now the U.S. was the world's biggest consumer market. How much protectionism might this diversion ultimately cause?

There has already been a rising shift away from long-dated U.S. debt in recent years, which is likely to continue.