Trump’s Tariff Tantrum Trauma

It’s interesting to note that no one considered the trade deficit or tariffs in general a major issue until Donald Trump hit the air waves. Since the US is a consumer based economy, economists in general consider a trade deficit healthy for the economy. Furthermore the economy seemed to be doing better before President Trump started his trade war as his policies caused GDP losses in Q1 that should not have occurred and manufacturing PMI has been contracting for the past 6 months. In other words while the president hopes to increase manufacturing in this country he seems to be decreasing it.

Now you would think that after say 3 months of manufacturing PMI getting worse the president’s economic advisers would say to him ‘ Mr President, this policy does not seem to be working out as planned. We need to re-evaluate’. While we don’t know if that happened, we do know that anyone who disagrees with the president is usually shown the door and the president’s cabinet appears to be intact.

What Trump has done with the tariffs is classic Donald Trump. Only Donald Trump sees the non-existent problem and only Donald Trump has the solution to the non-existent problem. The problem is the solution to the non-existent problem appears to be worse than the non-existent problem itself. Of course Trump also bashed and trashed prior administrations claiming they all cut bad trade deals.

The fact of the matter is the trade deficit is a non-issue and concentrating on it is a waste of time and resources. Bond investors are looking at the national debt and not the trade deficit. If in fact we needed to re-negotiate with some countries like China, it should have been done in private. The president constantly making public pronouncements and changing his mind is just leading to uncertainty and creating problems of its own

Interestingly enough, the latest court ruling declared the tariffs illegal or unconstitutional. The ruling is being appealed so we’ll have to see what happens. Stay tuned.