Tariffs, Tantrums, & Deals Made of 100% Tinsel: The Trump Trade-Triumph Mirage

A BREXIT for America: Trump’s trade playbook sacrifices prosperity for optics. The Trump-Starmer Agreement shows what happens as symbolism and spectacle prevail over substance, and sets up the...

A BREXIT for America: Trump’s trade playbook sacrifices prosperity for optics. The Trump-Starmer Agreement shows what happens as symbolism and spectacle prevail over substance, and sets up the gameboard for the next 200-odd Trump nothingburger “deals” that Trump will claim as world-changing…

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What masquerades as a trade deal is, in fact, performance art. Trump’s engagement with Starmer yields a non-binding framework filled with future promises but empty of enforceable commitments: an attention-generating stunt dressed in economic garb.

Agreement details are laughably sparse: a minor adjustment in U.S. tariffs for up to 100,000 British cars; vague overtures on steel and aluminum; and symbolic wins on beef and ethanol.

But the broader implications are serious, for this is likely to have very damgaing structural consequences. Declining exports, rising input costs, and a loss of investor confidence follow. The U.S. isolates itself from global trade networks, with all the inflationary and productivity-sapping consequences that entails. And beware of the tails of the distribution: not just bad, but catastrophic. Right now everyone is hunkering down, expecting that Trump will soon lose interest and wander off from trade.

But the institutional wreckage he leaves will endure. Yes, by January 2026 Trump is almost certain to have lost interest in trade and tariffs, and to have have wandered off into the business of wrecking other parts of the fragile equilibria that sustain American prosperity, But his actions in 2025 will have changed the world.

How will things than have settled out as far as trade is concerned?

We don’t know. I would not bet that even The One Who Is has an accurate Visualization of the Cosmic All with respect to this aspect of it.

But if I want to stay in this game, I do have to, sometimes, ante up.

At the moment, if I had to make a forecast of the result that the chaos-monkey trade mess is going to settle into, it is this: 10% tariffs by the U.S. on pretty-near everything, the abandonment by Trump of any higher tariffs, a reduction in U.S. exports, a bigger reduction in U.S. imports as capital flight removes the financing for a substantial tranche of U.S. imports and the First Trump Recession removes demand for another substantial tranche—and a declaration of victory by Donald Trump, as he will claim to have brought the trade deficit down, made foreign countries abandon their unfair trade policies, and made a lot of deals. The press will probably play along.

This is, however, only a central case outcome and a modal-likelihood scenario. The odds are really substantial that it will not come to pass. If you can, you should bet that things will be either worse or better. And you should definitely not be betting that things will not be much worse—you need insurance against the big-disaster scenarios, rather than to implicitly sell such insurance and wind up in the economic equivalent of finding yourself naked on the airless Moon.

My reason for being willing to venture this as my forecast is the outcome of the HUUUUGGGGEEEE trade deal Trump and Starmer “negotiated”. Basically, Trump abandoned everything except a 10% tariff on imports from Britain in return for being able to show that he is a big “dealmaker”, and Starmer played along. For everyone except Xi Jinping, offering “playing along” as your only meaningful offer is just as much of a no-brainer as it was for Starmer.

But this will still be a BREXIT-magnitude disaster, a Trump own goal scored against, the United States. U.S. producers have on net suffered a major loss of market access not just to the U.K. but to every single country in the world. Other producers, by contrast, still have ability to export elsewhere on the same terms. Other-country producers have lost a little with respect to their ability to fit into productive niches in the highly productive global division of labor. U.S. producers have lost a lot.

It is also a substantial own goal for Trump, at least if you see Trump as an advocate for U.S. exporters. It is, however a win for Trump considered as a videoclip-seeking attention hound.

Figure a U.S. in ten years like Britain today ten years after BREXIT: a country with an economy about 10% poorer than it would otherwise have been.

I noted this a couple of days ago:

A Fake Trade "Deal": The Trump-Starmer U.S.-U.K. Near-Nothingburger, & the Shadow of the Chaos Monkey

And I read the news about what is actually in the “deal” and the takes I have seen by others smarter than me as reinforcing my confidence in my understanding of the shape of things. Read through the press fluff to notice that this was much less a trade agreement than a video-ready spectacle. The economic substance was minimal. Ethanol and beef received some token tariff exemptions; in exchange, the UK obtained limited relief on metal tariffs and a vague promise on car exports—not even a binding agreement but merely a non-binding framework with deferred negotiation promises.

Here is Arthur Snell:

Arthur Snell: So the last shall be first, and the first last <https://arthursnell.substack.com/p/so-the-last-shall-be-first-and-the>: ‘Keir Starmer made a bit of a fool… gushing about Britain’s trade deal with the United States…. The idea that a fairly narrow, sectoral deal to reduce tariffs in a few areas is comparable to the end of the most destructive war in human history is a bit ridiculous…. The full details have now come out…. The so-called announcement of a “deal” appears to be an announcement of a deal to make a deal…. A proper trade deal in the United States has to be ratified by Congress…. There isn’t much of a way round this. So this woolly arrangement is what you get if you negotiate with the President, which is what Starmer chose to do…

And here is Joseph Politano. Joseph Politano rightly calls the deal a "farce," emphasizing that meaningful market access for either party was not actually achieved. British negotiators were simultaneously concluding a much more substantive trade agreement with India. The contrast laid bare the hollowness of the U.S.-U.K. arrangement—its sole function being spectacle:

Joseph Politano: The Farce of the Deal <https://www.apricitas.io/p/farce-of-the-deal>: ‘The US-UK Trade "Deal" Achieves Basically Nothing—and That's a Bad Sign for "Deals" to Come…. The US-UK “deal” is the… only one the US has negotiated…. The only actual tariff reduction America formally commits to is reducing the 25% car tariff to 10% for the first 100k vehicles exported from Great Britain. Washington promises to create a similar system for British steel & aluminum, but provided exactly zero details on what this actually means…. Lutnick also promised that aircraft engines & parts would be exempted from US tariffs, but this was a lie—the official document does not even mention planes.

In “exchange”, the US gets some tiny tariff-free quota for beef and ethanol exports…. Trade policy… is still several times more restrictive than before Trump…. To say this “deal” is tiny would be an understatement—it is microscopic…. The Trump… quiet decision to indefinitely delay tariffs on Mexican/Canadian auto parts was roughly 5-6x more impactful…. This entire episode… [was] basically a PR tour for slightly lower tariffs on Aston Martins & Bentleys…

Eric Platt and team at the FT also reported from the Milken Institute conference that U.S. Treasury Secretary Scott Bessent was dispatched to reassure global investors that Trump's team had a "plan." That effort rang hollow. Bessent's presence was primarily damage control, trying to allay fears of capital flight and investor exit as Trump's 10% universal tariff proposals roiled global markets. Such reassurances are unlikely to succeed in the face of profound policy unpredictability.

And so have:

Eric Platt, Amelia Pollard, Harriet Clarfelt & Oliver Barnes: Milken mission: Trump dispatches Bessent to calm the financial elite <https://www.ft.com/content/33f80d29-3f60-4efa-9c7c-0d67b639b7ad>: ‘The Trump administration had a clear message…. We have a plan…. Bessent tried to hammer home to investors that the president and his team had a playbook to jump-start growth and strike new deals…. Executives hit out at the administration’s approach to trade policy, warning it would hamstring American businesses and fail to deliver… deficit-reduction…. In public, however, few would criticise the president, fearful of retribution…. [The] trade war swung into view and investors came to realise how they had misjudged Trump’s agenda. “People got optimistic about Trump and the whole American exceptionalism thing early and it’s gone,” the chief executive of one private equity firm said. “It’s still bleak — you’re more depressed when you get a little hope and it goes away”…

Plus Martin Sandbu in the Financial Times drove the key economic insight: tariffs are taxes not only on imports but on exports as well. When a country makes itself a less reliable trading partner, it depresses the incentives for foreign producers to trade and collaborate, and it fractures the supply chains U.S. exporters depend upon. In this view, the Trump trade regime is not so much mercantilist as performative. It does not work even on its own protectionist logic:

Martin Sandbu: Donald Trump’s tariffs will boomerang on US exporters <https://www.ft.com/content/a18ed1bd-3546-453a-bf11-72b5ac6a56f5>: ‘The Lerner Symmetry Theorem… that an import tariff and a tax on exports have the same economic effect: they shrink both exports and imports…. An intuitive understanding for… Lerner symmetry…. Provided there are not a lot of unused resources… labour and capital will have to be drawn away from other production [to replace lost imports]…. Some of those resources… will be those already involved in… export[s]…. When supply chains cross borders, tariffs drive up the cost of imported inputs, hurting… manufacturing… mak[ing] the sector less able to export…. Exports from the US are projected to slide by 17 per cent… a much steeper fall than for China’s own exports or global exports as a whole…. The difference between China and the US is that only the latter is raising tariffs on everyone…. That prevents importers and producers from finding alternatives to China, whereas China can both replace US-origin imports and find new markets for its exports…

As Martin Wolf observed, U.S. tariffs are now at levels not seen since the Smoot-Hawley era. This historical parallel is not merely rhetorical. Smoot-Hawley helped ignite a chain reaction of retaliatory tariffs, deepened the Great Depression, and eroded global trade networks. Today, while the institutional context differs, the economic logic remains: uncertainty kills investment and planning:

Martin Wolf: Trump’s trade shock hits the global economy <https://www.ft.com/content/e4b7a0b2-3257-4bab-8b40-55225417c7f0>: ‘The biggest reality… apart from the prohibitive tariffs imposed by the US and China on each other, is the elevated uncertainty… itself economically paralysing. Indeed, one of the many depressing realities of the Trump administration is its failure to understand… the most important role of government is to reduce uncertainty, not do whatever it can to raise it…. I am not optimistic. But I can hope. We cannot afford to remain on a path towards economic and political disaster…

It is that uncertainty, I think, that is the true economic cost of the Trump approach even if all of the things-go-smash scenarios and possibilities are avoided. The abandonment of stable rule-based trade policy for stunt deals erodes the trust necessary to sustain the international economic system. If foreign producers and investors cannot trust that U.S. policies will remain consistent or even rational, they will seek alternatives.

The endgame? A U.S. economy semi-detached from the global trading system, suffering declining productivity as it loses access to innovation-rich supply chains. Rising prices from tariffs combined with falling demand due to recession mean a stagflationary landscape.

For in the longer term, trade disruptions are rarely temporary. Once global supply chains fracture, they do not automatically reassemble. Multinational corporations and foreign governments adjust by reallocating investment elsewhere. Domestic interest groups that gain massively from tariff walls acquire strength and influence.

Comparative advantage, the engine of so much global wealth generation, is not indestructible. And the prospect of reaping benefits from its creation drives much less policy reform than it should.

In sum, then, the central scenario is grim: a 10% universal tariff, declining trade volumes, and a symbolic "deal" culture replacing substantive engagement. But the tails of the distribution matter most.

And there are bigger risks: Trump, seeking new spectacles to star in, ignites further disruption—to the dollar system, to capital flows, or even to the basic institutional infrastructure of global trade. In that case, we do not end up like post-BREXIT Britain, 10% poorer. We end up in a state closer to autarky, with recession inflationary stagnation and decaying institutions.

That is why prudence demands betting not that things will turn out as expected, but that we prepare for the worse scenarios.

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