Trade, Trump, & the Inverse of Trust: I Gave a Quote to "Morning Brew" on How to View Trump
Like a declassé WWF performer yelling obscenities while waving a metal folding chair over his head & threatening to come into the ring and beat the s**t out of people with it…
Like a declassé WWF performer yelling obscenities while waving a metal folding chair over his head & threatening to come into the ring and beat the s**t out of people with it…
Brad DeLong: ‘One of the top priorities for Canada, for Mexico, for Europe, for China right now is to figure out how to start de-risking from the United States as much as possible, as fast as possible....
[What happens] depends on whether there is actually a trade war, or whether it is the same kind of contest as a [faked] World Wrestling Federation match.
Donald Trump was in the ring. He went outside the ring. He picked up the metal folding chair. He waved the metal folding chair over his head. He said: "I'm going to come into the ring and I'm going to beat you up with the chair!"
The question is: Will he put the chair down and come back in the ring and have it be a normal wrestling match? Or is he going to do it again—pick up the chair and wave it around?
Either way, we are in substantial trouble.
My guess is we're in as much trouble as Britain was after 2016, when they exited from the European Union. But it might be less. It might be a bunch more...
The show:
Good Work: Why Are We in a Trade War? <https://www.youtube.com/watch?v=eNptnCkCoVk>:
The trade war has begun, and investigative journalist Dan Toomey has been drafted to the front lines. In a top secret special operation, Lieutenant Colonel Toomey and the 13th Good Work Investigative Platoon infiltrate and uncover the reasons behind this war. Featuring interviews with:
Paul Kiernan, Wall Street Journal Reporter Paul’s reporting: https://www.wsj.com/news/author/paul-...
Steven Kamin, Fmr. Federal Reserve Director of International Finance About Steven: https://www.aei.org/profile/steven-b-...
Sam Lowe, European Trade Expert Sam’s Substack: https://mostfavourednation.substack.com/
Gregory Zuckerman, Wall Street Journal Special Writer Greg’s reporting: https://www.wsj.com/news/author/grego...
Mark Blyth, Brown University Professor of International Economics About Mark: https://home.watson.brown.edu/people/...
Brad Delong, Economic Historian & Author Brad’s Substack: https://braddelong.substack.com/
But there was a bunch more. My side, what is worth keeping:
“TRUMPXIT” is pronouncedd “Trump-Zit”. The "P" and the "X" together compress into a "P" and a "Z" in English phonetics. You want to preserve the "exit" reference in there, but that means the "P" absorbs the "K" part of the "X," and what's left phonetically is an "S" or "Z" sound. So: Trump-Zit…
What happens depends on whether this is actually a trade war—or a fake theatrical match like those of the World Wrestling Federation. Trump, after entering the ring, steps out of the ring. Now he is picking up a folding chair, waving it over his head, and shouting, "I'm going to beat you up with this!" He gets tons of attention and lots of praise from the people he listens to; praise for "standing up for America" and "fighting the globalists." But then—he puts the chair down.
What's actually happened? Not much, yet, apart from China noise and Apple rushing 600 tons of iPhones into the U.S. ahead of one of these threatened tariffs. So far it's the threat—not the follow-through—that's been driving things. And now he's paused things for 90 days.
Will he pick up the chair again? Will he then declare another victory simply for dominating attention? Will he then put it back down?
Either way, we're in trouble. We could be in as much trouble as Britain was post-2016 after its EU exit. Maybe less. Maybe more.
But if the big tariffs—like the proposed 46% on Vietnam—actually go into effect, we would be in much bigger trouble. That would mark the real beginning of a trade war, with real consequences much worse than BREXIT has been. And BREXIT has destroyed roughly 10% of Britain’s potential prosperity.
Right now we're still waving chairs at each other. Trump is waving one. China is waving one back. But, no, we have n't really hit each other yet—not in a way that has sustained, long-run impact. These things take time to unfold.
Some in Trump's orbit—Scott Bessent and his affinity group, for example—will say Trump doesn't want to break the global value chains that have underpinned U.S. prosperity. Instead, they argue he wants to shift the division of the trading surplus toward the U.S. They talk about rebuilding domestic manufacturing, creating communities of engineering practice, and reclaiming innovation leadership lost since the Reagan administration cut taxes without cutting spending, and thus triggered the federal budget deficits that drove the world toward a strong dollar equilibrium in which the hollowing-out of Midwestern manufacturing became inevitable. There are others who claim the tariffs are meant to raise revenue for tax cuts. Still others claim they are part of a strategy to greenlight friends and punish foes.
But none of these explanations map onto Trump's behavior.
Trump does things.
His advisors scramble afterward to retcon his actions into a policy narrative.
Take the idea of the "green box" and "red box" countries—where you reward countries that play nice and punish those that don't. Trump came into office in 2017 declaring NAFTA the worst deal ever. So Canada and Mexico came to the table. They negotiated. Trump called the result "the best trade deal ever." So, you'd expect they'd be in the "green box," right?
Wrong. He was furious at Canada's Trudeau and Mexico's Claudia Sheinbaum a month later. He violated the new USMCA trade obligations anyway. The chair-waving never stopped.
Everyone economically entangled with the U.S.—Europe, China, Canada, Mexico—is now deeply aware that they're vulnerable. At some point, Trump will demand something from them, and if they say no, he'll threaten to break the relationship, claiming that he does not care that it hurts the U.S. more. That level of uncertainty is profound,y corrosive. If you're building a global value chain, your counterparties must be reliable. Trump isn't.
So now, the rest of the world is de-risking. They're looking to replace U.S. links with alternatives: the Pearl River Delta, Saxony, Northern Italy. The U.K. tried this in 2016 and is now, by many estimates, 10% poorer than it would have been otherwise. Unless the U.S. government is taken out of the hands of the chaos faction, we will suffer a similar fate—fewer global value chains will include U.S. businesses and workers.
Do we then get a multipolar world? Do China and India dominate? We'll see. Europe is still a powerhouse—technologically, industrially. Take Volkswagen: the VW Microbus my wife and I just bought is a better-made car than any Tesla I've seen. And now Elon Musk seems more interested in Optimus robots and financial engineering than in making good vehicles.
Meanwhile, East Asia remains key with its set of key poles: Taiwan, South Korea, Japan, and China's coastal zones, if Xi Jinping allows them to remain dynamic.
Canada and Mexico, however, are especially vulnerable. Mexico is not as easily substitutable into other countries’ global chains as, say, Romania or Ukraine are. And Ontario has been part of Midwestern U.S. manufacturing for 150 years. It can't suddenly pivot elsewhere. Trump's plans—if they even qualify as plans—appear aimed at severing those links.
There hasn't been enough time for most other countries to act, and for us to see serious de-risking under way. However, what we have seen is a widespread pause in investment planning—both in the U.S. and abroad. Right now, companies are waiting to see what happens. When the investment numbers for March, April, and May come in, I expect we'll see a drop in U.S. investment, and a boost elsewhere, as companies start constructing alternatives to U.S.-centered value chains. Markets have already started pricing this in. When the tariff news broke, stock values plunged as investors tried to determine how much profit was at risk and which companies could recover. Many will adapt—but it will take time and capital. In the meantime, executives are racing to show investors that they're actively hedging exposure to American instability, so they don't lose their jobs in a panic-induced boardroom purge.
Even as late as 2015, I was anticipating that the future would bring politics-and-political-economy-as-usual, nothing like this.
Since 1870, we have seen the world transition from one economic mode to another: from SteamPower to Applied-Science and the Second Industrial Revolution, to Mass Production and the New Deal Order, to the Globalized Value-Chain mode and the Neoliberal Order under Reagan and Clinton. Since 1870, productivity growth has made each generation twice as rich as the last, on average. But the mode transitions mean that there are huge losers associated with each upward leap and shift. Each time, we adapted—well or poorly, but we adapted. Now, we are shifting again—this time into an economy driven by information, attention, and biotechnology in the context of accelerating global warming. But we seem to lack the institutional and political capacity to manage the transition at all, let alone choose to do it well or poorly.
I noted climate change. It continues. We're marching the climate northward at three miles a year. Berkeley today feels like Santa Barbara did in my youth. That's a massive, civilization-scale adjustment. It would've been far cheaper to implement Al Gore's BTU tax in 1993 than to bear the adaptation costs now. Worse still are potential systemic shocks—say, if the Himalayan snowmelt regime shifts or the Gulf Stream shuts down.
I thought back in 2015 that the economic-mode transition and dealing with global warming would dominate the history of my life. Yet, incredibly, we now have this. And so I now wonder whether it is the relative economic decline of the U.S. that will be the biggest world-historical news in the years I see.
I had expected normal politics. Instead, what we got was reality television.
Reagan, for all his faults, understood he wasn't the boss—he was the star. He hit his marks. He said his lines. Professionals ran the policy. He would no more run the policy than he would have written the script for Bedtime for Bonzo.
Trump, by contrast, thinks being president is like The Apprentice: wander around, say provocative things, and someone will edit it all into a coherent episode. But there's no editor. We get Trump raw and unfiltered. And so, in a world where every economic mode transition needs careful management—from globalization to decarbonization to biotechnical transformation—we've gotten the opposite.
Take the Trans-Pacific Partnership (TPP). Obama's team designed it to first coordinate with China's trading partners and then negotiate with China as a bloc. It was leverage, real leverage, for rebalancing trade. Trump tore it up on Day One. Then Trump launched a trade war against China. Without any strategy. Having disarmed himself first.
The tariffs we're now discussing appear to have been generated by Kevin Hassett using Microsoft Excel: one column for bilateral deficits, another for trade flows, divide one by the other, multiply by a constant, and—voilà—a tariff schedule. That was the whole analysis. No consideration of which sectors are vital, where communities of engineering practice matter, or what helps rebuild America's productive capacity. Just a spreadsheet. And a monkey at the keyboard.
We don't have to go through with TRUMPXIT or something worse. You don't even need four Republican senators and two House members to flip to make Hakeem Jeffries and Chuck Schumer the congressional leaders. All you need is John Thune and Mike Johnson to walk into a room with Trump and say: "You're great at the speeches, the rallies. But policy? That needs a regent. Or we will hand the ball off to Schumer and Jeffries, because more of our members will keep their seats in the 2016 election if we are fighting to defend you from the Democratic-controlled congress than with this clusterf**k circus you are running. Appoint a regent”
That, after all, is what Britain did with its monarchs from 1700 to 1850. That's what Reagan did in his second term—Howard Baker ran policy while Reagan delivered speeches. That arrangement worked.
Give Trump four names. My picks would be Mitt Romney—someone Republicans trust—and Liz Cheney. She's very conservative, but patriotic and competent. They're not chaos agents. Do that, and we might avoid making ourselves 10%, 20%, even 30% poorer over the next decade. But it requires political courage from a small number of Republican leaders. That's all it needs.
The problem is that Trump thinks he's in The Apprentice, but there's no editor anymore. If someone actually edited his week into an hour-long, well-produced show called The President, and deep-sixed all the chaos-monkey ravings so that nobody saw the outtakes, it might even be compelling.
The hat is kangaroo hide. Got it in Australia. It is now subject to a 10% tariff because Trump thinks it is so important to boost America’s kangaroo-ranching industry.even though the U.S. doesn't have kangaroos.
But Reagan played the part on behalf of the very cynical experts who started all this worship of private power, hatred of the very idea of government, dog-whistled prejudice. And, with the media ecology we now have, I really wonder how any courageous rightists could hope to pull off the regency idea. Fox and OAN and (anti-)social media would hyper-shred them at their first baby step toward the Oval Office.
There will be no regent. Trump will not allow it. It’s clear to anyone who matters to him that Trump is the smartest guy in every room he’s in, and the only person who matters to him is Donald Trump. Republican members are either too afraid of his base or see him as the horse that will carry them to total control of the government. For Bill Kristol’s idea of a handful of Republican’s in each house to go independent and caucus with Democrats to work, Trump’s polling numbers would have to crater. Even then, that only takes away Republican congressional power. He’s already marginalizing them.