What's Going on with Trump's Trade Wars? An Update
Monkey-chaos as constantly changing but ever-recurring kaleidoscope policy, with fake deals and real drama: the Trump performative tariff-threat theater of 2025 is a show running 24/7, and a...
Monkey-chaos as constantly changing but ever-recurring kaleidoscope policy, with fake deals and real drama: the Trump performative tariff-threat theater of 2025 is a show running 24/7, and a Masterclass in the art of NO DEALS. When unpredictability becomes the only rule, allies become ex-allies bracing for impact & prudently decoupling, while markets overwhelmed with noise fail to process the information that ongoing decoupling lies behind day-to-day monkey-chaos media noise…
We are now six months into the Second Trump Administration. tTe world has learned to expect chaos, not coherence. Forget “the art of the deal”—today’s trade regime is all smoke, mirrors, and random tariff math. Allies become ex-allies and begin to decouple. And financial markets sleepwalk.
It is now clear that Trump trade policy will never be clear—that there will be constant threats of tariffs and (sometimes) the imposition of tariffs for any reason that strikes Trump’s fancy at the moment, or for no reason at all. Chaos-monkey policy to the max.
Justin Wolfers puts it well on—**shudder**—Twitter, now the home of MechaHitler:
Justin Wolfers: ‘They've had 90 days to think about it, and all we got was the same old tariffs +/- a couple of random percentage points, a new insurrectionist support tax levied on Americans to show our allyship with Brazilian criminals, and yet another attempt to bully the extremely polite Canadians… <https://twitter.com/JustinWolfers/status/1944153885876105561>
No real “trade deals”.
There is and will be nothing that any previous administration or the press would ever have called a “trade deal” before.
None such can ever emerge from this administration.
The concept of a trade deal, at least in the lexicon of postwar American economic diplomacy, has meant a negotiated agreement with clear, enforceable commitments, often codified in treaty form and subject to legislative approval. These agreements—think NAFTA, the WTO, or even the modest U.S.-Korea Free Trade Agreement—are the product of painstaking negotiation, regulatory harmonization, and, crucially, mutual trust.
The current administration, by contrast, prefers the theater of “announcements” and “frameworks” that generate headlines but lack the legal force, technical detail, or institutional buy-in necessary to shape global commerce. The result is an endless carousel of press conferences and “victory” declarations, but little of substance that would meet the standards of any previous administration—or indeed, of any serious observer of international economic relations.
Why not? Because:
Trump cannot remember his promises to keep them,
Trump would not want to honor his promises if he remembered them,
Trumps’ sycophant-enabler-lieutenants’ promises do not bind him.
Credibility in governance has always been a cardinal virtue;. Acountry that keeps its word is a country that can “make deals”. A country that does not, cannot
But the Trump administration’s approach is that of making random non-credible threats to generate press coverage as its governing philosophy. Promises are made with abandon, forgotten as soon as they become inconvenient, and—crucially—no subordinate’s assurance can ever substitute for the leader’s caprice.
This is not simply a matter of personal style.
This is a structural defect caused by Trump’s Fox News-customer media-splash mindset that makes Trump, in a strange sense, powerless to shape the behavior of other countries in the U.S.’s or indeed in his own personal interest.
In the absence of credible commitment, foreign counterparts have no incentive to negotiate. They have no incentive to invest in the relationship with the US. Knowing that today’s “deal” may be tomorrow’s tweetstorm, they have every incentive to be prudent: to decouple, as fast as possible
For it is all performative—announcements and frameworks without binding substance. The much-ballyhooed “agreements” with the UK or Japan upon even the slightest inspection reveal themselves to be little more than restatements of existing understandings or vague promises to “explore” future cooperation, accompanied by random disruptions to globalized value-chains. The administration’s media apparatus trumpets each non-event as a “historic breakthrough.” And the press pretends to believe them. The net result is much less than a Potemkin village of trade policy: nothing behind the façades, which are themselves not impressive.
The administration’s tariff formulas are mathematically incoherent, based on fake calculations and no economic models whatsoever. One of the more remarkable features of the Trump trade wars is the open disdain for the arithmetic of international economics. Traditional trade policy—love it or hate it—has always rested on some foundation of economic analysis, however imperfect. I know: I built and ran models of NAFTA’s and WTO-creation’s likely economic effects for the Treasury.
The Trump administration, by contrast, has adopted formulas for tariffs that are produced by a random-number generator. The spectacle of White House officials brandishing cardboard signs with “tariff math” that no economist could defend would be comic, were it not so consequential.
Moreover, Trump administration’s disregard for law:
imposing tariffs with fake legal justifications,
negotiating “deals” that require Congressional approval but treating them as faits accomplis,
getting shadow-docket winks and nods to keep doing what he is doing from the Supreme Court
is absolutely appalling.
It undermines domestic rule of law:
Trump does something illegal,
a federal court enjoins it,
the Supreme Court uses the shadow docket to vacate the injunction,
the policy roles forward,
two years later a court finally rules on the substance
but by then the case is moot because the policy will have been randomly changed in the meanwhile.
Plus: American trade policy, for most of its postwar history, has operated within a robust legal framework: Congress delegates authority to the executive within clearly defined parameters, international agreements are subject to legislative review, and judicial oversight ensures compliance with statutory and constitutional norms.
Those allow us to negotiate frameworks for international trade that, while not win-win-win for everyone, have produced enormous surplus and fueled a substantial part of US economic growth.
The current administration, however, has repeatedly invoked fae and not even dubious legal rationales—national security, for instance—to impose tariffs on allies, and has treated the requirement for Congressional approval as a minor inconvenience rather than a constitutional necessity. This disregard for process has been abetted by a judiciary increasingly deferential to executive prerogative. The net effect is to erode both the domestic legitimacy of trade policy and the willingness of foreign governments to treat U.S. commitments as reliable.
America’s major trading partners—Canada, Mexico, the EU, and the UK—have now learned that appeasement and symbolic concessions gain them nothing.
Instead, they face perpetual policy whiplash and the risk of being targeted again at any moment. I
n the early days of Trump’s trade wars, some foreign governments hoped that symbolic gestures or limited concessions might secure a stable The renegotiation of NAFTA into USMCA, for example, was initially seen by Canadian and Mexican officials as a way to “get into the green bucket” of favored nations. Yet these efforts have been rewarded only with further demands and renewed threats.
The lesson is clear: there is no stable equilibrium to be found in appeasement.
Today’s concession is tomorrow’s proof of weakness, and the only constant is the unpredictability of U.S. demands. This has led America’s partners to adopt a more defensive posture, seeking to insulate themselves from American caprice rather than ingratiate themselves to it.
The U.S. stock market’s relatively muted reaction thus far reflects a mistaken belief that the chaos is temporary, and that TACO—Trump Always Chickens Out. Financial markets, ever the optimists, have tended to discount the long-term consequences of policy volatility, betting instead on the likelihood that the administration will ultimately back down before inflicting real damage. This “TACO” hypothesis—Trump Always Chickens Out—has some historical precedent; after all, many of the most draconian tariff threats have been quietly shelved or watered down after the headlines fade.
Yet this complacency is dangerous.
Markets are not omniscient; they are often slow to recognize structural shifts, especially when these are masked by short-term noise. The risk is that investors are sleepwalking into a world where the institutional underpinnings of American economic leadership have been irreparably damaged.
Markets are underpricing the risk of enduring institutional damage and long-term loss of American economic leadership. The deeper danger is not the immediate impact of any given tariff or counter-tariff, but the cumulative erosion of the institutions that have undergirded American economic preeminence since 1945. The postwar order—built on the Bretton Woods institutions, the GATT/WTO system, and a dense web of bilateral and multilateral agreements—depended on the predictability and reliability of U.S. policy. As these foundations are chipped away, the world becomes less willing to invest in the American project, and more willing to seek alternatives.
The process is gradual but inexorable, and by the time markets fully price in the new reality, the damage may be irreversible. In this sense, the stock market’s equanimity is less a sign of resilience than of obliviousness.
Even if TACO turns out to be true much more often than not, other countries cannot count on that, for they may well wind up in the “not”. And then what can they do?
Other countries must and will be prudent. While American investors may still believe that Trump will ultimately “chicken out,” foreign governments have little incentive to share this optimism. For them, the costs of being wrong are simply too high. P
rudence dictates diversification—of trade partners, supply chains, and strategic alliances. This is not simply a matter of hedging bets; it is a rational response to a world in which the United States is no longer a predictable anchor of the global system. The result is an acceleration of trends that, in a more stable environment, might have unfolded over decades: the rise of alternative trade blocs, the strengthening of regional supply chains, and a general movement away from dependence on the American market.
And Ontario may well find that its best response to some random Trump chaos-monkey action is indeed, on some hot summer day or cold winter night, to cut off electric power to Cleveland.
Thus countries are now accelerating the process of decoupling from the United States, seeking alternative trade partners and supply chains, as the unreliability of American commitments becomes a structural feature of the global economy. Mexico, for example, has begun to reorient its supply chains toward Europe and Asia, while the European Union is investing heavily in strategic autonomy—everything from semiconductor manufacturing to green technology. The logic is straightforward: in a world where U.S. policy can turn on a dime, it makes little sense to stake one’s prosperity on continued American goodwill. The long-term implication is a world economy less centered on the United States, with all the attendant consequences for American influence and prosperity.
The economic cost of these policies will be substantial: higher input prices, declining exports, capital flight, and a steady erosion of investor confidence—all pointing toward a more than “Brexit-magnitude disaster” for the United States. The analogy to Brexit is apt, if not understated. The United Kingdom’s decision to leave the European Union has, I think, reduced its GDP by at least 10% relative to trend, with further losses likely to accrue. The Trump trade wars threaten a similar, if not greater, self-inflicted wound. Tariffs raise the cost of imported inputs, making American manufacturing less competitive. Retaliatory measures by trading partners reduce export opportunities, while uncertainty drives capital to seek safer havens. Over time, these effects compound, leaving the U.S. economy smaller, less dynamic, and less attractive to investors. The warning from economic history is clear: nations that turn their backs on openness and predictability do so at their peril.
Globalization has been a major driver of American prosperity; the deliberate breaking of trade links for the sake of optics threatens to end this era for the U.S., even as the rest of the world continues to benefit from global integration. Since the late 19th century, American economic growth has been propelled by integration into the global economy—first through exports of agricultural and industrial goods, later through participation in complex global value chains.
The gains from trade are not merely theoretical; they are visible in the rising living standards, technological innovation, and geopolitical influence that have characterized the American century. To deliberately unravel these links, not in pursuit of strategic advantage but for the sake of short-term political theater, is to court decline.
The rest of the world, meanwhile, is not standing still. Europe, China, and other major players are deepening their own networks of trade and investment, positioning themselves to reap the benefits of a more multipolar global economy. If current trends persist, the United States may find itself not at the center of the world economic system, but increasingly on its periphery.
I hope someone if tracking all the small businesses that are getting the Presidential Shaft. Most of them source manufacturing and or materials from tariff countries. They are faced with far more financial uncertainty than large companies. Trump has shown total disregard for any trade agreements.
Dems need to be running ads featuring all the small business owners who are impacted.
Hey, I live in Cleveland!