All Measures Necessary

In an honest economy, people make money by trading with each other, with exact outcomes largely unforeseeable. In a politicized economy, on the other hand, hustlers make money by gaming government.

Thursday, March 13th, 2025

Bill Bonner, writing from Baltimore, Maryland

‘President Trump wanted a trade war with the world, and Americans are getting it, good and hard.’

—Wall Street Journal

This just in. Bloomberg:

Trump Vows 200% Tariff on EU Wine, Escalating Trade Tensions

President Donald Trump threatened to enact a 200% tariff on European wine, champagne and other alcoholic beverages, the latest escalation in a brewing trade war between the US and the EU.

What a wild and ridiculous ride. Whee!

The Primary Political Trend is headed down… and taking us down with it.

You’ll recall our unwelcome guess: that the real historical role for Donald Trump was not to arrest America’s decline…but to hasten it.

That is not to say that Mr. Trump is wrong about everything. The Department of Education should have been abolished long ago; education is a local issue, not a national one. Eliminating wokeism and DEI, firing federal employees, etc — much of what Trump is doing is a pleasure to watch.

But it doesn’t do any good to put a new label on the bottle if the wine is bad.

After Karine Jean-Pierre, we thought we might have seen the last of the air-head press secretaries at the White House. But no. Irish Times:

Tariffs proposed by U.S. President Donald Trump are a ‘tax cut for Americans,’ White House Press Secretary Karoline Leavitt said on Tuesday at a tense press conference that included her regretting giving a reporter a question. Leavitt briefed reporters when she clashed with an Associated Press reporter who questioned her about Trump's tax cut promises made on the presidential campaign trail.

Up is down. War is peace. And a tax increase is now a tax cut.

This is sour wine.

Yesterday, Trump imposed ‘tax cuts’ all over the world…principally on steel and aluminum.

Canadians escaped a doubled levy…after threatening to cut off electricity to New York. Trump accuses Canada of ‘ripping us off.’ But Canada’s tariff protections are generally lower than those of the US.

No matter. This isn’t science. Or math. It’s politics. And tawdry politics is what we’re talking about today.

An economy either produces what ‘The People’ want…or the elites use politics to get what they want. Typically, there’s a tolerable and fairly reliable middle ground, where the masses don’t mind being ripped off in exchange for the predictability of a stable ruling class.

In a free, honest economy, people make money by trading with each other, with exact outcomes largely unforeseeable. In a politicized economy, on the other hand, hustlers make money by gaming government policies. They know exactly who will get the loot.

If they are big steel companies, with big steel-workers’ unions, located in ‘swing states,’ for example, they might ask for tariffs…so they can sell their products at higher prices.

And in a declining empire, such as the Soviet Union in 1991, the opportunities for grift and self-dealing multiply. The old Soviet Union had resources. They were administered by civil servants — apparatchiks and nomenklatura. Then, when the system imploded, these insiders were able to pick up the pieces and become fabulously rich ‘oligarchs.’

Broadly, the more politics the less real freedom and prosperity. That’s why, when politics is on the rise, the Primary Political Trend is down.

But none of the victims, of yesterday’s trade war attack seems ready to roll over. The BBC:

Canada's government is announcing how it is hitting back after tariffs of 25% on steel and aluminum imports came into effect this morning. The three government ministers are expected to say Canada will impose more than $20bn in retaliatory tariffs. Canada is the biggest foreign supplier of steel and aluminium to the United States.

The EU says it will strike back with countermeasures on $28 billion worth of US goods…putting tariffs on “everything from bourbon to motorbikes.”

“We deeply regret these measures,” said Ursula von der Leyen. “Tariffs are a tax. They are bad for business. And worse for consumers.”

China says it will take ‘all measures necessary’ to protect its interests.

Antagonizing allies as well as enemies? What is the point? Whatever the aim, the result will probably weaken the old empire, turning it into a friendless pariah— raising consumer prices while making domestic industries less competitive and more in need of political protection.

And as the empire declines so does the real value of its capital assets. Look for continued, long-term, drift downward in both the Primary Political Trend (more politics)…and the Primary Market Trend (lower asset prices, in gold).

Regards,

Bill Bonner

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Research Note, by Dan Denning

What if middle class wage growth is more important to the Trump administration that higher stock prices? Higher wages, not higher stock prices? Commerce Secretary Howard Lutnick told CBS News yesterday that he believes President Trump would Iike to eliminate income taxes for anyone making less than $150,000/year (there is no record of Trump himself saying this).

Corporate profit margins have soared in the last twenty years, with executives taking home the lion’s share of rising profits (as opposed to wage earners). If the heart of the Bessent/Lutnick/Trump (BLT) plan is to raise real wages by shifting the tax burden from income tax to tariffs, investors have to consider the long-term impact on corporate earnings and profits (rising wages have to come out of total earnings).

Of course it’s possible that rising disposable income for millions of Americans (if achieved) could lead to higher earnings for some companies. But in the aggregate, if these policies favor labor over capital (wages over profits) the capital value of US companies should decline relative to gold (see chart above, where gold is on the verge of breaking out vs the S&P 500).