Food for Thought

Liberation Day? Liberation from what? Tariffs have been coming down all over the world since the end of WWII. Rarely do they pose a significant impediment to US exporters.

Trofim Lysenko measures wheat in a field near Odessa, Source: Getty Images

Monday, March 24^th, 2025

Bill Bonner, writing today from Baltimore, Maryland

“Whenever there are great strains or changes in the economic system, it tends to generate crackpot theories.”

--David Stockman

Once again, we are witness to an epic battle. Like David Stockman’s historic showdown in the early ‘80s. Economics vs. Politics. Economics wants stable money, honest interest rates, balanced budgets, and a smaller federal government. Politics wants what it always wants — more money and more power.

The Triumph of Politics, is the title Stockman gave to his memoir on the subject. It tells you all you need to know.

Politicians find ways to explain away their mistakes…and new theories to justify more. In the early ‘80s they claimed the need to fight communism. Today, the fight is against drugs, Russia, Iran, terrorists, immigrants… and unfair trade policies.

In the early days of the Soviet Union, collectivization of agriculture was an inevitable bust. People just didn’t work as hard for the workers’ paradise as they did for themselves. And the lessons, learned by bitter experience over generations of peasants — about what to plant, when to plant, and how to cultivate crops — were often lost on the bureaucrats and central planners in Moscow.

The result: millions of people went hungry.

It was into this challenging situation that a young, persuasive agronomist came forward with a solution. Timofil Lysenko claimed he could create a whole new genre of agriculture based on the Soviet model. Instead of competing with each other for water, nutrients and light, seeds would cooperate… and even produce bountiful yields — even in the wintertime.

The theory had crackpot written all over it. But in the early ’30s Stalin was grasping at straws and Lysenko had one. And who was going to tell Stalin he was wrong? Nikolai Vavilov — a traditional botanist — dared to speak the truth. For his trouble, he was sent to the Gulag… and then executed.

‘Lysenkoism’ was triumphant and declared official policy in the Soviet Union. The collective farms dutifully put it into practice. Crop yields collapsed even further. And an estimated ten million people starved to death.

Soviet policy had a profound effect on other communist regimes. It wasn’t long before Mao, in China, picked up Lysenkoism and gave it the go-ahead. Later acknowledged as one of Mao’s big errors, the death toll between 1959 and 1961 was as many as 45 million. Not all the deaths were directly caused by Lysenkoism, but by a combination of political mismanagement, political science, and political chaos.

Big Man leaders are often subject to Big Man delusions. Their yes-monkeys laugh when they say something meant to be funny. They cheer when the Big Man makes an outlandish promise. And after a while, the Big Man falls victim to his own sycophantic entourage. They listen to him so intently; he must know what he is talking about!

The problem is well known. In Ancient Rome, a triumphant general would be assigned a slave whose job was to whisper in the great man’s ear — Memento Homo (you are human) — to warn him.

Donald Trump has no such luck. Instead, he has another crackpot policy. And it’s coming to you on April 2.

We’re talking about his reciprocal tariffs. Trump says that when they are implemented, it will be ‘liberation day.’

Liberation Day? Liberation from what? Tariffs have been coming down all over the world since the end of WWII. Rarely do they pose a significant impediment to US exporters.

America imports about $3.4 trillion worth of goods each year. These imports are subject to a weighted average tariff of 1.6%. It also exports to the rest of the world, on which our exporters pay an average of about 1.85%. The difference — a quarter of one percent — is caused largely by India’s protectionist policies.

And who will tell Donald Trump the truth…that the ‘reciprocal’ concept is unworkable and that US tariffs are actually higher than many of our major trading partners? Japan’s tariffs average only 1.45%. Taiwan’s tariffs don’t even rise to a single percentage point. What about US tariffs on Chinese electric cars, at 100%? And what about the 140 foreign companies subject to US ‘export controls?’

If the ‘reciprocity’ were based only on the tariffs, the US would have to lower its barriers in many instances — just to make them ‘fair.’ This is not at all what the White House intends to do.

Because tariffs are a feature of politics, not economics. There is nothing about them that suggests they would lead to a healthier economy. And there’s nothing about them that is ‘fair’…unless fairness means that if you whack Peter with a stick you must also whack Paul. And if they whack each other…you have to whack yourself just to stay even.

But wait…there’s more to the story, isn’t there? Treasury Secretary Bessent is also supposed to consider Non-Tariff Barriers as he attempts to find reciprocity. Let’s look at how these NTB’s affect the calculations. Tomorrow.

Regards,

Bill Bonner