Fools Rush In

instead of an iron discipline and relentless determination to tackle the Number One threat facing the USA, the administration plunges further into what the WSJ calls ‘the dumbest trade war ever.'

Tuesday, March 25^th, 2025

Bill Bonner, writing from Baltimore, Maryland

In the news yesterday, Cryptopolitan:

President Donald Trump is now backing off plans to announce new industry-specific tariffs on April 2, according to a Monday report from the Wall Street Journal, which said the White House is still moving forward with reciprocal tariffs, but is now leaving out the broader measures on automobiles, pharmaceuticals, and semiconductors that were expected.

Mr. Trump may be delusional, but he’s not crazy. Faced with the reality of ‘reciprocal tariffs,’ he hesitates. Bloomberg:

President Donald Trump’s coming wave of tariffs is poised to be more targeted than the barrage he has occasionally threatened, aides and allies say, a potential relief for markets gripped by anxiety about an all-out tariff war.

But wait. The trade war just got screwier. USA Today tells us that his moment of sanity passed like a sneeze. Now, Captain Confusion is taking tariffs to a whole new level:

President Donald Trump on Monday said the U.S. will impose a 25% tariff on imports from any country that purchases oil or gasoline from Venezuela, targeting the South American nation for what he called "purposefully and deceitfully" sending criminals into the United States.

Like ‘second hand smoke,’ secondary tariffs are now a danger to a nation’s economic health.

Every major government program since WWII — Korea, the Vietnam War, the wars against poverty, drugs, Iraq, Afghanistan, Covid, the Ukraine…Gaza…not to mention scores of campaigns against other imagined foes — was a flop, often a very expensive, disgraceful and deadly flop.

And now, with this sad history so tight against its rear bumper, and realizing that it might lose control of the House or the Senate in just two years, you’d think Team Trump would forswear silly distractions and focus on things that really matter. It is not really any fret of ours whether or not Peru buys Venezuelan oil. But a fast-approaching debt crisis is. Bothering with anything else is not only a waste of time… but likely a death sentence to the empire.

But instead of an iron discipline and relentless determination to tackle the Number One threat facing the USA, the administration plunges further into what the Wall Street Journal aptly called ‘the dumbest trade war ever.’

We saw yesterday that the actual trade-weighted average tariffs paid by the US and its major trading partners are small and similar…generally below 2%. Making them ‘reciprocal’ will make little difference to anyone. It is only when you dig into the soft tissue of NTBs — non-tariff barriers — that you strike the raw nerves. But that is also where the confusion multiplies.

Let’s say we make shoes in one town and sell them in another town for $100 a pair. The shoemaker in the other town has to pay his workers more…so he has to charge $110 a pair for his shoes. He says we are unfair competition; the lower wages in our town are an NTB to trade.

But wait, then we notice that the other shoemaker’s workshop is in a building owned by the municipality, where he got a lease at a preferential rate.

Unfair! Another NTB! He’s being subsidized by the feds.

‘Hold on’…says the other shoemaker. His town is serious about the fight against global warming. It requires him to use solar power…which is more expensive than the coal we burn. Another NTB…this one in his favor.

What a mess!

The neighboring town is now ready to impose a ‘reciprocal’ tariff…meant to take into account all the many NTBs it believes it has discovered. And now the town’s mayor is upset because some hooligans — allegedly from our town — sprayed obscene graffiti on his office wall. He says he’ll retaliate with a tariff against anyone who does business with us.

Of course, this is politics. And it gets worse. We’ll hire an ex-mayor as a ‘consultant.’ He’ll be expensive. But he’ll talk to the members of the town council privately…maybe he can get them to see it our way.

Poor Treasury Secretary Scott Bessent is heading up America’s attempt at reciprocal tariffs. He’s meant to be weighing this against that…environmental protections against labor costs…subsidies against tax breaks. Spare a prayer for the man; he must know he’s on a fool’s errand. The apples of lower energy costs really can’t be balanced, in any meaningful way, against the peaches of a better educated workforce (educated at government expense!)

And what about national security!? If our town allows another town to make its shoes, what will we put on our feet when we go to war with it?

At the end of the day… or whenever future historians get around to looking at it… odds are good that they will see another comically dismal failure.

Regards,

Bill Bonner

---

Research Note, by Dan Denning

Markets are now expecting President Trump’s tariffs ‘to be more limited in scope’ according to wire reports this morning. That comes less than 24 hours after the S&P 500 closed above its 200-day moving average. The recent rally (after hitting 30 on the Relative Strength Index) leaves the index about two per cent down, year-to-date.

Tomorrow we’ll look at the big picture for paid readers in the April Monthly Strategy Report. Tom Dyson updates the Doom Index, the Dow/Gold ratio, and any changes or updates to the Official List of BPR stocks. And look for more on copper, shipping, and oil.

In the meantime, it was 25 years ago this week the dot.com bubble peaked. The Nasdaq 100 fell 83% over the next two years. It took 15 years for it to make a new high. The S&P 500 fell almost 50% but made a new high seven years later, just in time for the great housing crisis of 2007-2009.

How big will the coming draw down be and how long will the recovery from the ‘greatest financial experiment of all time’ take? Take our poll below and have your say.