The Fog of Wars
The President unveiled his new tariffs, a different one for each country, depending on how successfully it met US consumer demands. The more it offered to US househols, the greater the punishment.
Tuesday, April 15th, 2025
Bill Bonner, writing from Youghal, Ireland
The big story in the financial world is still the trade war.
Wars are serious business. Nations tend to get edgy when they think their material welfare…or military power…is in danger.
Japan bombed Pearl Harbor after the US cut off its oil supplies. Napoleon invaded Russia because he thought it was undermining his trade sanctions (against England). Hitler made his disastrous decision to send the 6th Army into Stalingrad in order to get access to oil.
Tariffs were the centerpiece of the Trump administration’s economic plan. And they are the biggest challenge to the world economy since the Covid hysteria. And yet, nobody seems to know what the plan is. What is the idea? Even the ‘why’ of it is still not settled. What problem is the Trump Team trying to solve?
Springfield News-Leader:
Trump, in a Truth Social post April 13, wrote that the U.S. needs to make products in the U.S. and won't "be held hostage by other Countries, especially hostile trading Nations" such as China. He said the U.S. is reviewing tariffs involving the entire technology supply chain.
"NOBODY is getting 'off the hook' for the unfair Trade Balances, and Non Monetary Tariff Barriers, that other Countries have used against us, especially not China which, by far, treats us the worst!" Trump wrote in a Truth Social post later on April 13. "There was no Tariff 'exception' announced on Friday. These products are subject to the existing 20% Fentanyl Tariffs, and they are just moving to a different Tariff 'bucket.'”
Fentanyl? Deindustrialization? Child labor? Currency manipulations? Buckets? Trade imbalances?
There seems no end to the possible breaches of Trump’s Fair Trade ideal, whatever it is. So, we ask ourselves: what kind of show is this — a comedy? A tragedy…or a farce?
“A farce!” say many commentators.
In a much-watched press conference, the President unveiled his new tariffs, a different one for each country, depending on how successfully it met US consumer demands. The more it offered to US households, the greater the punishment. And then, to underline the lack of intellectual rigor, the tariffs were only assessed at half the level of the supposed injustice. If America’s deficit with Iceland were 50%…the new ‘reciprocal’ tariff was only 25%.
Then, the stock market sold off. The Great Helmsman must have panicked. It was as if Eisenhower had called off the D-Day Landings because of clouds over the English Channel. Liberation Day would have to wait.
But instead of giving China the same break as everyone else, the world’s largest exporter was subjected to even higher tariffs. This was seen by some as an act of ‘genius,’ since it ‘isolated China’ from the rest of the world.
Instead, like choosing a prisoner for an especially brutal beating, it merely made the other prisoners realize how vulnerable they were. They appear to be joining forces to get away and leave the US on the sidelines. The Daily Express:
Europe appears to be shifting its gaze from west to east, as leaders lean towards China for trade agreements rather than aligning with President Donald Trump of the United States, with the news coming just days after China's huge economic decision that was described as an 'act of hybrid warfare' and designed to 'punish Trump.'
Euronews has reported that following President Trump's infamous "reciprocal tariffs" - which China responded to with huge tariff hikes on certain goods - speech at the White House earlier this month, the first call made by European Commission President Ursula von der Leyen was to China.
The European Commission, which had previously provided President Trump a stern warning over his tariffs, issued an official statement saying: "In response to the widespread disruption caused by the US tariffs, President von der Leyen stressed the responsibility of Europe and China, as two of the world's largest markets, to support a strong reformed trading system, free, fair and founded on a level playing field.
Then, this past weekend, after promising ‘no exemptions,’ Team Trump provided exemptions for some electronics, whose vendors must represent an important source of financing for Republican candidates.
And just when the buyers and sellers got comfortable with that, yet another pronunciamiento declared that the reprieve would be temporary, not permanent.
AP:
Tariff exemptions announced Friday on electronics like smartphones and laptops are only a temporary reprieve until the Trump administration develops a new tariff approach specific to the semiconductor industry, U.S. Commerce Secretary Howard Lutnick said Sunday.
But the result of this improv trade policy could turn it into a tragedy, says Oxford Economics. City AM:
[If Trump follows through with his tariffs] the fall in trade would nearly match those seen during the Covid-19 pandemic in 2020 and the US recession of 1975. Oxford Economics claimed their estimates were “conservative” given the unpredictability of retaliation and uncertainty regarding how consumers and firms respond to tariffs.
The IMF estimated that the Covid epidemic cost the world economy $12.5 trillion. Fortune magazine put the cost to the US economy alone at $14 trillion.
So, who knows?
But maybe the US won’t roll out the tariffs as threatened. More pauses? Delays? Exceptions?
Maybe Trump was looking to score political points at home as a tough hombre…getting even with foreigners who have been ‘ripping us off’ for years? Or maybe the idea is to trigger ‘negotiations’ that might lead to…well…we don’t know.
Or maybe the whole point is just to lower the value of the dollar…in order to make US exports more competitive? If so, it’s a dangerous game for a country that has $2 trillion deficits…and $37 trillion in debt. Investors are likely to lose their appetite for more US bonds.
But trade wars, like other wars, don’t always go as planned.
Regards,
Bill Bonner
Market Note, by Dan Denning
The ‘death cross’ is a technical trading pattern in which a short-term moving average crosses below a long-term moving average. In this case, on the S&P 500, the 50-day MA has crossed below the 200-day MA. The last time that happened was in April of 2022. It fell 14.3% from that moment until the ‘ChatGPT’ low in October.
Thoughts on the State Department
The USA was the most powerful nation in the World after 1945. It was the major manufacturing force, had the most powerful military and the greatest store of gold, which made the dollar the medium of international trade.
Over the years, its power slowly declined. At first, there was more competition in manufacturing as the nations devastated by war recovered. But later, the elite gave in to a fatal temptation. In 1971, they broke the link between the dollar and gold which allowed the money supply to be increased without restraint. At first, this nearly led to disaster as inflation surged and production declined, but by the early 80s, the authorities had managed to control the situation by allowing interest rates to rise unbelievably high.
A boom followed; but in this boom, the ones who made the most money were those employed in financial institutions and to some extent in IT. Those in manufacturing did much less well. Over the years, this encouraged bright young Americans to train for jobs in finance rather than engineering or science. The big money was made by pushing money around.
Later, as China and other Asian countries developed their own modern manufacturing capacity, more and more manufacturing was transferred out of the USA and it became less and less rewarding as a career. US capabilities slowly declined as the older and more experienced people retired and youngsters with less know-how took over; but in some areas, the decline could be quick when industries became uneconomical in the face of foreign competition. The elites didn`t mind that too much. They could still get rich by pushing money around.
After the fall of the Soviet Union, the State Department let itself be swayed by a group which advocated applying pressure to Russia by gradually encroaching on its former sphere of influence. War in the Middle East and Asia was also prosecuted with the idea of ensuring that the USA remained able to dominate the World.
In the meantime, Chinese industry became more and more advanced. China began to produce high technology items which could rival or surpass those made in the US. This was applied to both civilian and military projects, so China began to dominate certain fields – electric vehicles for instance. The Chinese navy and air force grew rapidly thanks to the capacity of China`s shipbuilding and aviation industries, and all this backed by advanced, often world-leading, research and development.
Despite all this, the State Department continued its policy of pushing at Russia. In particular they engineered a coup which placed Ukrainian nationalists, extremely hostile to Russia, in charge of Ukraine. The east of the country rebelled and was supported by Russia, and Russia annexed Crimea to protect its naval base.
The State Department and its European allies responded by gradually strengthening the Ukrainian army and using the Minsk accords as a delaying tactic to forestall Russian intervention. All this was accompanied by a sustained and effective propaganda campaign to vilify Russia and Russians. Matters came to a head in 2022 when NATO and the US refused to rule out Ukrainian membership of NATO which the Russians perceived as an existential threat. The Russians invaded but failed to achieve their initial objectives. Peace negotiations started, but the agreement was torpedoed by Boris Johnson and the State Department who persuaded Ukraine to fight on with the promise of Western support: arms, intelligence, and logistics.
As the war progressed, a new group began to gain ground in the State Department. They saw that the war was pushing Russia ever closer to China and that if the trend continued Russia and China between them could dominate Eurasia, which Halford Mackinder had described as the “World Island”. In 1904, Mackinder had foreseen that were China to reassert itself it would come to dominate Eurasia and would build a strong navy to dominate the World. To the new group in the State Department, this seemed to be becoming true before their eyes and they realized that backing Ukraine in the war against Russia was not at all in the interests of the USA. With the advent of Trump, they seem to have swept aside Ukraine`s former backers and those who wanted to pressurize Russia. A new page has been turned.
They also realized that the USA was not what it was during the cold war. It no longer had the research and engineering capacity to remain ahead of its rivals. There was an urgent need to re-direct talent towards research, development, and manufacturing. So, a new economic policy was designed. There would be high tariffs which would protect US manufacturing whilst it recovered its strength. At the same time, these tariffs would trash the financial economy and make it more attractive for clever folk to train as engineers rather than as financiers. There might also be an idea to link eventually the dollar to gold, but that aspect is not at all clear.
A new geopolitical strategy was also developed – the American island as a counter to the World island. Greenland and Canada should be incorporated into the USA to bring this about.
In all this, the leaders of Europe have been totally wrong footed. They seem to be prisoners of their own propaganda and their long-standing policy of hostility to Russia. It could end tragically for Europe. The leaders utter threats against Russia. They say that they will arm themselves over the next five to ten years so that they can fight Russia; but such threats might encourage Russia to attack before they`re ready. It would be better to make peace, but that would mean admitting they had been wrong in the past, something they seem unprepared to do.
Thanks to bold new economic strategies straight from the seventh circle of Hell, Amazon Fire Sticks and radios are now proudly Made in America, by broke overqualified PhDs who used to write peer-reviewed articles on post-capitalist eco-theology, but now spend their days shrink-wrapping Bluetooth remotes for $14 an hour.
These human paperweights, saddled with $3,000-a-month mortgages for homes the size of a large storage unit (1 bedroom, 0.5 bath, and a family of 4 sharing one toilet and an existential crisis), are the new face of the American labor renaissance.
Tariffs, of course, have jacked up the cost of components so high that paying them more would collapse the already twitching corpse of the U.S. dollar. Meanwhile, their $1,000 car payments are faithfully extracted each month like blood from a stone. Fuel, food, and medical care be damned.
Who needs insulin when you can stream reruns of The Office in HD?
All the while, the administration, those elected demigods of dysfunction are too busy licking caviar off gold-plated spoons at courtside NBA games to notice the nation has become a slow-motion breadline.
They sip champagne from crystal flutes shaped like middle fingers and wipe with currency more valuable than most Americans’ retirement accounts.
Wall Street, once fueled by ambition and cocaine, now runs on delusion and vibes. The stock market is poised to detonate in a supernova of inflation, despair, and unpaid credit card bills, ushering in not just a recession, but the Great American Faceplant.
By the time the average citizen gets one guilt-free night out without checking their bank app first, their kids will be grown, their dreams cremated, and death will be politely tapping them on the shoulder asking, “You done yet?”
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