Tariffs, Trump and the Conventional Wisdom

EXCLUSIVE NEWS|ANALYSIS OPINION | April 5th, 2025

Donald Trump campaigned on a promise to impose tariffs on our trading partners world-wide, and he especially emphasized that the tariffs would be higher on countries that had in past, gotten a free ride or had put excessive fees on our products. His stated goal was to level the playing field and bring back manufacturing to the US which had been out-sourced to lower wage countries.

This past week, he did what he said he was going to do. And the world went crazy because they expected his promises to be pie-crust-easily made and easily broken.

The stock market retreated to a point this week, so that any gains made in the past 12 months were wiped out. It might be noted that the PE’s had been in correction territory for some time and like all sell-offs, this happened to be the unexpected triggering event. The upper middle-class, like denizens of SaddleBrooke, were certainly nonplussed, whether they be liberal or conservative, as we get older the one thing we all dread is uncertainty. We like regular, steady gains in our portfolios. Trump has upset that pattern. His voting base, the younger, non-college educated are not nearly as reactive to this downturn as they likely have less invested in stocks-especially short term.

If people are honest, they recognize the most of the recent stock market gains have been fueled not by solid organic GDP growth but by Federal Government amphetamine-like spending and borrowing-not sustainable in the long run.

Predictably, the self-anointed savants of the economic world made comparisons to Smoot-Hawley tariffs of the 20’s and other tariff debacles back to President McKinley. As if the world of information and flows of goods, capital and trade are are in the same universe as we are today!  The truth is economists know zero about predicting the future and have the best hindsight of any profession.  Almost 100% consensus of the economic poohbahs predict that Trump has started a trade war and get set for a world-wide economic disaster. Companies\Countries have already begun responding predictably with lots of outrage to the fact that the US used to let our partners take advantage of our wealth by overpaying for foreign goods. That game is over and they know it. Soon, they will begin to adjust to the new reality and find amicable terms that Trump and the US can live with.

The irony here is worth pointing out: If tariffs are so bad, why did our neighbors in Canada have such high tariffs on our products? The answer is every country succumbs to political pressure and protects specific voting interests.

Trump has been negotiating large deals his entire career. His team of Secretary of State Rubio, Treasury Secretary Bessent and economic advisor Peter Navarro are not newbies that just happened to be available.  They agree with Trump’s view of the world and are ready to negotiate with all our partners. Further, the critics following the hoax line that Trump is not imposing tariffs on Russia, might consider that President Biden virtually shut down all aspects of trade with Russia already including all banking transactions-nothing left to tariff.

In the meantime, look for more disruption and chaos. Trump promised it and voters supported him. The rest of the world world will just have to buckle-up and we will see who is a better predictor of the future.