In two earlier posts I explained the genius of Trump’s tariff strategy which are considerable. I also said this site was apolitical, though judging by some of the comments received you might not have believed me. I made the point repeatedly that wherever you fall on the political spectrum you need to understand the concepts underlying the tariff policy to respond adequately to them. I also made clear that the goal was to turn upside down and essentially overthrow the current heavily left leaning globalist system. But I meant what I said about this site being educational not political and here I want to go into the various counterfactuals to the tariff policy and Trump’s overall approach in this and certain other areas. This no more means that I am against these policies than the earlier higher level discussion meant that I was for them. Overall, my objective judgement at this point is that much of the goals of the current regime are likely to succeed with the tariff policy but it is a high risk strategy and as with any high risk strategy it can also fail. As any high risk market trader will tell you, you don’t win every speculation. Hopefully the following accoiunt will give you some idea as to how to know if the trade goes bad so to speak and an understanding of some ways it can go bad. Just as those opposed to the tariff strategy need to understand its genius, those in favor of it need to understand its potential deeper flaws at a higher not superficial level.
Risk 1: The Centralized, Decentralized Issue
Overthrowing an entire global system is even for a .000032 billionaire(see earlier posts) and now President an extremely difficult thing to do. It is despite being a right wing project actually extremely radical and revolutionary in its own way. This is the unique activist conservatism as opposed to the earlier more passive variety that Trump’s new politics has ushered in. Any change of this magnitude besides facing the obvious political problem of “the paint is already on the canvas” of all politics faces a key problem all radical change faces of what we will call here centralized/decentralized power, an idea found many places including in the work of the great theorist of revolutions Barrington Moore. This idea basically states that if power is highly centralized like in pre-Soviet Russia or at Versailles under the French monarchy it can be more easily changed from the top if control is wrestled away by the revolution as there is not really resistance in a decentralized form seeking to maintain the status quo. If however this power is highly decentralized as in the case of the British monarchy with the king’s power checked by hundreds of independent nobles with their own territory in the countryside this is very difficult to change from above or to even centralize in the first place and change will only be more gradualist or Burkean in scope.
In this regard you could never really overthrow the globalist system and turn it upside down as Trump’s trying to do until such time as the global system had actually at least economically become quite centralized. Only then could you seize the overall structures and change them from above.
Hence, there are two risks to such an attempt and resulting counterfactuals: First, it is not clear that the global system has in fact developed to a degree that such centralized change based on the mechanism of tariffs can actually prove effective. The paradox here, is that at that developmental point at which the globalist system was fully centralized it might actually be too late in terms of too much development having occurred by potential US rivals for the U.S. to overturn it. Is this effort premature? Secondly, how decentralized are the nobles or in this case the other nation states. Do tariffs provide a sufficient centralized power mechanism in fact not just theory.
Also and just as importantly how hard can those independent nation states especially if the ideology shifts entirely to real-politique push back against the efforts of the centralized hegemon?
Now there is another key counterfactual along these same lines concerning the decentralized federalist power structure in the U.S. but I will consider that question which is crucial but deserves its own presentation in a later note.
Risk 2: The Return of the Apparatchkii
In revolution after revolution one of the first things those trying to change the system do is eliminate the existing bureaucratic class or as they called them in the Soviet system the men and women of the apparatus. These “bureaucrats” invariably gain from the conventional system and seek to preserve it including of course all of its corrupt aspects along with the good. When the Bolsheviks took over they got rid of all of the statist Tsarist elite and the Khmer Rouge attempted to completely wipe our the intellectual class in the most evil manner imaginable. Trump is attempting to do the same major change in many ways but still within the limits of a democratic society.
The problem revolutions encounter, however, is that along with getting rid of the incompetent and corrupt they get rid of the competent and even in some cases civic minded. DOGE has already faced this to a limited degree and has had to hire back certain government workers. But the broader problem remains nonetheless. Put most bluntly can you get enough talented people quickly enough to replace the people you are firing in this case.
Over and over again what tends to happen is that the apparatchikii ultimately in one form or another return. As the Constructivist’s discovered in their attempts to make production a work of art, the factories ultimately looked much the same after the revolution and were not at all concerned with art. The harder task is to not just eliminate the political structures wedded to an ideology you dislike but to reconstitute them in a competent form based on a different ideology. Not just to get rid of the Department of Education that you see as too leftist but create an alternative such department. It remains to be seen if Trump succeeds at this or if the model is just that of the corporate competitive model where you defeat and bankrupt your competitor, something which may prove inadequate here.
What does this broader question mean for tariffs? Simply this: if you want to eliminate domestic regulation to a high degree and instead change it to a “External RevenueAdministration” model you have to create a formidable bureaucratic structure not just make some great “deals”.
Risk 3: The Carpentry Problem
Plato at one point in one of his more famous dialogues recalls Socrates going around Athens and asking people what they know. Not surprisingly he finds many of the politicians to be mere rhetoricians and to know almost nothing but just to be good public speakers, to appear to know but not really know. Now I am not suggesting this is the case with Trump. He actually, and this is hardly surprising, knows a great deal. He seems almost to have developed his celebrity rhetorical skills in many ways simply as a necessary evil to succeed at the highest levels in the media heavy, rhetorician dominant world we live in.
But Socrates in his questioning encounters another group that is represented by such tradesmen as the carpenters who actually know a great deal about their specific craft. If you ask a carpenter what he knows he can tell you a tremendous amount of quite difficult knowledge about carpentry. The problem is with every other kind of knowledge he reads it back to carpentry and says “that’s a lot like carpentry and works like this….” In other words he confuses what he does know with what he doesn’t. Like the carpenter the incredibly talented businessmen around Trump are extremely good at in this case not carpentry but business and making money. Trump’s tariff plans are either a brilliant real-politique piece of foreign policy or a flawed effort to reduce difficult foreign policy to a simpler problem of “carpentry” so to speak, genius in business terms but flawed in others
Trump also faces a broader problem here which is that as I’ve suggested he is a master of rhetoric, but obviously also a fast learner and quite knowledgeable. After having trouble finding conventional Washington and academic types to fill his earlier first administration who would still be aggressively loyal to his agenda he has tapped instead a great many competent billionaires and what might be described as the “:Fox News Contingent ” In an earlier era, Reagan could still find a fair number of people who were, like George Shultz or Bill Bennett, loyal and risk takers but also intellectually high caliber. The Academy and much of politics today lacks an abundance of such figures exceptions, excepted.
His goal has therefore been this time around to get a group of outsiders for the most part that would like him have the aggressive risk taking mentality but also the rhetorical skills necessary. Only time will tell if he has succeeded or merely gotten in some cases rhetoricians with limited knowledge or carpenters with limited perspective. On the positive side Marco Rubio clearly brings great political skills with extreme competence and Scott Bessent seems to also be a highly skilled figure. Time will tell about his overall cabinet and I remain at this point entirely neutral. In any case all concerned, if such a central piece of Trump’s administration as tariffs is to succeed, will need to get beyond mere rhetoric to knowledge and not fall prey to the carpentry problem.
Hence as I’ve suggested there is with Trump’s tariffs both extreme genius and risk. How this plays out as I’ve been arguing all the way from the beginning of the start of Trump’s term will be crucial for markets and I will have a lot to say about all of this both on the positives and counterfactuals and on the more practical results as they take place in future posts.
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