In earlier posts we have discussed at a higher level many issues with tariffs. If you have been following this site you would have stayed far ahead of the curve in terms of the various events occurring and your understanding of these effects on the markets. You would also have known the counterfactuals that could derail these plans. Here I want to do a crucial update and suggest for the first time that I think Trump’s going to pull this all off. Even though there have been many potential obstacles at least right now it sure looks that way based on his administration’s actions and the events taking place. Could this still go awry? Sure these are as the Chinese sage once said “interesting times”, which is to say volatile times, so nothing is guaranteed but a number of question marks are now being answered. You will have to refer back to some of my earlier posts to fully understand what I’m saying as I will be brief here and just summarize.
First, it looks like the swimming pool is going to be overflowing soon and the economy zooming. The deals keep rolling in with over 500 billion to a trillion, yes, that’s not a misprint being promised by Saudi Arabia alone yesterday. American business is on the move internationally in a major way, significant reshoring is occurring, and Trump is championing American tech companies also with some of the most powerful tech heads even joining him abroad to get deals done. Enough water is flowing in to more than make up for any fiscal drain from the pool which may occur from cuts in government spending.
Second, the Congress it’s all but certain now will get the tax cuts through. That’s another huge inflow into the economic pool.
Third, I have written about the “carpenter problem” with Trump. It now becomes clear that he is able to maintain both a major emphasis on deal making and on real-politique foreign policy. He uses the real-politique as the stick and the tariff and economic deals as the carrot, and this is crucial, and wasn’t totally clear till some recent events, he fully understands each approach and can apply each in real time fully. This used to be the case with American leadership and could be said to be the uniquely American, to the extent the business side was emphasized, model for foreign policy in an earlier period. We can’t go into this fully here, perhaps I will in a later post, but this earlier model was replaced by the Neo-con, globalist Kojeve-Fukiyama end of history model. This more Hegelian model while interesting theoretically always had tremendous problems in the real world which were obscured by the relatively easy U.S. hegemony after the Cold War. Trump is it seems now successfully applying that earlier model which was a key to US political and economic power for many years.
Fourth, as I suggested in the last post it looks like the trade wars will be resolved with a 10 per cent world tariff tax across the board and any country that goes against the US finding itself with a much higher tariff and being then at a competitive disadvantage versus their neighbors. But more importantly, the tariff deals it now seems will get done. The world is not mounting a globalist push back of any significance. The wild cards are still the E.U. and China and those are both wild cards but also they are economies very dependent on US sales that need a deal and Trump it now seems clear will give it to them. It looks like they will also make deals opening up their markets in significant ways.
Fifth, I’ve said that Trump and the other billionaires in his cabinet are high risk-high reward people. It now appears the high risk and leveraging U.S. power will in fact work. Obviously those market models that assume that their is no alpha in the markets are disproven by this at least this point seeming success.
Sixth, Trump is maintaining and even gaining in popular support in the U.S. The latest Rasmussen poll has his popularity up to 52 percent versus 47 per cent which in American politics and given Trump’s usual numbers is quite high. The Democratic opposition party, and I say this with complete political neutrality, is having an incredibly hard time mounting a serious challenge to his policies and has yet to really workout as lots of high level Democrats have indicated what their message will be going forward.
For all these reasons, among others, it looks like Trump just might pull this off and the economy as he has argued enter a new “golden age.” That is all said with political neutrality which is maintained on this site and simply as an objective statement based on higher level political and economic analysis.
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