Further Thoughts on the Tariffs

 

While I fully expected Trump to look for some face-saving out to back down on the 145% tariffs on China, I did not expect it to happen so soon.   (The day after my latest post, actually!).  I expected him to cave only when we started feeling some real pain on Main Street.  He didn't wait that long.

I will add that I fully expect the 90 day "pause" to be the face-saving out Trump was looking for, and any return to either the 145% rate on China or "reciprocal" tariffs on the rest of the world to be quietly forgotten when 90 days roll around.  I expect any noises Trump is making now about resuming tariffs to be so much empty talk.  Of course, I though that when he put a 30 day "pause" on tariffs against Canada and Mexico as well.

So, what if I am right?  Well, for starters, I expect Trump's popularity to recover at least somewhat with the decision not to drive us into a ditch.  Then again, 10% tariffs on everyone and 30% on China will cause some price increases and economic slowing, particularly in our international trade sectors.  It will not be obviously catastrophic, but there will be a pinch.  People may not recognize the tariffs are causing the pinch, but it will be there and I expect it to eventually erode any recovery in Trump's popularity.  But it will take time.

I also suspect that Trump will take away some lessons from this little episode.  One will be that if one of his policies proves disastrous it is, after all, better to abandon the policy than to stick with it.  Fair enough.  One only wishes any number of other Presidents had learned the same thing.  Of course, it is better not to adopt a disastrous policy in the first place, but that is a different story.

Another lesson I expect Trump to take away that may -- alas -- prove true is that if you start with a disastrous policy, retreating to one that is merely bad makes the bad policy look pretty good by comparison.  (Incidentally, it is past hoping that any future President will not adopt any bad policies.  that amounts to saying one hopes future President will never make mistakes -- not compatible with ordinary, fallible human nature).  

One he seems highly resistant to learning is that, while it is better to retreat from a disastrous policy to a merely bad policy than stick with the disastrous policy, it is better to pick one bad policy and stick with it than to jump erratically from one bad policy to another.

And, of course, I could be wrong.  Trump might raise tariffs again after all.  Then all bets would be off.