Oh, the grand old Duke of Trump,
He had 10,000 tariffs,
He marched them up to the top of the hill,
And he marched them down again.
Trump says that he has merely “paused” his “beautiful” reciprocal tariffs, and in 90 days’ time, if he does not get what he wants, he will throw them back into battle once again to fight those who have supposedly been looting, pillaging, raping and plundering the US for decades.
But the original Duke in the English nursery rhyme never did go back up that hill, and Trump is equally unlikely to do so after seeing his declaration of what amounted to a trade war on the rest of the world blow up in his face. It is a measure of his hubris that he did not foresee that he could not antagonise so many powerful people and countries at the same time, a group that included America’s leading oligarchs, notably Elon Musk.
As always, Trump is portraying as a victory, or at worst a victory postponed, what is in reality the defeat of his far-reaching goals: the reindustrialising of the US and the remaking of the world’s trading system to America’s advantage.
But the upwards of 100 countries which will soon start negotiating new tariff regimes with the US believe that Trump blinked first and showed weakness this week when he “paused” the reciprocal tariffs. This will make them less likely to make concessions to the US in negotiations than they might otherwise have done.
Trump has visibly overreached his own political and economic strength in a failed bid to bend other nations to his will. The limitations, and even fragility, of American power, though still monumental, were starkly displayed this week as US government securities, the bedrock of American economic hegemony, fell precipitously in value, along with stock prices and the US dollar.
Pundits correctly identify this as Trump’s “Liz Truss moment”, when the whole US financial system began to quiver and totter. Fear of an even greater financial meltdown began to become self-fulfilling. By 9 April, the The Wall Street Journal calmly observed that “the market has switched to ‘sell everything American’ mode”.
The amateur, shambolic way in which tariffs were calculated erodes confidence in the US
The White House evidently expected a fall in the stock market and was philosophical about it, but the nasty surprise came when the bond market showed signs of going the same way. Investors feared that US government securities might not be “the safe haven” against all disasters they are traditionally expected to be.
Trump’s inner coterie must have known the joke by former president Bill Clinton’s chief strategist, James Carville, who once famously said: “I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a .400 baseball hitter. But now I would want to come back as the bond market. You can intimidate everybody.” Evidently, the White House did not think things could get this bad this fast, but when it did they were duly intimidated, as Carville predicted.
Trump retreated as the bond prices declined, but, as in the UK after the Truss debacle in 2022, getting this close to the cliff-edge of financial calamity has a lasting impact on future confidence. Distrust of the Government’s judgement, competence and even sanity will be slow to ebb. A demoralising feeling remains that what almost happened once might easily happen again.
Though the US economy is far bigger than that of the UK, it can still be permanently damaged by the belief that the White House may have another bout of self-destructive irrationality. The amateur and shambolic way in which the reciprocal tariffs were calculated and rolled off further erodes confidence in the US as a stable place to do business.
square PATRICK COCKBURN
Newsletter (£)
Trump has abdicated America's superpower status
Read MoreTrump did not march all his 10,000 tariffs back down the hill as in the rhyme, since he has raised those on Chinese exports to an astronomical 125 per cent. This extinguishes the will to trade between the world’s two largest economies. Given that half the economic growth in the world since 2000 has occurred in the US and China, this conflict will have huge negative repercussions on the world economy. China has vast resources, political stability, and says it will “fight to the end.” Loss of its exports to the US is a blow, but not a fatal one or something for which it is unprepared.
What a prolonged trade war between the US and China does do is guarantee a permanent escalation in global uncertainty. This will inevitably have a depressing economic and political impact everywhere. The unsettling effect of Trump’s massive tariff hikes followed by an abrupt U-turn reinforces the growing sense of instability in relations between the US and the great majority of its European allies over the Ukraine war. Nobody knows if the conflict with China will escalate or be terminated by another U-turn.
Trump may have retreated from the brink, but uncertainty about US future intentions get ever higher.
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