Day of the Zenith, 21st of Spring, 525 M.E. (Deneb): And just like that, we're a fundamentally diminished nation.
On October 19, 2024, The Economist magazine claimed the American economy was “the envy of the world.” Today, a mere five months later, all three major Wall Street index funds are plummeting. The tech-heavy Nasdaq fund was down 4.5%, while the Dow dropped 2.7% at opening. Bloomberg calculated that around $2 trillion has been knocked off the value of the S&P 500 today, with Apple among the biggest losers. Meanwhile, the dollar hit a six-month low, going down at least 2.2% this morning compared to other major currencies.
What happened? Last night, the Orange One announced that he will impose a 10% tariff on all imports to the United States, with higher rates on specific countries and the European Union. The U.S. will subject Chinese goods to a new tariff of 34 percent, on top of other tariffs imposed since January. The E.U.’s tariff was set at 20 percent, Japan’s at 24 percent, Britain’s at 10 percent. and India’s at 26 percent. New tariffs on all automobiles made outside the United States also took effect, adding to the previous tariffs on steel, aluminum and other imports that Trump has already imposed since returning to office. He even imposed tariffs on uninhabited regions, like Australia’s Heard and McDonald Islands, which are occupied only by penguins and seals.
Tellingly, though, he did not impose any tariffs on Russia.
Agent Orange is calling yesterday "Liberation Day" but it's not clear who is being liberated or from what. “Never before has an hour of Presidential rhetoric cost so many people so much,” according to former Treasury secretary Lawrence Summers, who estimates the loss from the new tariff policies to be close to $30 trillion, "or $300,000 per family of four."
The White House says it is merely imposing “reciprocal tariffs,” which they claim are about half of what other countries charge on U.S. goods, although the numbers they are using are fundamentally flawed. For example, Paul Krugman points out that while Trump claims the E.U. places 39% tariffs on U.S. goods, the actual rate is less than 3% on average.
Apparently, for each country, the White House looked up its 2024 trade deficit and then divided that deficit by the country’s exports to us. Then, to be “kind,” they offered a discount, cutting that figure in half. However, trade deficits aren't tariffs, and financial journalist James Surowiecki called the approach “extraordinary nonsense.” Japanese consumers don't buy as many American products as American consumers buy Japanese products for a wide variety of reasons, including price, quality, and need, and not just because of government sanctioned tariffs.
The tariffs are likely to drive up prices for American consumers and manufacturers. Business groups, trade experts, economists, Democratic lawmakers, and even a few Republicans have denounced the tariffs, and even former vice president Mike Pence called them the "Trump Tariff Tax," claiming they represent "the largest peacetime tax hike in U.S. history.”
Trump had waited until the stock market closed yesterday before he announced the new tariffs. But by noon today, the S&P 500 had tumbled more than 4 percent, echoing sharp declines in Asia and Europe as investors balked at the tariffs.
The so-called "president" is undermining a system of global trade that has fostered international cooperation since World War II. “This is Trump saying. . . 'I am going to overturn globalization as we’ve known it,'” said CNN global economic analyst Rana Foroohar.
“I’m hoping it doesn’t push the U.S. and the world into recession,” Foroohar added. However, JP Morgan forecasts that these policies, if sustained, will likely push the US and global economy into a recession this year. “In the short run, the effect is probably a recession," agreed economist Brad Setser of the Council on Foreign Relations, adding, "It’s going to raise the price of so many goods that can’t be made in the United States." In the long run, he said, "it’s a vision of the U.S. that is very isolated from the world.”
The Turnip finally built his fucking wall, but this time we're all trapped inside. The tariffs are likely a way to make private industry dependent on the president in the same way he has tried to make law firms and universities dependent on him. Senator Chris Murphy suggested companies “will need to pledge loyalty to Trump in order to get sanctions relief.” He warned that the "tariffs are DESIGNED to create economic hardship." Trump will then have a straight-face rationale for releasing them, business by business or industry by industry. "As he adjusts or grants relief," Murphy points out, "it’s a win-win: the economy improves and dissent disappears.”
The Constitution gives Congress, not the president, the power to impose tariffs. However, the International Emergency Economic Powers Act allows the president to impose tariffs if he declares a national emergency under the National Emergencies Act, which Trump has done, citing a need "to increase our competitive edge, protect our sovereignty, and strengthen our national and economic security.”
The same law, however, also allows Congress to end such a declaration of emergency. But so far, Republicans have declined to do so. Yesterday, the Senate passed a resolution to block the tariffs on Canadian products, with four Republicans (Susan Collins, Mitch McConnell, Lisa Murkowski, and Rand Paul) joining Democrats to pass the resolution. But Speaker Mike Johnson is unlikely to take the measure up in the House any time soon.
As I said at the top of the post, we're now a fundamentally diminished country. Our economy is in shambles, we're heading for a major recession, an autocratic despot is illegally and unconstitutionally seizing control of every aspect of government, and the agencies and government organizations intended as a financial safety net and to protect our health, food, air, and water have been gutted and decimated.
I'm not happy with these times or these conditions.
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