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”the 30,000-foot view”:

1. The opposition is not concerned about doing whatever it takes to subvert Trump and DOGE/musk because what is happening is the greatest conceivable attack on the swamp and it includes the fed.
2. Whatever spending reductions Trump achieves are removal of fiscal stimulus.
3. Trump wants to lower rates, but this can be considered inflationary; the defenders of the swamp will thus accuse him of erroneous policy plus “usurping the independent fed.”
4. many say tariffs are a drag effect.

So this is a perfect set-up for the "resistance" because they can use the inflation numbers to say the desire for easier rates is inflationary and wrong; they have already worked hard to look like they are the good guys on inflation and protecting the consumer. So Trump could be in a predicament here where he gets lots of pressure to shut up on easier rates, and Powell will join the chorus against him because both musk and Trump have made it clear they are not his friends and do not have his back. Hence, stimulus spending disappears with DOGE work, rates stay up, tariffs kick in and you have a serious threat to credit and equity markets. The swamp-lovers would be happy as the proverbial clam to stick Trump with a crash.

That’s the big-picture point putting Trump at (political) risk.if something like this takes shape, the Trump tariffs will be compared to smoot-Hawley and Trump will be equated with hoover and, as art Fleming used to say about double jeopardy, “everything’s doubled and the scores can really change”. This could even turn out to be the catalyst that sours the Trump-musk relationship.

Donald Trump’s interpretation of the united States’s tariff history is playing the central role in his world and domestic perspective simultaneously, both on the level of economic policy as well as diplomatic/foreign policy.Let’s put it in shorthand.Trump views American history as a timeline that started out with the federal government relying on sources of income like taxes on grain production (whiskey) and tariffs on goods exported mostly by Europe to the u.s.over time, Trump contends, politics and special interest influence resulted in competitor exporters to American markets in Europe acquiring leverage on American legislators and others with “juice” to shift the burden tariffs imposed on these foreigners to newly created income taxes on the American domestic income-earner. This coincided with a greatly expanding (and as Trump sees it, increasingly corrupt) federal government owing to the costs of war, land acquisition, and a general and unconstitutional shift away from federalism, especially as initiated by the unrepentant Theodore Roosevelt who said unapologetically this was the only way to effect the trust-busting America needed with JP Morgan as the central target of that mission.At around the same time, the Federal Reserve Board was created, and the power of government to borrow, especially with the lingering memory that this was the chief thing Lincoln wanted in prosecuting the war against the South’s succession, took on reality. This was a huge factor under Wilson with the United States’s entry into World War I so, what Trump envisions is a reversal of this historical course from more than a century ago and all its (insidious, as he sees it) central elements which he considers bellicose and war-prone, repression of the “little guy taxpayer”, empowerment of over bloated government and selfish/adverse (often foreign) special interest and globalism and reliance on foreign goods out of the reach of what should be the sovereignty of the American citizenry. To call this isolationism is something I think Trump himself might respond to by saying “maybe isolationism isn’t a dirty word; it keeps you out of war, at peace, productive, independent, and it keeps the American people in control of their own country and prosperous, and it limits the power of government as our founding fathers intended.”

American tariff history deserves some detailed inspection in trying to understand where Trump is coming from and what the risk are inherent in the Trump concept moving forward.

The sore spot for Trump in tariff history is smoot-Hawley and everyone in Trump’s corner and Trump himself are acutely aware of it. The deification of Franklin Roosevelt in the wake of the first world war, the roaring twenties, the great crash and the bank failures that brought on the great depression revolves around depicting Herbert hoover and smoot-Hawley as the “bad guys and their bad ideas” as what wrecked u.s. prosperity at its height and created suffering of such magnitude that the only way out was letting FDR preside over an omnipotent government that replaced the reliance on the “myth of rugged individualism” that was suddenly seen as a lie. In many ways Donald Trump can be viewed as the end of a 90-year timeline framed around the halo over FDR’s head, despite the fact that the supreme court struck down all but two of his numerous new deal programs (TVA and Social Security), and the fact that the culmination of Roosevelt’s fourth term was another world war leading to the first use of nuclear weapons of mass destruction.

Trump thinks he can force interest rates downward and also unleash domestic energy production to get a “porridge is just right” combination of lower energy costs, more domestic production worldwide (of everything), lower money costs (interest)—but this is a big gamble because by definition, government adding a cost in the form of a tariff that does nothing in contributing value is BY DEFINITION a drag on output/input which is the essence of a productivity decline. He would say “not true, Reid, because I’m lowering energy cost”. I’m noticing a lot of people who want to be considered “smart” saying “nobody knows what will happen.”

And this is why congress has always passed the hot potato to the president with “broad powers to raise and lower tariffs as he sees fit” so HE takes the political heat.We have even had situations where congress introduced tariffs so crazily high, they were intended to fail; this backfired with the tariff on abominations which was written to fail but it passed because New York loved it and tipped the balance because of their unique situation with the French Canadians at that time and—guess what?—new York’s relationship with Canada remains peculiar today so Kathy Hochul is howling about it. This does not change the fact that she looks like a reanimated version of Phyllis Diller’s exhumed corpse.

In the end a tariff is a cost with no value and a decline in productivity. Its political implication is usually paying off a protected class (usually union labor) that has outpriced itself in world competitive context (hence Biden’s actions and doubletalk). This was built into the system at the end of World War two to avoid tough medicine and reinforced with currency bs that paid off the u.s. to protect u.s. industries and make Europe pay for the Marshall plan and NATO defense with a guaranteed market of buying u.s. cars. This eventually backfired when they invaded our market with superior product and they beat us on quality with higher prices. Japan did the same. The result has been that over the past 45 years swings in the price of oil have been around twice the net trade surplus/deficit and Trump thinks he can get the porridge just right. The Dulles boys have had more influence with what we live with than any president or any congress.

Bottom line, the Trump vision is very risky. He (Trump) might pull it off and has proven more than once to have more than nine lives. But this is not the same world as the one Japan enjoyed an isolated existence from prior to commodore perry because we have a global financial system that can hedge against anything.It’s like the castle with the proverbial moat around it stocked with alligators and raised drawbridges.Don’t mean diddly if the London underground runs under the castle.You just get off at the station under the castle and come up through the basement to the kitchen and fix yourself an English muffin and watch Monty python with the staff.This risk is exacerbated by ongoing inflation and other economic data releases that can be manipulated by partisan interpretations to box Trump in.

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