A๐งก473-word๐under ๐3-minute๐read
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I liked the idea of tariffs. ย I liked the idea of reciprocal tariffs even better.
I imagined the tariffs as a negotiating tool administered at appropriate levels.ย
I didnโt imagine a world blanketed in tariffs, nor did I foresee the administration employing a formula that originated in the Twilight Zone.
What was I thinking?
Having witnessed DOGE in action, I should have known better.
No matter. Iโm doubling down as itโs still premature for any declaration of defeat.
Donโt get me wrong. Tariffs wonโt lower our overall trade imbalances, or the national debt. However, thereโs a chance they could still accomplish the objective they are suited for: reducing trade barriers.ย
Some modest victories are emerging. Smaller countries like Vietnam and Israel have little choice but to acquiesce. Regardless, success in getting a bunch of small nations to surrender wonโt move the needle.
China is the key, but the intractable personalities of the two leaders doesnโt bode well for finding common ground.
ย A case can also be made to target the EU. However, that boils down to a handful of countries, most notably Germany. Then again, is the trade deficit with the EU a byproduct of trade barriers?
Case in point: The President chastises Europe for not buying American cars. Heโs correct, they donโt. Only one American car โ the Ford Puma - is in the top 20.
Is that really because of tariffs?
Petrol is pricey in Europe which prompts the purchase of fuel-efficient vehicles. Of the top 10 models sold in Europe all but one have three or four-cylinder engines. Not to mention that Germany is home to some of the finest car manufacturers in the world.
What is the US known for making? Pickup trucks and bigger cars.
Do trade barriers play a role? Probably, but not appreciably.
The tariff tragedy has already done damage. And before the dust settles, more damage will ensue.
The cleantech industry is likely to suffer more than others. The pending trade war with China will cause multiple negative ripples. Key rare earth minerals will become more difficult and more expansive to source. The administration also has its sights set on Southeast Asia including Vietnam and Indonesia for acting China conduits. This will make sourcing solar components increasingly problematic.
On a macro level, the haphazard execution of the tariff strategy has created - and will continue to create - volatility in the financial markets. Credit will tighten and decisions will be prolonged. And this is all without mentioning the โRโ word โ recession, which at this point, it all but certain.
It all depends on the execution. However, if the collective economic IQ of the administration doesnโt improve, it will be the economy that gets executed.
#tariffs #gdp #tradedeficit #spending