Note: I am travelling so postings will be irregular for a few weeks.

April Sales Data Shows Global Impact of Trump Tariffs

World economic activity slowed to a 21-month low in April when seen through the lens of the Sales Managers Indexes for the world’s largest economies (China, the USA and India).

The Sales Managers Indexes for all three countries are in fact significantly down on March, and three out of five of the growth related Indexes have fallen below the crucial 50 line separating economic growth from decline. The Staffing Index is looking particularly grim, having fallen in April to a 31 month low.
The massive Trump Tariff’s are very likely to be the root cause of this sudden drop in all index values, from Business Confidence to Job Recruitment.

• The Dallas Fed’s April M-PMI had a stagflationary smell today. New orders plummeted from flat to -20, and the general business activity index fell 20 points to -35.8, its lowest since May 2020. Meanwhile, prices paid for inputs jumped to multiyear highs. The average of the business conditions indexes of the regional business surveys conducted by five of the 12 Fed district banks plunged in April and suggests that the national M-PMI did the same. (Ed Yardeni)

In the real world via The Transcript:

• “What I will emphasize, though, and I mentioned this in my earlier comments, following the April 2 announcement of tariffs, we have seen a significant slowdown in orders since that period. I think retailers for the most part are in latency mode. They’re trying to understand where the trade discussions are going to go, how it’s going to impact consumers. And so we saw some of this behavior during the pandemic.” – Flexsteel Industries ($FLXS ) CEO Derek Schmidt
• “I met with the CEO of a US Auto Manufacturer, who is laser focused on increasing competitiveness in the face of tariffs. If they don’t adapt their global supplier network fast enough, their costs will increase by up to $10,000 a vehicle. Unlike past disruptions in the global markets, supply chain AI agents now reconfigure business rules in real-time. Businesses reduce dependency on high tariff regions by reprioritizing tier two and three suppliers, while activating the certification of new vendors. This same conversation is happening across all industries as CEOs navigate this terrain.” – ServiceNow ($NOW ) CEO William McDermott
• “The impact of tariffs on the energy business will be outsized since we source LFP battery cells from China. We are in the process of commissioning equipment for the local manufacturing of LFP battery cells in the U.S. However, the equipment which we have can only service a fraction of our total installed capacity. We’ve also been working on securing additional supply chain from non-China-based supplies but it will take time.” – Tesla ($TSLA ) Chief Accounting Officer Vaibhav Taneja
• “Most of the feedback that we’re getting from the field is customers are reporting uncertainty as it relates to tariffs. And so that’s just something that us and each one of our customers are having to deal with right now and how they make investment decisions. And ultimately, that’s going to impact freight volumes.” – Old Dominion Freight Line ($ODFL ) CFO Adam Satterfield
• “I don’t care if you call it a recession or not, in this industry that’s a recession.” SouthWest Airlines ($LUV ) CEO Bob Jordan
• Client and job seeker caution continues to elongate decision cycles and subdue hiring activity and new project starts.” – Robert Half ($RHI ) CFO Keith Waddell

Front loading is worldwide:

“Following the U.S. presidential election and the threat of additional tariffs, Asian producers have increased imports by over 30% year-over-year in the fourth quarter and February year-to-date this year. Essentially loading the U.S. industry.” – Whirlpool ($WHR ) CEO Marc Bitzer

Goldman Sachs:

• Our soft GDP growth forecast of 0.5% for 2025 Q4/Q4 largely reflects the negative effects of tariffs through standard channels—tariffs function like a tax hike, tighten financial conditions, and increase uncertainty for businesses. This Analyst explores other potential disruptive effects on production and employment that could arise if US producers cease to be competitive because of higher input costs, face prohibitive retaliatory tariffs, or lose access to rare earth elements.

• The first risk arises from higher production costs. Tariff rates will rise sharply for some imported inputs, which we estimate could raise US production costs by 5-15% in some industries, a large share of their current operating surplus. This could make them less competitive with foreign producers, especially in foreign markets where US tariffs on final goods would not protect them. Some US companies might question whether it makes sense to produce at these costs if they fear that foreign competitors will undersell them or that consumers will not accept price hikes commensurate with cost increases. Trade policy volatility heightens these risks because if tariffs are reversed and prices fall, producers would likely have to absorb the tariff costs they incurred.

• The second risk is very high foreign retaliatory tariffs. While most countries’ retaliation against US exports has been restrained so far, China’s 125% tariff is likely high enough to block most US exports. We estimate that tariffed US exports to China amount to 0.5% of US GDP and support over 750,000 jobs, including many in the agriculture, electronics, transportation equipment, chemicals, and machinery industries. While this capacity could be redirected to other markets or products eventually, the hit from lost exports to China could be disruptive in the short run.

• The third risk, loss of access to some rare earth elements, is the hardest to assess because it is not yet clear how tightly China’s new restrictions will limit exports to the US. But if exports were to stop at some point, US production of a range of products that use rare earths would be at risk.

• The potential impact of these risks and how companies might react are both highly uncertain. For insight, we survey our sector analysts about how companies they cover are likely to respond. Concerningly, roughly half of them expect trade-war related production disruptions and layoffs.

• Recent news reports indicate that both US and Chinese officials are concerned that the current very high tariff rates could have disruptive unintended consequences and would like to step back, as our forecast assumes they will. But if they don’t, our analysis suggests that there would be further downside risk to our GDP forecast. To monitor these risks, we introduce trade war trackers that compare industrial production and payrolls in the best- and worst-affected industries.

Trump to Soften Blow of Automotive Tariffs After negotiations, companies paying Trump’s car tariffs won’t also be charged for other levies

President Trump is expected to soften the impact of his automotive tariffs, preventing duties on foreign-made cars from stacking on top of other tariffs he has imposed and easing some levies on foreign parts used to manufacture cars in the U.S., according to people familiar with the matter.

The decision will mean that automakers paying Trump’s automotive tariffs won’t also be charged for other duties, such as those on steel and aluminum, according to people familiar with the policy. The move would be retroactive, the people said, meaning that automakers could be reimbursed for such tariffs already paid. The 25% tariff on finished foreign-made cars went into effect early this month.

The administration will also modify its tariffs on foreign auto parts—slated to be 25% and effective May 3—allowing automakers to be reimbursed for those tariffs up to an amount equal to 3.75% of the value of a U.S.-made car for one year. The reimbursement would fall to 2.5% of the car’s value in a second year, and then be phased out altogether.

Trump is expected to take the actions ahead of a trip to Michigan for a rally outside Detroit on Tuesday evening, marking 100 days since he took office.

Automakers, who have been in near daily communications with the administration, secured some relief while Trump obtained commitments to further his domestic manufacturing goals, the people said. (…)

The steps are meant to provide automakers time to move supply chains for parts back to the U.S., and would likely be a significant boost to automakers in the short term, said one person familiar with the plan. Automakers would have to apply to the government for reimbursements, and it wasn’t immediately clear where those funds would come from. (…)

Bloomberg:

(…) The pivot also would represent the latest evolution in Trump’s ever-changing trade strategy, following his decision earlier this month to pause higher tariffs on dozens of trading partners to allow time for negotiations.

The expected changes come just before the 25% tariffs on foreign auto parts are set to take effect May 3. Under the planned changes, automakers would be able to secure a partial reimbursement for tariffs on imported auto parts, based on the value of their US car production, according to the official. (…)

It may be because I am currently in Prague, where Franz Kafka was born in 1883, but this whole tariff saga seems increasingly Kafkaesque, a word describing situations that are nightmarishly complex, bizarre, or illogical.

So meet Franz Kafka:

• Meet the frazzled customs brokers on the front lines of a trade war

The regulatory analyst for Pacific Customs Brokers Ltd. is immersed in the chaos of U.S. President Donald Trump’s ever-changing tariff policies, wading through a constant barrage of announcements to arrive at the nitty-gritty details of what her clients need to know when their goods reach the border.

The complexity of her work has grown tenfold within the past few months, and she’s not the only one.

Late nights, quadrupling call volumes and questions about the “essential character” of random products have become the norm for those in the customs-brokers business since Mr. Trump set his trade war into motion.

Brokers with decades of industry experience say that today’s volatile trade environment has transformed their role from what was once perceived as a paper-pusher into an essential partner for a growing number of businesses coming to them for advice at every turn. (…)

In the past, lead times between these kinds of announcements and their actual implementation would be a month or more. Now, yesterday’s news is quickly becoming today’s reality, as new orders come in hot and fast – and at all hours of the day or night. (…)

For some smaller carriers, the situation has escalated into such a large headache that their shipments to the United States have simply been put on hold. (…)

Depending on the product, this is where things can get murky for imports from the U.S. Because of the various tariffs Washington has placed on nearly every single country in the world, a table with screws from one country, wood from another and steel from yet another has become a lot more complex to process for those in the customs business.

Entries that used to take half an hour can now take around four to five hours for U.S. imports, Mr. Timm said. (…)

For example, if a table has a wooden top and metal legs, she must spend time evaluating its essential character to make sure it’s assigned the correct tariff number.

Various methods can be used to do this, she said, such as considering how the table appears to a consumer, how it would be marketed, or which of its components hold the most value. (…)

Aside from working longer hours, he said PCB staff are constantly in training sessions to keep up with the current trade environment and learn new skills, such as de-escalating phone calls with frustrated clients.

“I don’t think there’s any industry in Canada that would be more affected by workflow than us,” he said. (…)

“Tomorrow is another day. Who knows what’s going to happen?”

Nobody knows, not even Trump who may change his mind because he’s going somewhere tomorrow.

Tariff War Shows Asian Nations Need New Trade Partners: ADB Head

The export-driven economies of countries in the region are stronger than in the past, but there is no room for complacency as the US persists with its strategy of high tariffs on almost every country in the world, Masato Kanda, the ADB’s president, said in an interview on Bloomberg TV on Tuesday.

Asian economies are exposed to the global market, “not only trade but also the financial capital markets and decreased confidence,” Kanda said.

“This is a time for Asia to boost domestic demand, pursue sound economic policies and diversify industries and trade partners,” he said. (…)

• Japan Worries Trump Tariffs Will Push Countries Toward China

BTW, the FT informs us that not only will prices rise, shortages are likely for a large swat of goods:

• The first tariffed shipments from China landed in US ports on Monday with inventory for the summer season, with analysts expecting price increases to emerge for consumers around the middle of this year if the measures persist.
• Logistics groups said container bookings to the US had fallen sharply since the introduction of 145 per cent tariffs on Chinese imports to the US. The Port of Los Angeles, the main route of entry for goods from China, expects scheduled arrivals in the week starting May 4 to be a third lower than a year before, while airfreight handlers have also reported sharp falls in bookings. Bookings for standard 20-foot shipping containers from China to the US were 45 per cent lower than a year earlier by mid-April, according to the latest available data from container tracking service Vizion.

• Goldman Sachs analysts said the levies could knock $5bn-$10bn off Amazon’s operating profits this year, depending on how the trade war plays out, a hit of 6-12 per cent.

It’s Too Late: The Changes Are Coming

Ray Dalio:

Some people believe that the tariff disruptions will settle down as more negotiations happen and greater thought is given to how to structure them to work in a sensible way.  However, I am now hearing from a large and growing number of people who are having to deal with these issues that it is already too late. 

For example, many exporters to the United States and importers from other countries that trade with the U.S. are saying they have to greatly reduce their dealings with the United States, recognizing that whatever happens with tariffs, these problems won’t go away, and that radically reduced interdependencies with the U.S. is a reality that has to be planned for. Most obviously, American producers and investors in China, Chinese producers and investors in China that deal with Americans, American producers and investors in the United States that deal with Chinese, and Chinese producers and investors in United States that deal with Americans must now go about making alternative plans, regardless of what the next round of trade negotiations are like. 

While this need to minimize U.S. – China interdependence and worry about conflict is now broadly recognized, this view is now becoming more commonly believed by most people in most countries who are dealing with most issues related to trade relations, capital markets relations, geopolitical relations, and military relations with the United States.

Though not yet fully realized, it is also increasingly being realized that the United States’ role as the world’s biggest consumer of manufactured goods and greatest producer of debt assets to finance its over-consumption is unsustainable, so assuming that one can sell and lend to the U.S. and get paid back with hard (i.e. not devalued) dollars on their U.S. debt holdings is naive thinking, so other plans have to be made.

Said more simply, enormous trade and capital imbalances are creating unsustainable conditions and major risks of being cut off, so they must come down -i.e., excessive imbalances + deglobalization = smaller trade and capital imbalances.

More broadly, what I am saying is that, based on many of my indicators, it appears that:

1) we are on the brink of the monetary order, the domestic political and the international world orders breaking down due to unsustainable, bad fundamentals that can be easily seen and measured,

2) the progression of events leading to these increasing disorders is similar to those that have progressed many times throughout history, so this one looks like a contemporary version of the old story of how monetary, domestic political and social, and international geopolitical orders change,

3) there is a growing risk that the United States, imposing these challenges to deal with, will increasingly be bypassed by a world of countries that will adapt to these separations from the United States and create new synapses that grow around it, and

4) if these circumstances are managed in the best ways, the outcomes will be much better than if they are managed in the worst ways

In my opinion, what would be best is calm, analytical, and coordinated engineering and implementation, with the imbalances and the needs for self-sufficiencies treated as shared challenges, to produce the “beautiful” deleveragings and rebalancings that need to take place. (…)

For these reasons, I fear that we are moving beyond the ideal time to be knowledgeable about and properly plan for these big changes in the world order, and believe that investors, policy makers, and other decision-makers need to stop undulating their views and positions in reaction to the day-to-day market moves and policy announcements and instead deal with these big fundamental changes in the world order calmly, intelligently, and, ideally, cooperatively.

FEARFUL

April 28, 2025

We had just landed in Prague Friday morning when our taxi driver, realizing we were Canadians, freely expressed his incomprehension and fears about Trump’s policies, not only on trade but also on Ukraine, noting that “1 million Ukrainian refugees” have pushed inflation up in Czechia.

Official data puts the number of Ukrainian refugees at 364,000 but our driver, working 16 hours a day, feels it’s much higher given food inflation at 6%+, unsurprising after a nearly 4% jump in the country’s population and the war in Ukraine, Europe’s bread basket.

Overall inflation in Czechia has moderated from 3.3% last December to 2.7%, thanks in large part to declining energy costs as Brent oil prices slumped from $82 to $66 in three months.

The precipitous drop in world oil prices, mainly reflecting lower anticipated demand, is providing welcomed relief to consumers just before tariffs start biting.

Trump blinked several times last week, fearful that financial panic could jeopardize his “grand plans”. It really took Scott Bessent, “increasingly influential in Trump’s quasi-imperial court”, to explain that the worldwide stagflation underway would be blamed on him.

So he blinked on tariffs, he blinked on China and he blinked on Powell, the latter becoming the convenient necessary scapegoat for whatever bad happens from now on.

Of course, a cynic might say this is merely putting lipstick on a financial pig. Fair enough: no amount of “tricks” — or “puts” — will stop US yields from surging if America’s fiscal fundamentals keep deteriorating, inflation expectations soar and/or Trump remains capricious. All seem probable. But right now the key point is this: in Bessent, there is a dragon tamer, of sorts, in the White House, clinging on to the beast’s tail. Let us hope that Musk does not push him out. If he does, investors in New York and London alike will really start to panic. (FT’s Gillian Tett)

Mr. Bessent, himself fearful of markets wrath, is now telling us, straight faced, of a “strategic uncertainty” scheme behind all the chaos. He said the administration was looking to strike short-term “agreements in principle — rather than detailed trade deals” — to ease trade tensions.

In an interview on ABC’s “This Week,” Treasury Secretary Scott Bessent described President Trump’s approach to tariffs as “strategic uncertainty” to establish leverage over foreign nations.

He gave no specifics when host Martha Raddatz asked him about Trump’s recent claim that he’s already struck 200 trade deals, given none have been announced.

Raddatz also pressed Bessent on Trump’s claim that he had spoken to President Xi Jinping of China on the trade negotiations. The Chinese have denied that any negotiations have taken place. Presumably, the treasury secretary would be aware of such a conversation, but Bessent replied: “I don’t know if President Trump has spoken with President Xi. I know they have a very good relationship and a lot of respect for each other.”

Trump on Friday argued that markets are beginning to understand the “strategy”.

We also learned from the WSJ last Friday that the deep state is trying to take control of the trade show:

In an attempt to streamline talks over President Trump’s so-called reciprocal tariffs, officials plan to use a framework prepared by the U.S. Trade Representative’s office that lays out broad categories for negotiation: tariffs and quotas; non-tariff barriers to trade, such as regulations on U.S. goods; digital trade; rules of origin for products; and economic security and other commercial issues, according to people familiar with a draft document outlining the negotiating terms.

Within those categories, U.S. officials would spell out demands for individual nations, people familiar with the matter said, emphasizing that the document could change as the administration gets more input.

“USTR is working under an organized and rigorous framework and moving ahead quickly with willing trading partners,” said a USTR spokeswoman. “President Trump and USTR have made U.S. objectives clear and our trading partners have a very good sense of what they can each individually offer.”

Hallelujah!

The U.S. is looking to negotiate within the new framework with about 18 major U.S. trading partners on a rolling basis over the next two months, the people familiar with the matter said. The initial plan is for six nations to come in for talks in one week, six nations in a second week, and six nations for a third week of talks—an 18-nation cycle that would then repeat until the administration’s self-imposed July 8 deadline. At that point, reciprocal tariffs would hit nations that can’t reach a deal, unless Trump further extends his 90 day pause.

So, a rational, organized and structured method, … until Trump fights back:

“I am this giant store,” he tells TIME. “It’s a giant, beautiful store, and everybody wants to go shopping there. And on behalf of the American people, I own the store, and I set prices, and I’ll say, If you want to shop here, this is what you have to pay.”

Actually, He sets prices that the American people will pay, consumers and businesses alike, reducing purchasing power and raising the costs of doing business all at once across the economy. Such centralization never ends well.

The FT last week listed 6 companies having quantified the costs of Trump’s policies on their businesses: GE Vernova: $400M, Baker Hughes: $200M, Boston Scientific: $200M, J&J: $400M, RTX: $850M, GE Aerospace: $500M. That’s $2.6B on only 6 companies. “A little disturbance” that one could too simply extrapolate to $216 billions for all S&P 500 companies.

That compares with the recently alleged $150B in gross savings (down from $2T, then $1T) that the DOGE team of more than 100 now claims to achieve.

There are other beautiful stores in the world that Americans want access to, some quite a bit larger than America. These store owners also seem intent to set their own prices.

The European Union’s economy commissioner told The Wall Street Journal this week that the 27-nation bloc of 450 million people is still awaiting specific demands from the Trump administration. The USTR spokeswoman disputed that, saying the agency has repeatedly made its framework known to the Europeans.

To the FT,

the Commission president warned she was ready to dramatically expand the transatlantic trade war to services if those talks failed, potentially including a tax on digital advertising revenues that would hit tech groups such as Amazon, Google and Facebook. “We are developing retaliatory measures,” von der Leyen said, explaining these could include the first use of the bloc’s anti-coercion instrument with the power to hit services exports. “There’s a wide range of countermeasures . . . in case the negotiations are not satisfactory.”

She ruled out revisiting the EU’s “untouchable” regulations on digital content and market power, which Trump officials see as an effective tax on US Big Tech firms. Nor will the EU negotiate over VAT, which she said was equivalent to US sales tax: “These are not in the packages of negotiation because these are our sovereign decisions.”

“Companies that offer services make a good business in this [EU] market. And the vast majority of the services, 80 per cent of the services are coming from the US. So again, we want a negotiated solution that is the best for us, all of us,” she said. As well as potentially targeting services trade, von der Leyen said Brussels was also considering moves such as a possible levy on scrap metal exports to the US, where EU supplies are in high demand from US steel mills.

“[There is] the interest of so many countries around the world to work closer with us, together, to balance the system and to have free trade really competing on quality and not around tariffs,” von der Leyen said.

About the other megastore, Trump last week said that his administration has been in touch with China “every day,” although Chinese officials have denied any substantial contact on trade.

“They had a meeting this morning,” Trump said Thursday during a meeting with Norway’s prime minister when a reporter asked about the Chinese statement.

Pressed on which administration officials were involved in discussions, the US president said, “it doesn’t matter who ‘they’ is. We may reveal it later, but they had meetings this morning, and we’ve been meeting with China.”

About those “theys”, a Chinese official said: “I want to emphasize that there are currently no economic and trade negotiations between China and the United States,” adding that “any reports on development in talks are groundless and have no factual basis.”

Speaking of facts, on Friday, Trump told reporters that

(…) he would not call President Xi Jinping if his Chinese counterpart does not call him first. Then Trump said such a call had occurred, without giving details.

“He’s called. And I don’t think that’s a sign of weakness on his behalf,” Trump said.

The US president declined to answer when asked by reporters Friday when he spoke with Xi, saying, “I’ll let you know at the appropriate time. Let’s see if we can make a deal.”

China’s reply: “It takes the person who tied the bell to untie it.”

Seven years ago, Trump tweeted that “trade wars are good, and easy to win”.

Not so much.

The goal (or is it a strategy?) now is apparently to reach “agreements in principle — rather than detailed trade deals”.

Who’s reassured by that?

The FT also told us last week that “in response to Donald Trump’s trade war, Apple aims to shift assembly of all US iPhones as soon as next year from China to India.” 

MAGA?

Seems that Tim Cook does not like losing pricing control on his products. But how can he be confident that India will not get China’s tariffs next year?

Incredibly in the land of the free enterprise, from the WSJ:

(…) As they outlined cost-cutting measures on earnings conference calls in recent days, many CEOs used language that boils down to a corporate version of the Serenity Prayer. 

“Control the controllables and try to help mitigate some of the things we can’t control,” Norfolk Southern Chief Executive Officer Mark George told investors and analysts as he cited plans to wring savings out of fuel and labor costs, among other areas. (…)

International Business Machines CEO Arvind Krishna said the technology company was “focused on areas we can control,” including productivity initiatives throughout the company. PepsiCo CEO Ramon Laguarta said the company is “controlling what we can” by, in part, making its supply chain more efficient. (…)

By cutting costs and streamlining operations internally, companies can take action now, even if they have little ability to predict what happens next, according to executives and corporate advisers. (…)

Many companies are trying to be mindful not to make drastic cuts that could hamstring businesses should trade tensions ease or the economy fare better than expected later this year. (…)

“A lot of companies are not looking at layoffs per se, because they lived through Covid and lost a lot of talent” that proved difficult to rehire when the economy rebounded, Williams said. “Without pulling dramatic levers, they are looking at those expenditures, saying, ‘Defer until we get more clarity.’” (…)

Some companies are cutting jobs. The staffing firm Robert Half said it eliminated an unspecified number of administrative and corporate staff positions to reduce its overhead costs. The savings: $80 million.

“We came out of the election, there was a surge in business confidence. Our discussions and the tenor of our discussions with our clients was improving, and so we were quite optimistic,” CEO M. Keith Waddell told investors. “And that changed.”

On the other front that was supposed to be settled before inauguration:

The US is talking to Russia, but continues to sideline Ukraine. Now, Washington is threatening to walk away from negotiations unless Ukraine accepts a deal on Putin’s terms. Trump’s most recent ultimatum — that Kyiv must accept US recognition of the Russian occupation of Crimea — has made a mockery of the peace process, wrote FT’s editorial board.

Earlier this week, FT reporters revealed that Vladimir Putin had offered to halt the invasion along the current front line. It is the first formal indication that Russia might be willing to step back from its maximalist goals. But European officials told our journalists that Russia’s apparent concession may just lure Trump into accepting fresh demands from Moscow.

• Mr. Trump said Russia’s recent bombardments of Ukraine made him wonder whether President Vladimir V. Putin wanted to end the war. “It makes me think that maybe he doesn’t want to stop the war, he’s just tapping me along.” It makes him think…

The FT’s Tim Harford:

The US has clearly lost credibility — as an ally, as a place to invest, as a trading partner and as a country where the rule of law is paramount. If the world suffers no more than a recession as a result, we will have escaped lightly. Yet a sunnier scenario is not hard to imagine: it is conceivable that Trump has finally gone too far, been so transparently incompetent and done so much damage to the people who supported him that the rest of the US political system will start constraining his urges.

Within the USA, from Axios:

A passel of polls dropped this weekend ahead of President Trump hitting his 100-day milestone on Tuesday. The Smart Brevity:

• “Chaotic,” “scary”: “The turbulent early months of Mr. Trump’s administration are seen as ‘chaotic’ and ‘scary’ by majorities of voters — even many who approve of the job he is doing. Voters do not view him as understanding the problems in their daily lives and have soured on his leadership.” — N.Y. Times (gift link)
• Lowest 100-day approval in 72 years: “Trump’s approval rating stands at 41%, down 4 points since March and 7 points since late February, a new CNN poll conducted by SSRS finds. That’s lower than any newly elected president dating back at least to Dwight Eisenhower.” — CNN
• Short honeymoon: “39 percent of adult Americans approve of the way Trump is handling his job, compared with 55 percent who disapprove … In February, those numbers were 45 percent positive and 53 percent negative. Among registered voters, the deterioration has been even larger. … Most presidents enjoy a honeymoon during their first months in office, only to see their ratings decline later in the first year. Trump may be an exception.” — WashPost (gift link)

From the U. Of Michigan:

US consumer sentiment fell to one of the lowest readings on record and long-term inflation expectations climbed to the highest since 1991 on worries over the domestic consequences from his tariffs.

Finally, here’s Hubert Marleau again:

Trump supporters essentially refuse to admit that under a classical liberal economic order, where cooperation exists, all countries win. Yet, this truism has deep theoretical roots that are supported by valid theories and empirical evidence.

Under Ricardo’s law of “comparative advantage” and Adam Smith’s existence of the “invisible hand”, the allocation of resources is more efficient, thereby tending to reduce inflation and promote economic growth. Given that the demand for internationally traded goods and services, perhaps with the exception of energy products and Google search services, is price elastic, a fall in spending will be far greater than associated tariff-caused price increase, resulting in a drop in total revenues.

Instead, they contend that trade is a zero-sum game in which every transaction involves winners and losers. This spurious notion is completely opposite to the economic premise that trading money for goods is mutually beneficial to both buyer and seller.

Maybe Trump drank too much Kool-Aid. Yuval Harari has cleverly figured out what his vision is:

“In a Trump world, international agreements, organisations and laws cannot be anything but a plot to weaken some countries and strengthen others. Trump’s ideal world is a mosaic of fortresses, where countries are separated by high financial, military, cultural and physical walls, foregoing the potential of mutually beneficial cooperation but offering countries more stability and peace.

There is, of course, a key component missing from this vision. Thousands of years of history teach us that each fortress would probably want a bit more security, prosperity and territory for itself, at the expense of its neighbours.

In the absence of universal values, global institutions and international laws, how would rival fortresses resolve their disputes? Trump’s solution is simple: the way to prevent conflicts is for the weak to do whatever the strong demand. According to this view, conflict occurs only when the weak refuse to accept reality. War is therefore always the fault of the weak.

Thus consideration of justice, morality and international law are irrelevant, and the only thing that matters in international trade relations is power. So the weaker economies must surrender to stronger ones to assure peace.”

It is mind-boggling that the Trump team, who say that they are in the know, fail to see the trade deficit for what it is, targeting the symptom rather than the root cause, which is persistent budget deficits stemming from fiscal profligacy.

(…) the Federal Government is spending $2.0 trillion more than it collects from taxation revenue, of which $1.0 trillion is funded with domestic savings and the other $1.0 trillion with foreign capital. (…)

Put another way, closing the current account deficit would require more savings on the part of Americans, like higher corporate profits and personal savings, but the real key is to reduce government spending. America’s trade and budget deficit problems are its own.

Maybe the Administration is itself drinking too much Kool-Aid by failing to see that the US may be the one who will be the big loser, if it continues on this path of terrorising its trading partners with wild tariff rates.

Denying that prosperity has everything to do with knowledge and the liberty to use it productively is what may do the US in. In this connection, winning this adversarial approach to trade policy may prove to be more difficult than what Trump and company are banking on.

My first post of the year was FEAR, arguing that the year would be dominated by Trump’s mantra: “Real power is, I don’t even want to use the word, fear.”

On April 7, I wrote FEARLESS, highlighting China’s “Stand Up!” moment as mighty and fearless China lead the rebellion.

FEARFUL brings fear right back to the bully after Mr. Market spoke loudly and clearly. The Trump administration is now fearful of showing its backtracking, its improvised strategy, its surrender to the unanticipated fearlessness.

What comes next? Certainly not business as usual from this shallow cabinet.

I fear I cannot be fearless at current valuations amid such uncertainty.

But Prague is really beautiful!

(I will be travelling until May 15 with irregular postings)