Trump’s Tariffs Are a Masterclass in Economic Cluelessness

THE WAR ON TRUTH, PART I: A case study on how aggressively presented nonsense is a key tool in bamboozling society

President Trump’s “Liberation Day” global tariff tsunami, which went into effect today, might be the single dumbest economic policy by a major country in memory – certainly since communism was imposed on parts of the globe. It’s stupider than the 1980s’ trickle-down economics, the last Republican flim-flammery. It reflects a complete misunderstanding of trade, of how prices and currencies work, and of basic economic cause and effect. It’s neither reciprocal, nor strategic, nor remotely beneficial to the American people.

Here’s why.

Trade deficits are not losses

Trump continues to paint trade deficits as evidence that other countries are cheating America. In his nuance-free world, if the US buys more than it sells, it’s somehow being robbed. But a trade deficit isn’t theft — it’s a sign of a strong economy with high consumer demand. Americans are buying so much from others because they are not poor.

The fundamental view of this as a zero-sum contest is flawed. Think of it this way: Most people have a massive trade deficit with Amazon — we buy things from them, and they don’t buy anything from us. That’s not unfair. It’s called commerce. The same principle applies to countries: Americans buy what they need or want from abroad, and other countries sell the stuff because, among other reasons, they value the dollars. A currency reflects, in a way, a country’s reputation and credibility (so smart countries protect these).

That has interesting self-correcting effects, which most people who studied at the Wharton School of Business would understand, even if that does not apply to the president. Importing more than you export can weaken your currency by increasing its supply; essentially, the US sells dollars for the currency – say, euros – with which to buy Audis. That increased supply of dollars (barring moves by the Fed to shore up the currency, or other factors) can suppress its exchange rate. A weaker currency in turn makes exports cheaper and imports more expensive — encouraging a pendulum effect that can narrow the deficit.

Either way, a trade deficit usually means the world wants to invest in you. Here’s why: