I am writing this from the last days of our captivity.
Indeed, by the time some of you read this, we will be free. If all goes according to the White House’s plan, April 2 will go down in history as America’s “Liberation Day.”
Steve Bannon, a prominent unofficial Trump advisor, is so confident about its success, he’s already talking about making Liberation Day a federal holiday next year.
But we’re getting ahead of ourselves. From what will we be liberated on Liberation Day?
The Trump administration has been oddly parsimonious about providing one of its patented pithy catchphrases for what we’re being liberated from. You’d think they’d come up with something like “Globalist Tyranny,” “Neoliberal Serfdom,” “Surplus Production Sucker Status.”
But we can infer what they have in mind from context. On March 21, President Trump posted on social media, “April 2nd is Liberation Day in America!!! For DECADES we have been ripped off and abused by every nation in the World, both friend and foe. Now it is finally time for the Good Ol’ USA to get some of that MONEY, and RESPECT, BACK. GOD BLESS AMERICA!!!”
To this end, Trump intends to impose sweeping tariffs on foreign cars and reciprocal tariffs on every single American trading partner.
The exact numbers and other details are murky. “No one knows what the f— is going on,” Politico quoted a White House ally close to Trump’s inner circle as saying over the weekend. “What are they going to tariff? Who are they gonna tariff and at what rates? Like, the very basic questions haven’t been answered yet.”
White House trade advisor Peter Navarro expects these tariffs to raise $600 billion annually. Nearly every serious economist across the ideological spectrum understands that American consumers would pay the bulk of that. Thus, if “successful,” Trump would be imposing the largest, most regressive tax increase in history.
It would be regressive because the taxes would hit the poor and middle class much harder than the wealthy, because a larger share of their income goes toward basics like gas, food and clothes.
The challenge of writing about “Liberation Day” is that it is so incandescently stupid it amounts to a conceptual piñata: You can whack at it from any angle and get some reward for your effort.
For starters, many people understand that tariffs on, say, foreign steel make foreign steel more expensive. As a result, the things we make from foreign steel become more expensive, too. What gets overlooked, however, is that taxing foreign steel also makes domestic steel more expensive. When you make something more scarce — steel, eggs, Taylor Swift tickets — prices go up.
Politically, the idea of deliberately making things — like literally all the things — more expensive, when you were elected in large part due to popular exhaustion with inflation, is so irrational it’s like the economic policy equivalent of a Dali painting.
Geopolitically, blowing up our alliances and the global economy in the name of “self-sufficiency” is unfathomably idiotic. The more a country relies on tariffs to “protect” its economy, the poorer it is. The more friendly trading partners a country has, the stronger it is.
The wellspring of this geyser of asininity is the simple fact that Trump doesn’t understand how trade works.
The British economist Charles Goodhart coined “Goodhart’s Law”: “When a measure becomes a target, it ceases to be a good measure.” For Trump, the measure in question is balance of trade. He thinks trade deficits are proof that America is being “ripped off.” That’s not how trade works.
Every time you get a haircut, you have a trade deficit with the barber. Are you being ripped off?
Trump’s obsession with Canada illustrates his confusion. We have a trade deficit with Canada, under a trade agreement he crafted in his first term. Hence, Trump claims we “subsidize” Canada $200 billion a year (a made-up number, but that’s beside the point). The only reason we have a trade deficit with Canada is that they sell us oil at a price below global market rates. If we stopped buying their cheaper oil, we’d be worse off. Gas prices would go up and American jobs dedicated to refining that oil and exporting it would vanish. But the metric Trump cares about would improve.
Hold on here. Stuff we need would have become more scarce and expensive. Americans would be worse off. And that’s a win because … why?
During the years of our supposed economic captivity, the American economy became the “envy of the world.” That’s what Trump seems bent on liberating us from.
@JonahDispatch