The trade war started quickly; it won't end that way

A GREY SWAN PUBLICATION Tuesday April 8, 2025 The Tariff Chaos Is Just Starting “When I was growing up, my parents told me, 'Finish your dinner. People in China and India are starving.' I tell my daughters, 'Finish your homework. People in India and China are starving for your job.'” –Thomas Friedman Neither China nor Trump are ready to budge on tariffs yet… April 8, 2025 — Tariffs, tariffs everywhere… What a rollicking good time for the press. And for Trump critics. The wires: Stocks slide around the world as investors recoil from Trump’s tariffs We watched the tape Thursday. The Dow was down 1,000…then 1,200…then 1,500. Where would it come to rest, we wondered. It ended the day down 1,679. In his first term, Trump committed one of the biggest blunders in U.S. economic history — shutting down the economy and replacing real output with an extra $4 trillion in phony, printed-up stimmy checks. The result? The worst inflation in fifty years. And now…here comes Big Blunder No. 2. Doubters overseas and skeptics at home — all are having a field day. Raw Story: “This might be the single stupidest thing any of us will ever see," [Ian] Dunt argued. "It is stupid in every way: presentationally, intellectually, politically, methodologically, morally and of course economically. The word stupid doesn’t really suffice for the full level of idiocy we’ve now reached." Trump’s tariffs are so dumb they are uniting Democrats and Republicans… free traders and protectionists…comedians and historians. Alternet: Shortly after President Donald Trump issued Wednesday’s announcement of new tariffs, four Senate Republicans joined Democrats to extend a lopsided bipartisan rebuke to his trade policy. The Senate adopted a resolution by a 51 to 48 vote to block his proposed tariffs on imports from Canada, a longtime U.S. ally. Now, former Vice President Mike Pence is further infuriating Trump supporters by calling out his new tariffs as “a tax.” The tariffs are even making economists look smart. Finally, here is something that Paul Krugman — famously wrong about most everything — can be right about. Raw Story: "Based on what he said, he’s gone full-on crazy," wrote Krugman, a frequent critic of the president. "It’s not just that he appears to be imposing much higher tariffs than almost anyone expected. He’s also making false claims about our trading partners — not sure in this case whether they’re lies, because he may be truly ignorant — that will both enrage them and make it very hard to back down. Basically, he’s claiming that the rest of the world is placing very high tariffs on U.S. products, and that he’s imposing 'reciprocal' tariffs that are only half what they impose on us." "The EU, like the United States, has generally low tariffs; the average tariff it charges on U.S. goods is less than 3 percent," wrote Krugman. "So where does this 39 percent number come from? I have no idea. Many people speculated that Trump would count value-added taxes as tariffs, even though they aren’t — European producers selling to the EU market pay the same VAT as U.S. producers, so it doesn’t discriminate and therefore isn’t protectionist. But even if you get that wrong, EU VAT rates are in the vicinity of 20 percent, so you still can’t get anywhere close to 39 percent." Where do Trump’s numbers come from? Some are nonsense. Some are irrelevant. Some are pure WTF. The Donald, for example, says Taiwan should get a 64% tariff. Continued Below... The $36 Trillion Vegas Meeting You Weren't Invited To A secret meeting just took place in Las Vegas. Inside exclusive sky suites at the Aria Resort, Wall Street executives gathered to behind closed doors. They aren't warning the public. They're positioning themselves for what's coming. By the time you see the headlines, it will be too late. But there's still time — if you act now. Watch this controversial video now, and send it to everyone you know. On a total of $134 billion of back-and-forth trade in 2023, tariffs on imports and exports averaged 2% — even Steven, coming and going. So, why a penalty tariff on our supposed ally? Trump: “We are going to charge countries for doing business in our country and taking our jobs, taking our wealth, taking a lot of things that they have been taking over the years.” Business Insider: Commerce Secretary Howard Lutnick said on Wednesday that President Donald Trump's new reciprocal tariffs are just a response to how the U.S. has been treated on trade. Laura Ingraham at Fox picks up the fight club angle. “Only Trump has the guts” to stop the foreigners from ripping us off, she says. Get it? They’re Honor Tariffs… like honor killings, designed to reclaim America’s sense of fairness…justice…and honor. We’re going to teach them a lesson by imposing taxes – on ourselves! Because, the foreigners don’t pay the tariff penalties. U.S. consumers do. Warren Buffett explains: “The Tooth Fairy doesn't pay 'em!” And why are the feds getting involved at all? Donald Trump is the ultimate politician…always fighting for power, prestige, and money. That’s why he insists upon being a ‘winner.’ In politics, you are either a winner or a victim. Now, he thinks he can win by bludgeoning other nations with tariffs. But trade is not meant to be part of the political world. It’s part of the win-win world of commerce -- bargaining, negotiating, and trying to satisfy a customer. When an honest trade happens, both sides win. Each gets something he didn’t have before and gives up something he considers less valuable. Bringing in politics just queers the deal. And now that the politicians are on the case, you can expect them to make the same sort of mess of it that they made of Amtrak, Iraq, and the Covid hysteria. Expect lower growth, higher prices, and more chaos. Regards, Bill Bonner Bonner Private Research & Grey Swan P.S. from Addison: “These were peaceful protests, not crazy mobs,” writes Kim K. (not the reality star), headlining a series of reader responses that adroitly express confusion over both the tariffs and the “Hands Off!” protests over the weekend. “The protestors were peacefully practicing our democratic right to peacefully gather and protest. When this right ends, so does our democracy.” Indeed. The signs we featured advocate the guillotine for Trump and Musk. Historically speaking, that didn’t work out so well for the folks who advocated a similar solution in 1789 in France. “In your article,” Carl N. writes, “you say ‘mobs excel at being against something.’ This brought to mind a comment by Eric Hoffer in his book The True Believer: Hatred is the most accessible and comprehensive of all the unifying agents. Mass movements can rise and spread without belief in a god, but never without a belief in a devil." “The chaos is self-inflicted,” our friend Scott P. begins with a familiar criticism following a subject line that is curiously titled Your Drumbeat For War: Every society that allows wealth and power to concentrate collapses — interestingly, that's every society with a government. As Ben Franklin forewarned: 'A republic if you can keep it.' Keeping it requires the people to diligently focus on leveling the playing field — a naive fantasy. So, we have wealth and power concentrated to destructive levels. The left says, 'It should be steady as she goes,' realizing a select few benefits immensely. The right says, 'Let's concentrate wealth and power more,' and installs the current clown show. The right is expecting that their billionaire champions will be the first men in human history to forego their wealth and power for the benefit of the masses. Don't hold your breath. We'll never solve the problem until we identify it. The left blames the right (a great diversion). The right blames immigrants, the poor, minorities, women, foreigners, and the left (an even more significant diversion to amplify outrage). Surprisingly, no one looks at the well-heeled elites—the ones controlling all that wealth and power. Curious. The Republicans and Democrats had a tacit agreement to share the spoils regardless of who was in charge. The king has now changed the agreement. All players must now grovel and pay tribute to the crown. Mr. P ends with this familiar barb: “You are on the deck of a sinking ship, crafting witty banter. We'll see how long you stay afloat.” Curious indeed. Pretty sure that’s ad hominem… apparently, we are the problem. And also… pretty sure we’ve never advocated for war. “Addison,” writes Richard S., further expressing confusion, “My question to President Trump is, what’s the grand plan? Lay it out for We The People. So we know whatever sacrifices we need to make, the sun will be shining on the other side. If the plan is like what President Milei laid out for Argentina, it worked.” Richard, we took our best shot at explaining The Trump Master Plan right here. There are more emails in the box. Send yours to: addison@greyswanfraternity.com. We read them all. P.P.S.:  If you’re a paid-up member of the Grey Swan Investment Fraternity, please join us for a live Zoom call on Thursday at 11 a.m. April, 10 EST. This week, we’ll take a deeper dive into our model portfolio and how those positions have fared during the global sell-off. (Quick spoiler alert: 15 of 20 positions are up, including all five of our Aggressive Portfolio positions.) Fraternity members will get the link and password Thursday morning. Seats are limited. Risk isn’t. We’re also asking for your best trading ideas. You read that right: we’re throwing the gates wide open and “crowd-sourcing” new trades with you! Bring ‘em on… no ideas are too small. If you have any suggestions on  new trades or macro ideas we’re missing, please share them here: addison@greyswanfraternity.com. How did we get here? Find out in these riveting reads: Demise of the Dollar, Financial Reckoning Day, and Empire of Debt — all three books are now available in their third post-pandemic editions. You might enjoy one or all three. (Or… simply pre-order Empire of Debt: We Came, We Saw, We Borrowed, now available at Amazon and Barnes & Noble or if you prefer one of these sites: Bookshop.org, Books-A-Million or Target.) Please send your comments, reactions, opprobrium, vitriol and praise to: feedback@greyswanfraternity.com

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