Morning all. I start off today with a conversation with leading Democratic economist Dr. Rob Shapiro. It’s a primer on tariffs and their likely economic and geopolitical impact. The video is above and for those who would rather read along the transcript can be found in the button to the upper right.
The Trump tariffs appear imminent. In the last few days he has threatened across the board tariffs for all imports from all countries; sector tariffs on aluminum and other commodities; country tariffs of 25% on Canada and Mexico, 10% on China and over the weekend 25% and 50% on Colombia.
Paul Krugman has described all this as Voodoo trade policy. Perhaps we should call it economic alchemy or magical thinking, for the President continues to misrepresent/misunderstand how tariffs work. He keeps insisting the tax America will apply on imports will be paid for by foreign governments. As Rob explains, the tax will be paid for by us and our companies. They are a new national tax that we will all pay. Depending on the scope of what our Mad Orange King decides when he wakes up later this week we could literally see the price of just about everything for everybody begin to rise as early as this weekend.
As Trump plays a big game with all of us - I am for this, maybe for that - it makes it hard to forecast the impact of his plans. So what Rob and I lay out here is what we believe to be the likely outcomes of what Trump and his team have been discussing and in some cases already implementing. Here we go, and be prepared to be really fucking angry:
Trump’s tariffs are likely to raise prices on a vast array of goods for Americans, re-igniting inflation, making it far less likely that the Fed cuts interest rates again this year. Elevated interest rates also make a wide array of things more expensive for all of us - homes, cars, credit card expenditures, loans for businesses, etc.
Trump’s tariffs undermine the rules-based global system America has imagined and built, weakening our influence throughout the world. They are also likely to lead to destructive trade wars with our most important allies, and begin to undermine our foundational economic and security arrangements of North America and NATO. The head of the World Trade Organization warned last week that these trade wars would be “catastrophic” for the nations of the world, reminding us that the trade wars of the 1930s led to the most destructive actual war in human history, WWII.
A primary justification of these dangerous tariffs is that they bring more revenue into the Treasury, creating what are called “offsets” for the enormous cost of Trump’s proposed tax cuts for the wealthiest and corporations. As Rob details, this would be a direct massive transfer of wealth from working people to the very wealthiest.
In their emerging budget plans Republicans are also floating various middle class tax increases to offset the costs of the plutocratic Trump tax plan. They are also exploring huge cuts in government programs that would drive up the costs of health care and other vital services for every day Americans.
As we discussed with David Leopold a few days ago the President’s wildly ambitious efforts to reduce the legal and undocumented immigrant population in the US will lead to labor shortages and higher prices for food, health care, child care, restaurants and hotels and other items.
While we didn’t talk about it in our video, we wake up this morning to another new Trumpian economic disruption/threat - the indiscriminate freezing of government spending for a wide array of programs - infrastructure, health care, etc. While we don’t yet know the scope of it all, holding back hundreds of billions of government spending will slow growth, hurt businesses, drive up unemployment and cause incredible economic chaos across the US.
As Rob and I discuss all of this together is likely to raise prices on every day Americans, re-ignite inflation, slow economic growth, keep interest rates at elevated levels, begin trade wars and make America a rogue or pariah nation not an indispensable one. Why would do all this? What is the end game? To provide tax breaks for the oligarchs and their companies, and to give Russia and China what they’ve long sought - the weakening of America and the US led global order? For remember, higher food, health care, child care, mortgages etc are no biggies to wealthy folks. They can absorb these higher costs. For the rest of us all of this represents an extraordinary betrayal of the core promise of the Trump campaign, and of course, of everything that has made America great.
Could things turn out differently? Could the President back off his tariff threats, or his tax cuts? Sure. The President stopped short of implementing the Colombian tariffs this weekend, for example. What Rob and I lay out here is what is likely to happen given what the President has said and what history and economic theory tells us. Could we be wrong about what is likely to happen? I sure hope so.
But all of this is why we need to keep fighting, keep working to block the Unacceptable 3, why we need to keep working to weaken Trump and make it less likely he succeeds. For Donald Trump is moving fast and breaking things that really matter and that aren’t his. Our goal must remain to make it as hard as possible for him to succeed.
What can we do? Call your elected representatives today and demand they start fighting Trump’s tariffs and his broader economic plan right now. No tariffs, no tax cuts for plutocrats, no plunder and no selling out America.
A few more things:
Gabbard, Kennedy and Patel have their nomination hearings this week. Keep making your calls everyone.
We’ve endorsed Abigail Spanberger for Governor of Virginia. Watch my recent interview with her, learn more, volunteer and consider donating to her campaign. Our goal is to raise $100,000 for her by March 31st. We’ve already raised $17,000 - thank you all.
Be sure to watch my new video presentation (and companion essay) on the early days of Trump 2.0 and the need for us to keep fighting; review my current working 7 takeways and recommendations about the path forward (video and post), and my new essay on how "betrayal” is the word that I think best captures the new Trump era.
On Saturday the DNC will vote for a new Chair and new leaders. You can catch my interviews with leading Chair candidates Ken Martin, Martin O’Malley and Ben Wikler here. We are in the home stretch my friends.
I’m speaking to a major political gathering in person at the University of Southern California this Thursday, January 30th. My panel starts at 215pm PT. Hope to be able to see some members of the Hopium community there.
For those coming up for renewal for your paid Hopium subscription please make sure your payment info is current. Paid subscribers keep this place going in this time of enormous challenge.
Proud to be in this fight with all of you - Simon
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