Saturday, August 3, 2019

What did Donald Trump do today?

He was wrong about what tariffs are, again.

This morning, Trump tweeted this:

Literally no part of this is true. As is often the case, the only question is whether Trump is deliberately lying about any given part, or simply confused.

For example, the question of whether things are "going very well with China" is more or less answered by the fact that trade talks once again broke down this week, and Trump responded with yet another round of tariffs. (China immediately promised to retaliate.) It is now more than 18 months since Trump first declared that "trade wars are good, and easy to win." 

But when Trump falsely says that China is "paying us Tens of Billions of Dollars," it's just possible that he may actually believe it. (Trump, who brags about having eventually gotten an undergraduate degree from the University of Pennsylvania's Wharton School, is notoriously easily confused by basic economic concepts.) In reality, as everyone else—consumers and retailers and markets and economists and central bankers and his own advisors—are aware, tariffs are taxes paid by consumers in the form of higher prices. (If American consumers didn't pay Trump's tariffs, they wouldn't work. The whole point is to discourage buying foreign goods.) 

American consumers are now expected to pay about $1,270 more at the cash register per household per year as a result of Trump's tariffs, with the cost falling disproportionately on poorer families. (That figure does not include the cost of the first year and a half of Trump's trade war.)

The amount of money collected up front at the border—the money that is then re-collected from Americans in the form of higher prices—is less than the amount the government is spending to bail out just one sector of the economy hurt by the trade war. 

As for inflation, it is fairly low—although Trump's price increases via tariffs are certainly helping to prop up prices. The problem is that Trump seems to think that "no inflation" is a good thing. It's not, if you're trying to avoid economic contractions and recessions. Worries about a looming disaster are why the Federal Reserve did act this week. Trump, who personally saves tens of millions of dollars in debt financing each time interest rates fall, may already have forgotten that.

So what?

  • Past a certain point, where the economy is concerned, it doesn't matter if a president is incompetent or lying or corrupt.