tariffs

“I know what the hell I’m doing,” Trump tells Republicans, as trillions in stock values evaporate.

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Heather Cox Richardson | Letters from an American

Heather Cox Richardson

April 12, 2025

It was just 20 days ago—on March 24—that editor in chief of The Atlantic Jeffrey Goldberg reported that the most senior members of the Trump administration discussed a military strike on the Houthis in Yemen on an unsecure commercial messaging app and that they included him on the chat.

Their Signal chat, which Goldberg published later in response to the administration’s insistence that there was nothing classified in the chat, showed that Secretary of Defense Pete Hegseth had posted precise details of the munitions and planes involved in the strikes. It showed that neither President Donald Trump nor the acting chairman of the Joint Chiefs of Staff—a Biden appointee—was on the chat, and that White House deputy chief of staff Stephen Miller apparently made the decision to strike based on his interpretation of what President Donald Trump wanted. In violation of the Presidential Records Act, the app was set to delete the messages. There was apparently no larger strategy or diplomatic plan other than to strike, and participants greeted news of the collapse of an apartment building into which a Houthi leader had allegedly walked with emojis of fists, fire, and a U.S. flag.

This extraordinary lapse in national security protections would normally have defined an administration and caused a number of resignations, but the White House called the case “closed” on March 31. And there was more: On April 2, Dasha Burns of Politico reported that the team working with national security advisor Mike Waltz regularly used the unsecure Signal app to communicate about issues involving Ukraine, China, Gaza, the Middle East, the U.S., and Europe. The officials to whom Burns spoke said they had personal knowledge of at least 20 such chats.

That story has been almost completely driven out of the news by President Donald Trump’s tariff machinations since April 2. On that day, after teasing the idea of what he called “Liberation Day,” Trump announced that at 12:01 a.m. on Wednesday, April 9, he would be imposing a 10% tariff on all imports to the United States, with significantly higher rates on countries he claims engage in unfair trade practices. By the next day it had been established that his team, led by trade advisor Peter Navarro, arrived at the tariff rates with a nonsensical formula that simply took the U.S. trade deficit with a country, divided it by the value of that country’s exports to the U.S., and cut the resulting number in half.

For the next week, the stock market plummeted, jumping only with rumors that Trump would back off on the tariffs, while economists and financial analysts revised the chances of inflation and recession upward, and economic growth downward. News coming out of the White House was contradictory: one advisor would say that Trump would not negotiate over tariffs and they were here to stay, while another would say he intended to negotiate and they were just starting points.

Meanwhile, as predicted, other countries began to put tariffs on goods from the United States or pause exports, and global markets fell. Americans from business leaders to small business owners to consumers and wage workers called out the “stupidity” of Trump’s trade war. Others noted that the tariffs appeared to be intended as a shakedown as countries or businesses who offered Trump the right price could get exemptions.

As trillions of dollars in stock values evaporated, Trump insisted the tariffs were here to stay. “I know what the hell I’m doing,” Trump told Republicans on Tuesday, April 8. He boasted that global leaders were “kissing my ass.” On Wednesday, April 9, at 9:33 a.m, he posted: “BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!” At 9:37, he posted “THIS IS A GREAT TIME TO BUY!!! DJT”

But, as Tyler Pager, Maggie Haberman, Ana Swanson, and Jonathan Swan of the New York Times reported, Trump’s team, led by Treasury Secretary Scott Bessent, was worried about setting off a financial panic that could not be stopped. Driving their concern was a broad sell-off of U.S. government bonds, which in the past investors had seen as a safe haven during times of market turmoil, and the rise in popularity of the government bonds of other countries.

Former treasury secretary Lawrence Summers noted that global financial markets were backing away from U.S. assets. Fund manager at Penn Mutual Asset Management George Cipolloni told Bernard Condon and Stan Choe of the Associated Press: “The fear is the U.S. is losing its standing as the safe haven. Our bond market is the biggest and most stable in the world, but when you add instability, bad things can happen.”

On April 8, U.S. Trade Representative Jamieson Greer defended Trump’s tariffs to the Senate Finance Committee. He was offering similar testimony before the House Ways and Means Committee at 1:18 p.m. the following day when a social media post from Trump pulled the rug out from under him. Trump paused most of the highest tariffs for 90 days and instituted an across-the-board tariff of 10% in their place. But, perhaps unwilling to look weak, he announced that he was raising tariffs on goods from China to 125% effective immediately, “[b]ased on the lack of respect that China has shown to the World’s Markets.”

With Trump’s tariff pause, stocks jumped upward in one of the biggest single-day gains since World War II. Hedge fund manager Spencer Hakimian posted a graph showing that Nasdaq call volume—bets that stock values would rise—spiked minutes before Trump’s announcement. He commented: “Not a good look at all.” Representative Alexandria Ocasio-Cortez (D-NY) reposted Hakimian’s post and added: “Any member of Congress who purchased stocks in the last 48 hours should probably disclose that now. I’ve been hearing some interesting chatter on the floor. Disclosure deadline is May 15th. We’re about to learn a few things. It’s time to ban insider trading in Congress.”

David Smith of The Guardian noted that the juxtaposition of Trump golfing, dining with donors, and meeting with race car drivers even as economic chaos tanked people’s retirement accounts prompted accusations that he has lost touch with reality. A widely circulated video that appears to be Trump bragging to NASCAR drivers visiting the White House that investor Charles Schwab made $2.5 billion on Wednesday and that another investor made $900 million has fed anger at Trump’s economic chaos. On Friday the University of Michigan released its well-respected consumer-sentiment index, showing that consumer sentiment about the economy and personal finances fell for the fourth straight month, dropping 11% from March. Consumers from all political affiliations fear recession, inflation, and unemployment.

This level of consumer sentiment is the second lowest since the index began in 1952. Chief U.S. economist at Pantheon Macroeconomics Samuel Tombs told the Wall Street Journal’s Harriet Torry: “Consumers have spiraled from anxious to petrified.” James Knightley, the chief international economist at the multinational banking and financial services company ING, noted that consumers appear to blame Trump for their concerns. While in January 44% of respondents told researchers that the government was doing a poor job of managing inflation and unemployment, now 67% say so.

The tariff change happened so quickly that White House officials could not tell reporters what the actual tariff rates were for different countries. When more information was available, Kevin Schaul of the Washington Post noted that Trump’s new tariff levies had actually increased tariffs rather than lowered them because he had dropped rates only on goods from countries that don’t export much to the U.S. He had raised them significantly—not just to 125% but to 145%—on China, a major trading partner.

On Friday, China imposed 125% tariffs on goods from the U.S. A spokesperson for the Chinese Finance Ministry said that Trump’s tariff machinations “will become a joke in the history of the world economy.” At 9:20 a.m. President Trump posted: “We are doing really well on our TARIFF POLICY. Very exciting for America, and the World!!! It is moving along quickly. DJT.” The new tariffs had badly threatened Apple Inc., and at 10:36 p.m. the U.S. Customs and Border Protection posted a notice that various electronics, including smartphone and computer monitors, are exempt from the tariffs.

When economist Justin Wolfers commented: “I just want to tip my hat to the crack team of White House economists who were able to discover—in just a few short days—that the U.S. is dependent on China for smartphones, computers and semiconductors,” Dr. Soumya Rangarajan noted that “a basic medicine we use 1000x per day in the hospital, heparin, is also dependent on China, and people will die without it.” As Sabrina Malhi of the Washington Post explained, about 12 million people hospitalized in the U.S. need heparin every year, and it is only one of the many medications that will be affected by Trump’s tariffs on goods from China.

Josh Marshall of Talking Points Memo posted that a “[g]ood way to see the current tariffs, as of literally today, is no tariffs on high value add manufactured goods marketed to middle and upper middle classes. Massive tariffs for cheap consumer items” that benefit those lower on the economic ladder.

While the damage from the tariffs both to the domestic and global economy, as well as the USA’s standing in the world, is not yet clear—all the chaos has been about the prospect of Trump’s high tariff rates, not their actual effect—Trump appears to be trying to downplay that story in favor of demonstrating his power.

As the tariff saga played out on Wednesday, Trump signed a memorandum for the heads of executive departments and agencies informing them that they no longer need to let the public know when they get rid of regulations that they determine are obviously unlawful. Kate Riga of Talking Points Memo notes that “unlawful” appears to mean anything Trump doesn’t like.

In a breathtaking violation of the Constitution, on Wednesday Trump also went after two individuals: Christopher Krebs and Miles Taylor. Trump appointed Krebs to head the Cybersecurity and Infrastructure Security Agency (CISA), where in 2020 Krebs assured the American people that the presidential election had not been stolen. Trump now claims Krebs thus censored the speech of Trump loyalists.

As a Department of Homeland Security staffer, Taylor wrote an op-ed under the pseudonym “Anonymous” saying that members of the first Trump administration were pushing back against the president’s policies. Taylor later wrote a book about his time in the White House that Trump claims was “designed to sow chaos and distrust in Government” and thus “could properly be characterized as treasonous and as possibly violating the Espionage Act.” A grand jury believed Trump himself violated the Espionage Act by retaining classified documents.

Trump stripped security clearances from Krebs and Taylor and also from their employers. He ordered government officials to investigate the two men and to recommend “appropriate remedial or preventative actions to be taken to protect America’s interests.” Employees at CISA told Kevin Collier of NBC News they were disheartened by the attack on Krebs and noted that staffing cuts at CISA had “already severely degraded our capacity to defend critical infrastructure.”

America flexes her muscles and unilaterally changes the rules. Or did it?

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By Billy Bragg

It was meant to inspire comparisons with the D-Day landings. In reality, Tяump’s ‘Liberation Day’ levying of punitive tariffs on allies and enemies ended up being more akin to the Suez Crisis of 1956 when Britain and France invaded Egypt only to withdraw a month later in the face of criticism from the US government.

This humiliation marked the end of Britain’s role as a great power, undermining the UK’s ability to act with impunity on the world stage. Tяump’s terrible tariff tantrum was a similar attempt to flex America’s muscles and unilaterally change the rules of global trade.

The US had done such a thing before. In August 1971, President Richard Nixon announced to an unsuspecting world that the dollar would no longer be convertible into gold held by the US. He also imposed an immediate 10% tariff on all imports that would be removed once other nations agreed to a new international monetary system.

Perhaps Tяump had something like this in mind when he announced ‘Liberation Day’. However, the world has changed since Nixon took his unilateral decision. In 1971, the US had no economic rivals. As a military super power, the USSR could challenge the US, but America had hegemony over world markets.

That is no longer true. China now manufactures more goods that the US and has a faster rate of GDP growth. A reliance on exports does make it vulnerable to tariffs, but unlike the rivals the US faced in the 1970s, it has the capacity to fight fire with fire if challenged, as we are seeing in the current trade war.

Since the Second World War, American’s have never had to deal with a genuine challenge to their economic superiority. Now China’s rise seems to have spooked America into self-harming policy decisions.

The shelves at Walmart are packed with goods made in China whose prices will double in the coming weeks. The amount of damage that Tяump’s obsession with punishing perceived rivals has done to America’s economy remains to be seen.

But what has been shattered in the past ten days is the great myth that animates populism – the fervent belief that everything could be put to rights if only someone had the will to do it, regardless of the consequences.

Billy Bragg is an English singer, songwriter, musician, author and political activist. His music blends elements of folk music, punk rock and protest songs, with lyrics that mostly span political or romantic themes. His activism is centred on social change and left-wing political causes.

Trump’s Psychological Vulnerability

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And the destruction of the American Economy

By Timothy Snyder

Trump has an obvious weakness that makes America weak. He places the American economy at risk for the sake of a personal foible, a visible vulnerability.

All his adult life, Trump has been ripping people off. That is his modus operandi. Rather than a conscience, he has the habit of displacement. It is not that he is ripping people off. Everyone else is ripping him off.

a wooden toy holding a wooden object in one hand

As he has aged this has grown into an vulnerability. He actually seems to believe that everyone is ripping him off. He makes no distinction between himself and the government. And he has no grasp of how any significant policy actually works. This means that anyone who has access to him and understands his vulnerability can generate a self-destructive American policy.

An easy example of this, before the tariffs, was Ukraine. Somewhere Trump got the idea that Ukraine was ripping off the United States. And once the idea was in his head, he was its slave. He kept repeating that the Ukraine owed the United States $350 billion.

This made no sense. The assistance in question was aid, not a loan. The value of the aid was about a third of what Trump claimed. Most of the military aid came in the form of spending inside the United States. And of course the Ukrainians have paid. They have fulfilled the entire NATO mission by themselves in holding off a Russian attack. They have suffered enormous losses of all kinds. And they have shared intelligence and innovations with the United States. But none of that matters to Trump. Once he is told that he is being ripped off, he is helpless, and others must suffer.

We don’t know now, though it is not hard to guess, who told Trump that Ukraine was ripping him off. The Russians have a keen sense of psychological vulnerabilities, and they have been paying close attention to Trump for a long time.

Trump also cites the made-up number of $350 billion to justify tariffs. He claims that Europeans, curiously, somehow “owe” the United States that exact same amount. Trump believes that if Americans buy more from another country than residents of that country buy from us, that is a loss, that he personally is somehow being ripped off. And so when the United States formulated tariffs on the whole world last week, the operating principle was that all trade deficits — cases where we buy more than we sell — should be eliminated.

This is nonsensical. There is no state of nature where countries buy and sell the exact same amount from one another.

Imagine a party where people are freely talking to each other. Then someone jumps up on a table and insists that in every conversation each speaker should use the exact same number of words as the person with whom he or she is in dialogue. What would happen then? Every conversation would grind to a halt, because an artificial planned equality of words is not how conversations work. An artificial planned equality of the value of imports and exports is, by the same token, not how trade works.

There is a much injustice in international trade. And there is much to be said for a thoughtful trade policy that protects or encourages certain industries. Manufacturing is of inherent value. But none of this will arise from the hurt feelings of an oligarchical president.

Because Trump’s policy is based on personal vulnerability, it is erratic. If someone makes him feel more vulnerable than he was already, he will stop. He will not, for example, impose tariffs on Russia, because he is afraid of Russia. On the other hand, if someone convinces him that he has won, then he will also reduce the tariffs, as has just happened. If he no longer feels that he is being ripped off, then he yields. Until the moment when his feelings change.

To a person which such a obvious vulnerability, everything seems out of control. And so control is the only answer. Everyone is acting to rip me off. And so I must establish control by calling them all out, and making them deal with me from a position of weakness and ridicule. And so now the United States — so goes the theory – will now negotiate individually with every single country of the world. We have broken agreements with many of them, and now we will sign new agreements, which will probably be worse: we lack time now, and patience, and focus. And we can never get back the trust of our closest trade partners.

The same is true in domestic policy. By establishing the tariffs, Trump thinks that he is creating leverage for himself against American companies. They will all have to come to him personally to seek the “carve-out,” the exception, that will allow them to continue to trade in world markets and function as they had before. And so Trump can enjoy feeling less vulnerable as he tries to bully companies. But this amounts to central planning, and of a particularly irrational sort: one that depends upon one man’s feelings. Investing inside the United States no longer means what it once did. And this will not quickly change.

We all have our foibles, our whims, our vulnerabilities. But when one person has unchecked power, irrationality becomes unchecked. Donald Trump thinks that everyone is always ripping him off. If he were the president in a normal situation, this would be a minor problem. But in a situation in which he has gotten away with an attempted coup, in which the Supreme Court has told him he is immune from prosecution, in which members of his own party rarely challenge him, in which Congress no longer sees the need to pass laws, and so on, in which too much of the media normalizes him, Trump’s vulnerability can bring about the destruction of the country.

We have thousands of years of political theory and indeed great literature to instruct us on this point: too much power brings out the worst in people — especially among the worst of people. As the founders understood, the purpose of the rule of law, of checks and balances, of regular elections, is to prevent precisely such a situation. Allowing our republic to be compromised has many costs, for example to our rights, and to our dignity. But it also has costs in a very basic economic sense. When you elevate the mad king, you elevate the madness.

Trump Is Stupid, Erratic and Weak

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The disaster of Trumponomics continues

By Paul Krugman

Anyone sounding the all-clear on tariffs, or Trump economic policy in general, should be kept away from sharp objects and banned from operating heavy machinery. We’re in a hardly better place than we were before Donald Trump announced a tariff pause (in a Truth Social post, of course.) In fact, we may be in a worse place.

Let me make four points about Trump’s post-pause tariff regime.

1. Even the post-pause tariff rates represent a huge protectionist shock

2. Destructive uncertainty about future policy has increased

3. We’re still at risk of a major financial crisis

4. The world now knows that Trump is weak as well as erratic

Still a huge protectionist shock

Yesterday Trump announced that he wasn’t going to impose all those tariffs he announced last week after all. Instead, he’s putting a 10 percent tariff on everyone, and 125 percent on China.

Question of the day: Does the 10 percent rate still apply to the penguins of the Heard and McDonald islands?

Anyway, this new announcement still sets tariffs at a much higher level than they were before Trump took office, indeed higher than he suggested during the campaign. For example, during the campaign researchers at the Peterson Institute for International Economics constructed a model assuming Trump implemented a 10 percent tariffs across the board and 60 percent on China. The researchers concluded that this regime would impose a nasty shock on the US economy. Now we are facing a tariffs of more than twice that level against China as well as 10 percent on all other countries.

How high are overall tariffs after the “pause” was announced?

That’s actually a tricky question. China accounted for 13 percent of U.S. imports in 2024, and if you apply the newly announced rates to 2024 imports you come up with an average rate of 24.95 — higher than before the pause. Incredibly high tariff rates on China will, however, lead to lower imports from China, so a calculation based on 2024 trade is problematic.

However, not importing from China is also very costly: if we no longer import a good from China we must either shift to other, more expensive suppliers or the good simply disappears from the shelves. In the chart at the top of this post I’ve made an estimate of the “effective” tariff rate post-pause. The effective tariff takes into account both direct and indirect costs, and reflects the increase in the cost of living imposed by the tariff. With a 125% tariff on Chinese imports and a 10% tariff on all other imports, I arrive at an effective tariff rate that is slightly below the Smoot-Hawley level of 1930. But this still represents a huge jump in tariffs in a US economy that now imports three times as much as it did in 1930. Trump’s post-pause tariff regime remains the biggest trade shock in U.S., and I think world history.

It’s the uncertainty, stupid

Like many other observers, I’ve been arguing that uncertainty about Trump’s policies is as big a drag on the economy as the policies themselves. Before the Rose Garden announcement, I warned that it wouldn’t be the end of the story:

Trump may impose further tariffs, or slash them as suddenly as he raised them, depending on who spoke to him last. L’Etat, c’est Trump.

This kind of uncertainty is paralyzing for businesses, who are realizing that any kind of long-term commitment can turn out to have been a disastrous mistake. Build a plant that depends on imported parts, and Trump may cut you off at the knees with new tariffs. Build a plant that’s only profitable if tariffs stay in place, and Trump may cut you off at the knees by backing down.

Again, the point is that there really isn’t a MAGA economic philosophy, just whatever suits Trump’s fragile ego.

And so it has proved. So are things settled now? Hardly. The pause is for 90 days. Then what happens? Nobody, Trump included, has the faintest idea. If you imagine that the U.S. can negotiate “tailored” tariff deals with the more than 75 countries Trump claims are seeking a deal in just three months, ask yourself, who’s supposed to be sorting out the details?

So if you were a business owner or executive, would you make any major investments or long-term commitments over the next few months? I wouldn’t.

Still a risk of financial crisis

Yesterday I noted that financial markets were showing the telltale signs of an incipient financial crisis. I looked mainly at the breakeven inflation rate, but many other indicators were also flashing yellow. Even yields on long-term federal bonds, normally a safe haven in troubled times, were sounding a warning.

The inimitable Nathan Tankus has a new post explaining why we were and continue to be vulnerable to a new crisis. He explains why the Rose Garden announcement may have been a new tariff-induced “Lehman moment” for the financial system. He explains a lot of stuff that I didn’t know or had grasped only vaguely — in particular, how hedge funds have become key providers of liquidity, even in the Treasury market (via the “basis trade.”) So when hedge funds’ portfolios take a hit from erratic policy, this quickly creates system-wide stress.

I’m planning to write a primer about financial crises and how they happen this weekend.

The level of financial market stress declined somewhat yesterday, but the situation remains fraught. Trump’s next stupid policy move — and there will be more stupid moves — could quite easily tip us over the edge.

Above all, don’t take yesterday’s relief rally as a sign that the danger is behind us. Look at how the NASDAQ behaved after the original Lehman moment:

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There were several big but short-lived stock rallies along the way to a huge decline. Assuming that yesterday’s surge was the end of the story requires ignoring both the fundamentals of erratic policy and the lessons of history.

Bullies are weak

The story of the tariffs so far — at least as other countries will see it — is that Trump announced extreme policies, insisted that he would persist with those policies no matter what, then beat an ignominious retreat. In other words, Trump is a typical bully, full of swagger and tough talk, who runs away at the first sign of adversity.

On tariffs, Trump’s cowardice and weakness may be a good thing. But what about everything else?

Paul Krugman is an American New Keynesian economist who is the Distinguished Professor of Economics at the Graduate Center of the City University of New York. He was a columnist for The New York Times from 2000 to 2024

Source: Trump Is Stupid, Erratic and Weak – Paul Krugman