At least oil prices are down. Not that they were down that much, mind you, when I filled the car with diesel on Sunday evening. The cost of filling my 60 litre tank had risen, in recent weeks, to about €100. On Sunday, that was down to €97. And of course a solid €50 of that was tax anyway, which has little to do with the underlying price of a barrel of crude.
But if you are looking for silver linings in the global economic chaos unleashed by the President of the United States (and the President of the United States alone) then there you go: At least oil prices are down.
We are in the midst of an entirely man-made economic catastrophe unleashed in protest at a genuine grievance, but without any discernable ends. That is to say, the United States has many voters who have reasons to feel aggrieved about the global trade regime and its impacts on their communities. The industry-denuded towns in the American rust belt are real – I have visited more than a few of them. The generic arrogance of liberals in defence of free trade – “upskill yourself, learn to code” – is real and was never a substitute for policy. The left in particular has long been guilty of believing that generous welfare payments are a substitute for work, and the dignity it provides – but they are merely a substitute for income. People like to have careers, and they like to have purpose. For whole communities in parts of the United States, their sense of purpose was hollowed out. Donald Trump’s political appeal has been to capture that loss in a phrase – “Make America Great Again” – that appeals to a sense of lost dignity as much as it appeals to a sense of lost income.
But any fool can diagnose a problem.
It is telling that if you ask three Trump defenders what his objective with tariffs is, you will get three different answers. One person will tell you that clearly, Trump wants to re-shore American manufacturing and create jobs in the rust belt. Another will tell you that, equally clearly, Donald Trump is a master negotiator who wants to bring other countries to the table and get them to negotiate more free trade deals with the United States. A third will tell you – just as Donald Trump himself did in a weekend tweet – that it is entirely clear that Trump is crashing the markets on purpose in order to drive money into US treasury bonds, thus reducing the interest rates on US Government debt and allowing him to refinance that portion of it that is due for repayment this autumn at cheaper rates. This third one, by the way, is the most insane explanation of all, which is presumably why the President himself now favours it. If you cause an economic recession just to lower the interest rates on your debt, you will still end up borrowing more and having to repay more.
Presumably, a fourth at some point will say “at least oil prices are down”.
This is where we get to faith-based economics, because ultimately all four – if they are true believers – will simply default to whichever objective best aligns with observable reality. So the position ends up being “whatever has happened was always the plan, it’s just you Trump critics couldn’t see it”.
But what has happened? Markets have crashed. But markets crashing isn’t even the biggest problem. The single biggest problem is this:
Businesses operate on certainty. An investor planning to build a factory needs to know what his tariff rate will be not just next week, but four, five, and ten years from now. With President Trump’s economic policies, nobody can be sure what the tariff rate will be tomorrow. He could negotiate the tariffs away, or he could be re-aligning the global trade regime with permanent tariffs. There are those of you amongst my readers who firmly believe one, or the other, or even both.
Uncertainty kills investment, and the uncertainty index has been driven to the highest point on record.
And what has actually been achieved in return? Defenders of the Trump administration have some things to point to, to be sure, though in this second term almost the entirety of that is the work of Elon Musk and DOGE in going after wasteful Government spending. But even that policy could be overturned – just like all of Trump’s executive orders – by the next President on Day One.
Contrast this with those politicians who enact lasting reforms: Nobody has been able to un-do Barack Obama’s health reform, for example. Or Bill Clinton’s welfare reform. Or David Cameron’s accidental Brexit. That which was done by executive order can be un-done just as easily. That includes the tariffs.
Which is why, presumably, Democrats can expect an enormous influx of cash from big business in the US over the coming years. Business does not like tariffs, and the easiest way to undo them is to ensure that a Democrat is the next President of the United States.
We are about to enter what the media will – and nobody can complain about this – accurately call “the Trump recession”. If we are lucky, we will avoid “The Trump Depression”.
This is what happens when you make policy based on a whim, with no clear long term objective. Since the global populist right is not going away, it would be well advised to learn lessons from what is happening with Donald Trump. Experienced, measured, and cautious politicians have their merits, too. Blowing things up for the sake of them is not the act of any sensible conservative, nor, for that matter, any sensible nationalist.