Trump's Ignores Advisors, Doubles Down on Failed Policies, Kudlow Won't Comment


Despite all losses and no wins, Trump refuses to change his tariff policy. He is now a one-man show.

Trump Ignores Aides, Goes It Alone

Please consider Trump is Ignoring his Aides and Going it Alone in the Trade War Now.

No Comment From Kudlow

  • Trump is trusting his instincts and ignoring the advice of his aides regarding issues surrounding the trade conflict with the world’s second largest economy, said five people briefed on the action.
  • National Economic Council director Larry Kudlow declined to comment in a CNBC interview Tuesday that he and other advisors disagree with Trump’s trade war actions.
  • Last week, Politico reported that Trump’s advisors are pushing him to focus on keeping the economy strong even if it means letting up on China in the trade war and loosening Trump’s intense criticism of the Federal Reserve Chairman Jerome Powell.

No Comment is a Comment

No comment on such questions is indeed a comment.

There is clear dissent among Trump's advisors.

Trump's Trade Quagmire

I do not often agree with Krugman, but this is one of the times that I do.

In Trump’s Trade Quagmire (Wonkish), Krugman notes the obvious "He just keeps escalating as his strategy fails."

Remember the Vietnam quagmire? Well, here’s my thought: Trump’s trade war is looking more and more like a classic policy quagmire. It’s not working — that is, it isn’t at all delivering the results Trump wants. But he’s even less willing than the average politician to admit to a mistake, so he keeps doing even more of what’s not working. And if you extrapolate based on that insight, the implications for the U.S. and world economies are starting to get pretty scary.

Krugman's Five Points

  1. The trade war is getting big. Tariffs on Chinese goods are back to levels we associate with pre-1930s protectionism. And the trade war is reaching the point where it becomes a significant drag on the U.S. economy.
  2. The trade war is failing in its goals, at least as Trump sees them: the Chinese aren’t crying uncle, and the trade deficit is rising, not falling.
  3. The Fed probably can’t offset the harm the trade war is doing, and is probably getting less willing even to try.
  4. Trump is likely to respond to his disappointments by escalating, with tariffs on more stuff and more countries, and — despite denials — in the end, with currency intervention.
  5. Other countries will retaliate, and this will get very ugly, very fast.

US Treasury Declares China a Currency Manipulator

I agree with Krugman on all five points.

Of course, I do, because I have made those same points myself over the past year.

The situation came to a head yesterday as noted in US Treasury Declares China a Currency Manipulator Under Orders From Trump

The currency manipulation charge came following a tit-for-tat retaliation in which China Halts All US Ag Imports in response to Trump placing additional tariffs on China.

Failure of Trump's Tariffs

Krugman posted some charts showing Trump's failures and lies.

They are from Fred, the St. Louis Fed, repository and PIIE.

I recreated the Fred charts with extra details and comments.

Average Tariff Rates

Those tariffs act as a tax on consumers, approximately 21% on $500 billion in imports.

How much customs duties are collected?

Customs Duties

Let's give Trump credit for roughly $33.9 billion in increased tariff duties per year.

What about exports?

Net Exports of Goods and Services

Let's home in on that starting with the moment Trump placed tariffs on China.

Next Exports of Goods and Services Detail

Tariff Man Success

Since Trump launched his ever-escalating trade war:

  1. Net exports have fallen by $90.8 billion
  2. Customs duties have risen by $33.9 billion
  3. Taxes on consumers and business are up by about $100 billion

If that's not success, what is?

Lie of the Day

The alleged "massive" amount of money is an additional $33.9 billion while net exports are down by $90.8 billion and taxes on consumers are up.

We call this "winning".

Why Trump's Policies Aren't Shrinking the Deficit

Krugman has this explanation:

"Mainly the answer is that Trump’s theory of the case is all wrong. Trade balances are mainly about macroeconomics, not tariff policy. In particular, the persistent weakness of the Japanese and European economies, probably mainly the result of shrinking prime-age work forces, keeps the yen and the euro low and makes the U.S. less competitive."

Import Shuffle

Krugman also notes, as have I, "U.S. tariffs on Chinese goods don’t do much to reduce overall imports, because we just shift to products from other Asian economies."

In Import Shuffle: Canada, Mexico Surpass China as the US' Biggest Trading Partner, I noted Vietnam is the biggest beneficiary of in percentage terms, followed by the Netherlands, Belgium and Taiwan.

Personalities Aside

I follow many people I typically disagree with. Paul Krugman is one of them.


Because sometimes they are spot on. Krugman wrote an excellent column that led to this one.

Never let personalities get in the way of a well-presented case.

In contrast with Krugman with whom I agree about 20% of the time, I don't ever recall agreeing with Larry Summers on anything significant.

Recession May "Help"

In a perverse way, Trump may manage to reduce the trade imbalance.

A Global Manufacturing Recession Started and Trump's China Tariffs Made Matters Worse.

Trump's tariffs are certainly recessionary. Note what happens to trade in recession in my first chart on net exports above.

And please note the average lead time between manufacturing recessions is less than a full quarter.

For discussion, please see Manufacturing Recessions vs Real Recessions: How Much Lead Time Do You Expect?

Mike "Mish" Shedlock

Comments (28)
No. 1-14

I despise trump's moves in this arena, but I'm wondering, is he trying to force a chinese collapse? That seems to be the only way these moves make sense to me?


The one period of tariffs, the Smoot Hawley 1930s, that is said to have contributed to the G Depression was preceded by tariffs in 1861, 1864, 1890 and 1922 which did NOT produce recessions of any kind (per Rickards). We've had 45 years of stagnant wages, young people (some my friends) that can find no real jobs, wealth inequality to the max and the hollowing out of America. Trump is a failed businessperson and a horrible example for humanity as a whole. But we have to try something before everyone of your houses has no bidders at all.


as Goldmand calculates this adds ~ 23 bp to the PCE it brings US REAL negative rates that much closer helping our gold/silver plays that much more. Bring on the stagflation!

Tony Bennett
Tony Bennett

I would be very hesitant attributing trade numbers solely to DJT's tariff policy.

Until Powell's U-Turn at beginning of year, the Federal Reserve had embarked on a tightening policy (QT + rate hikes) the past couple of years, which sent $US higher ... while most other central banks continued easing.


And yet the data shows no price increases due to tariffs.

"The consumer price index rose just 0.1 percent in May, the Department of Labor said Tuesday. Compared with a year ago, prices rose just 1.8 percent. After taking out volatile food and energy prices, inflation ran at 0.1 percent for the month and 2.0 percent for the year, both below economist expectations.

In other words, even with the tariffs the Trump administration has imposed, consumer prices are rising by less than the Fed thinks is consistent with price stability. Its theoretically possible prices would be rising at an even slower rate than they are if the tariffs were not in place. But that would only mean the Fed would have to work harder to push them back toward the target.

Car and truck prices are perhaps the most important consumer item that tariff opponents claimed would be pushed up by the metals tariffs. But these have hardly moved. Compared with a year ago, car prices are up just 1.1 percent. The price of new trucks is 0.8 percent higher than a year ago."

Tools and hardware were often cited by those promoting the “tariffs are taxes on consumers” narrative. But prices on these are up just 1.5 percent compared with a year ago.

The prices of televisions have crashed. In May, television prices fell 1.5 percent. This is the tenth consecutive monthly decline for televisions. Compared with a year ago, television prices are off 18.6 percent.

But computers and related hardware prices are down 4.9 percent compared with last year. Phone prices fell again, for at least the ninth consecutive month, and are now down 13.8 percent compared with a year ago.