The Markets Have the Whip Hand Over Trump

The President again revealed his weakness. But great danger remains.

This morning, I woke up thinking of an old saying I heard from a career military officer friend of mine. It was, “When you’re in a foxhole, the world becomes very simple.”

What he meant, of course, was that when facing an existential crisis, the welter of issues that normally bounce around inside your head are stilled and everything becomes binary. Either what you are considering doing increases the likelihood that you will live or it increases the likelihood you will die.

It’s an important lesson for America today.

We face an existential crisis. While there are countless concerns that engaged citizens may have about a massive range of policy issues, for the moment our attention needs to be focused on just one thing. We either stop Donald Trump and MAGA and America survives or we do not, and America as we know it dies.

Of course, when I had this thought I was reading of the reaction of the world to Trump’s tariffs that had gone into effect just hours before. US Treasury yields were up. The world was questioning whether it made sense to invest in the U.S. It did not seem unreasonable to think that barring a sudden reversal a deep recession was inevitable, perhaps worse.

The sudden reversal ultimately came, as we now know. Trump blinked. His big talk about remaking the world trading system and midwifing a new “golden age” for America driven by the return of good old-fashioned manufacturing jobs went out the window. Tariffs were put on hold. Tariff levels were reset. He maintained his trade war with China as a means of continuing to seem tough. But in reality he completely caved.

While the Republican Party and many Democrats were inclined to treat Trump as the unchallengeable king he imagines himself to be, markets proved once again that as far as our president is concerned, they have the whip hand. As has happened once before inhis administration, when markets threatened to reveal the Trump’s economic ineptitude, he folded like a house of cards.

Of course, given that he and his team don’t think anything true, their policy “reset” actually does not help address many important problems. Yes, the stock market rebounded. But Trump did not restore certainty to the marketplace nor did he regain its trust. He has said he was only postponing the tariffs. Further, he made it crystal clear that he and his team are both irrational and incompetent. The ten percent tariff level he asserted was his new bid was not high enough to force any country to bend to his will or to lead any company to return its manufacturing to the United States. (Admittedly, his original threat would not have done that either. Costs in the US for many products would be higher than producing overseas even with Trump’s tariffs. Further, no company would undertake the big capital costs associated with reshoring its factories without having more clarity about the post 2028, post Trump future of the United States. In addition, many countries would find other ways to keep manufacturers within their borders.)