The Real Story of the Tariff Wars

The 4 trillion loss that wasn’t.

If you judge economic policy by one day drops in the stock market, the decision of the US Trump administration to go ahead with a whole slew of fresh tariffs on a long list of nations is a disastrous error. The mainstream media of course have framed it as such, with the Reuters response being fairly typical:

“US Stock Market Loses $4 trillion in value as Trump plows ahead on tariffs….President Donald Trump’s tariffs have spooked investors, with fears of an economic downturn driving a stock market sell-off that has wiped out $4 trillion from the S&P 500’s peak last month, when Wall Street was cheering much of Trump's agenda.

A barrage of new Trump policies has increased uncertainty for businesses, consumers and investors, notably back-and-forth tariff moves against major trading partners like Canada, Mexico and China.

The stock market selloff deepened on Monday. The benchmark S&P 500 (.SPX), opens new tab fell 2.7%, its biggest daily drop of the year. The Nasdaq Composite (.IXIC), opens new tab slid 4%, its largest one-day decline since September 2022.

The S&P 500 on Monday closed down 8.6% from its February 19 record high, shedding over $4 trillion in market value since then and nearing a 10% decline that would represent a correction for the index. The tech-heavy Nasdaq ended Thursday down more than 10% from its December high.“

It doesn’t take a particularly severe level of cynicism to detect a slight note of glee underlying the surface panic of reporting like this. Perhaps the vast majority of journalists in the western world rather wish the Trump administration will fail, and are more predisposed to scream ‘LOOK at this crash!’ than they are to properly analyse anything.

And on the surface at least they do have a point. I’m not here to deny that stock is down or to deny that this is a rather obvious consequence of Liberty Day and the announcement of such a broad sweep of tariffs on US trading partners. It was obvious to everyone, friend or foe, that introducing a large number of tariffs on a large number of nations all at the same time would have this impact.

But really that doesn’t tell you anything significant at all.

But what about this? The usual Democrat, Swamp and mainstream media sources are not the only ones criticising the so called Trump Tariffs. Sources that should be taken far more seriously are doing so as well:

And by sources that should be taken seriously, I mean Thomas Sowell rather than Bill Evers. Sowell’s assessment of the tariffs was bleak and consistent with the standard economic principles of the Right, which have long considered free trade an axiomatic good and the use of tariffs and protectionism as always a very foolish misstep.

Sowell is of course a brilliant economist, and a person who has a very long track record of being right. But for me Sowell’s true greatness is not so much rooted in economics as it is rooted in correct responses to cultural phenomena and social issues. Economics was a tool Sowell applied to discussing cultural and sociological issues, for example dismantling many of the key assumptions of feminism by applying an economist’s dry but devastating record of the OTHER reasons for gender pay disparities that have nothing to do with a largely imaginary Patriarchy or non existent or exaggerated female oppression by males. Sowell showed that female choices and innate biology led to work pauses that reduced lifelong earning capacity, not a ‘glass ceiling’ of deliberate oppression. Anyone with career breaks has to reset their career, which applies to men for example with long term illness or long term unemployment for other reasons as well as to women who leave the work environment to raise children and then return in part time positions or positions that were ‘stalled’ or reversed by the years away from work. Sowell applied the same economics and logic to racial economic disparities, but again the economics was a tool of cultural commentary and it was the cultural, sociological positions that provided the real insight in Sowell’s work. The economics provided an evidence base, but the revelation was in the exposure of how false various narratives of oppression had become.

It’s my belief that these wider brilliant insights as both a trained economist and a sociological and cultural commentator shouldn’t be lessened by Sowell disagreeing with Trump on tariffs, but also shouldn’t lend credence to Sowell’s position on the tariff wars. Because when he talks about tariffs Sowell is speaking as a completely conformist rightwing economist, as someone who assumes that free trade, global trade, and unfettered free market economics is an axiomatic good thar will always deliver positive results.

When that position is contrasted for example with its traditional opposite, say the failed model of Communism in the sclerotic end days of the Soviet Union, of course Sowell’s position is the correct one. And when it’s describing the record of free trade in massively increasing freedom, liberty, social mobility, general standards of living, life expectancy, literacy, technological advance and poitical enfranchisement as the fundamental advantages of capitalism over communism, then again it is of course correct. Sowell’s economics, or that of any ‘rightwing’ or libertarian economist, makes perfect sense in the broad sweep of history and certainly makes infinitely more sense than victim culture or past or contemporary support for Statism, Communism and Smash Capitalism brands of left wing anarchism.

And it’s absolutely perfect for dismantling false, inflated or imaginary narratives of oppression.

But here’s the thing. On the Right free market liberalism has become a fetish, and a slavish devotion to the wisdom of the market, as both extreme libertarians and most rightwing economic thinkers and politicians (it’s necessary to distinguish between thinkers and politicians, most of the time) manifest. On the Right there is a blind adherence to free market principles no matter what. And it’s probably, along with the Polite Right support for the post WWII settlement of an ‘international rules based order’ with its fetish for the sanctity of the UN and NATO, one of the key failings of traditional conservatism and the reason for the necessity of populism and Trumpism.

Because the untrammelled free market principles that automatically oppose tariffs and protectionism are also opposing, now, what those tariffs and protectionism are intended to do, and the necessity of what needs to be done.

To understand the tariffs properly, you have to understand the state of the world and US economy before them, what the tariffs are being introduced for, and the stakes of what is being done together with the potential rewards of success.

So where was the economy at the start of this? Well as the Reuters article states, in February the stock market was at a record high. In mainstream economic shorthand, the peaks of stock market value indicate the health of the market and the strength of the economy. There are a couple of indicators used for how well the economy is doing, and these garner almost all the attention and commentary of the financial pages and the talking head economists.

For a very long time economic health has often been presented as either GDP level, GDP growth, or stock market levels and growth. And these things can indeed represent healthy and positive growth indicating favourable underlying conditions or wise policy choices.

But the reality is that the veracity of these indicators for assessing economic health and the wisdom of an economic platform is not absolute. There are many other factors that go into a genuinely healthy economy, and some of these can be expressed by the following questions:

1. Whether the growth relates to a genuine improvement that will last, or whether it’s a very short term increase that will quickly be adjusted (the same applies to losses and drops-are these likely to be adjusted quickly, or do they represent a long term downturn?).

2. Whether the growth relates to a range of real positive factors, or whether it’s the result of an artificial stimulus. Pumping in newly printed or borrowed money can give a temporary boost, but the more you do that, the LESS healthy your real position is, no matter how ‘pumped up’ it appears. Artificial stimulus and money printing is the economic equivalent of injecting steroids into the body. Bulk and power can seem to be acquired….but a heart attack might also be waiting. You can make the economy bigger, but have you really made it healthier or are you simply increasing the dimensions without increasing the real strength?

3. Are things being done that are highly damaging to most of the economy, and most of the people, in order to provide that temporary boost for stock market value?

Now let’s be honest about the situation facing this Trump administration and the deep economic problems they inherited.

First, the actual health of the economy wasn’t being reported accurately or even sanely anymore. Virtually every economic indicator that could be manipulated, was manipulated, and the overall ‘state of the economy’ was not subject to honest reporting. Throughout the western world there has been extreme dishonesty on the shape of the economy and its general level of health. Employment figures were grossly distorted, with the Biden administration rarely if ever being honest regarding how msny people had been added to the employment figures. All reporting on that indicator of economic health was dishonest.

Second, it’s possible to have policies and measures that massively increase the value of some companies and some share portfolios or even increase the stock market as a whole which are ALSO measures that, in the wider economy, are disastrous and damaging. From the 2008 crash on (but really before that too, it just got more obvious) the western economies became hooked on artificial stimulus and vast money invention and vast spending of imaginary, future or borrowed funds so that State action plugged the gaps in the hull of a sinking system and gave it artificial buoyancy. The whole thing has been kept paradoxically alive by pumping it full of drugs that are unhealthy, a bit like supplying a soldier in a lost war with crack to keep him fighting another day.

What just looking at the stock market impact of tariffs doesn’t tell you, and what the assumption that short term damage from tariffs and long term benefits of free trade mean that tariffs should ALWAYS be avoided and that free trade should ALWAYS be supported doesn’t realise either, is that the economic consensus was NOT one of free markets anyway. It was one of alleged free market absolutism, but which wasn’t a genuine free market at all. It was one with enormous built in tariff disparities, vast but highly protectionist economic zones, and purely selective State interference in the operation of the free market POSING as a system of global free trade.

It was this:

And it was this:

The problem with the rightwing support for free trade and loathing of tariffs comes when free trade exists in name only, or is demanded only of one side of the trading arrangement.

The EU, for example, is NOT a free trade area between aligned mutually beneficial economies in Western Europe. It’s a bureaucratic, corporatist protectionist cartel EXCLUDING US trade and even within the EU itself protecting and prioritising SOME EU economies while ruthlessly damaging others. When Britain joined the EU, it sacrificed preferential trading status with the entire Commonwealth, or about one fifth of the entire globe. It was then bound by EU decision on trade arrangements outside the EU. It lost trillions that would have come to it by sustained advantage within Commonwealth trading.

This wasn’t gaining free trade with European partners. This was having a global network of preferential trade (your own system geared to your advantage with you getting things cheaper from former colonies) sacrificed so that your economic decisions could be made by a DIFFERENT protectionist network designed to protect, essentially, French agriculture and German industry, your immediate competing neighbours. It wasn’t the removal of tariffs as far as the UK was concerned, and it wasn’t the birth of untrammelled free trade opportunities, it was the transfer of sovereign control of what tariffs apply to your economy ANYWAY into foreign hands.

The only economies most EU policies and a VAST set of EU tariffs are DESIGNED to benefit are those of France and Germany, the agricultural base of the first and the industrial base of the second. Britain did not join because it depended on European trade, it depended on European trade because it had joined. The EU blocks its member states from the capacity to negotiate free trade deals with anyone else. This closes off most of the world or means that trade with most of the world operates at increased cost.

And the US was ALSO being shafted by the existence of the EU. The EU was applying, for decades, tariffs on US goods while the US was not applying the same tariffs (or even reciprocal tariffs at half the rate, as Trump is now doing).

So the entire rightwing economic argument against tariffs doesn’t ACTUALLY apply to what we are seeing. The choice is not one between genuine free trade where a level playing field rewards the best products in true capitalist competition and crazy tariffs introduced by Trump alone. It was one where it had become normal and expected for a huge tariff system to apply in ONLY ONE direction. What was the result of that for Americans?

American manufacturers and producers were inherently disadvantaged. Foreign goods were allowed to come into the US cheaply and undercut US goods. Meanwhile US goods sent abroad were subject to tariffs that made them more expensive than competing foreign rival goods, especially in the most protected economic areas. While Americans paid for the defence of Europe through NATO, they also found themselves limited in European markets by severe tariffs especially on things like cars and meat. Why cars and meat? The German auto industry and the French agricultural base, that’s why.

The UK was exploited as a net funder receiving very little protection of its industries and people, shackled to a European market of declining global significance and declining share of GDP that came with loss of sovereignty and loss of global trading opportunities and loss of control over its own economy and areas like employment law. The US was exploited as a rich big brother you both depend on for your security and screw over financially with deals that damage US exports and US manufacturers in a system of one sided tariffs.

It’s not Trump coming in and ruining a system that was doing great for the UK or the US or even the whole world. It’s Trump coming in and trying to address massive unjust and systemic trading disadvantages that harm the US and have been blocking US suppliers and ripping off US consumers for a long time.

But it gets even worse than that. We have two other factors to understand here before we understand tariffs fully. It’s not just that we aren’t talking about a free trade system Trump has ruined, but a rigged protectionist system he’s now addressing.

Under globalism, the western economies have also been grossly distorted by corruption and debt. Under Keynesian economic theory, and under the general expansion of the State particularly since the Great Depression and WWII’s war economy, we have seen this idea that the State generates a healthy economy not by stepping back and freeing entrepreneurial innovation and free market competition, but by stepping in and applying vast spending as a firehose of money supposedly washing away any flames of economic distress. This started as the State building real things in vast projects supposedly kickstarting broader economic confidence. You build the Hoover Dam and you get out of an economic slump. State infrastructure spending solves national economic downturns (supposedly).

The success of that idea is much more debatable than most people acknowledge, and FDR’s New Deal for example was not the unalloyed triumph some people still depict it as. But these things did expand the State and did create the idea that the State is naturally large and naturally fitted for direct interventions in the economy at regular intervals which consist solely of large scale spending.

Now think about those assumptions running constantly in this supposed free market. More and more taxation, spending and debt. And more and more spending, taxation and debt as the solution to State directed errors in the economy. Oops we have spent the money unwisely and the economy is about to collapse. Let’s spend some more, even more unwisely. That will fix it.

Now factor in that the spending isn’t on the Hoover Dam anymore. It’s not on real things that can show real benefit. The vast government spending bills and the vast debt are all going towards unreal things that do damage. They are going to a huge corrupt network of NGOs. They are keeping the share portfolios of companies that aren’t healthy, competitive and efficient artificially inflated with huge State contracts.

Or they are are keeping in foreign policy terms a whole set of military industrial complex share portfolios and stock values very high on the basis of perpetual war and bombing nations so that the same nations can be rebuilt (supposedly) by huge government contracts. Only this time the roads and the dams and the electric plants aren’t actually built because both the people distributing the money and the savages receiving it are utterly corrupt.

Or the vast spending in your ‘free market’ of constant State intervention and building debt is going directly to foreign companies because after all they put in the lowest tender or their CEO does play golf with your free market supporting politician or because your market must be free to foreign investment and you’ve let them buy every US or UK company (including vital infrastructure and energy companies) while, curiously, the nation that company comes from won’t let Americans or Brits buy its vital infrastructure, its ports, or its energy suppliers.

Or it is going to Green companies that were set up by the friend or partner or the ‘free market capitalist’ that exist solely on State subsidies of green technology and have all their risks and costs underwritten by the taxpayer and end up spending several billion of taxpayers money while producing no end product.

For a while, the share portfolios and stock market value of companies producing nothing can be kept surprisingly high if the State keeps paying them to produce nothing. Say a fast speed train line that never exists. Or a promise to provide 5G broadband and faster connection speeds to every household that spends 40 billion without connecting a single person to the internet. But are those high stock market performances likely to continue? Do they show a strong, healthy economy?

And how about the spending DOGE has exposed. It kept tens of thousands of people in jobs. It certainly delivered a great lifestyle for many people in Washington D.C. and many of the wives and children of Democrat judges. But were all those NGOs really a boost to the wider US economy? Or if the government was funding the NGO and the NGO was paying a company called Trans Kids R Us a vast consultancy fee, was the stock market high valuation of Trans Kids R Us really a symptom of a flourishing economy and society?

This may seem a long departure from disagreeing with Thomas Sowell and Reuters about Trump tariffs. But the thing is it isn’t. Because free market economics only makes sense if it delivers benefits to the majority of ordinary people in your own nation. For that to happen it has to be a GENUINE free market (not distorted by one way tariffs, protectionist blocks elsewhere, and constant State interventions and vast spending) and it has to be benefiting in REAL TERMS they can experience, that helps people outside Washington or London. The bottom 50% of America owns just 1% of stocks and shares. COVID showed you could add 4 trillion to the stock owned by the top billionaires while the exact same measures inflicted vast damage on most of the economy and most people.

In other words, stock value and share value and two or three day fluctuations of those mean FAR LESS than majority economic experience, inflation, vast debt, corruption, and national decline as experienced by all those people living in towns devastated by Globalist policies. The ways you measure the health of the economy have to look at long term trajectories rather than one day snapshots. And a free market that isn’t a free market anyway and that is harming most people is the same as a vaccine that isn’t a vaccine and is harming most people. In both cases the general applicable good (capitalism works, other vaccines work) shouldn’t be used as a prop to a thing that isn’t what it claims to be that is inflicting harm.

Globalism isn’t a free market. A free market has value if it helps your people.

And it’s not been doing that. This thing that is a free market in the same way a gene therapy is a vaccine has been doing the opposite. A SMALL number of people have been benefiting an awful lot, but they have been benefiting from measures that ruin and impoverish the nation as a whole, and anyone OUTSIDE the client classes of the Globalist elite or outside that elite itself. It’s not stock market value that tells you whether most people are doing well or the economy as a whole is doing well.

It’s whether there are any jobs in your town. It’s whether everyone in your town is on welfare. It’s whether you can afford a home, a car, a holiday, and to have kids. It’s whether there’s an industry left in your State. It’s whether there’s a car plant nearby. It’s whether you can build an American car, buy an American car, and afford to keep an American car running or whether you can’t do any of those things or you can only buy a foreign car.

Because now you have to factor in China. And your lack of tariffs on China, while China has tariffs on you. And your rich people who own your companies being taken over by a Chinese company. Or that Anerican company going bankrupt. Or that American company deciding to put all if it’s manufacturing jobs in China, employing Chinese people instead of American people, and then selling Chinese made cars to the US.

The Sowell line and the standard rightwing line on tariffs only makes sense in a perfect free market system. If that system already exists and is already delivering great benefits.

It makes no sense talking about Globalism and a free market in name only system that has ruined the WIDER economy and delivered towns with no jobs and lives with no hope for MOST people while a very few people have done very well out of it and can’t see what the problem is.

The US in particular has a huge internal market and is 34% of the global market. It doesn’t need to accept an imbalanced global system harming the US manufacturer and the US consumer with one sided tariffs, and it doesn’t need to concentrate on economic indicators that show healthy profit for a very few at the expense of national destruction and building towards a huge bubble burst anyway.

The stock value in many cases was inflated by artificial stimulus. You can’t live forever on artificial stimulus and massive State debt, either the long term kind that has come in State expansion with Keynesian spending since WWII, the medium term kind that has come since 2008 to pump stimulating drugs into a flatlining patient or the very short term effects for example of the Biden administration throwing gold bars overboard in a desperate attempt to pump up the market to win the election or to distribute and steal as much as they could before losing control of government.

None of that is actual economic health. What was building was a gigantic disaster that might still come and that would make the temporary bloody nose of punching back against Globalism today (whether through tariffs or other measures) look like a gentle kiss.

Resetting a vastly corrupt system heading straight for absolute collapse or absolute tyranny (probably both) has short term costs. It may be that getting the change needed to reform an artificially pumped up, droid rage economy of total corruption and insanity that is about to have a massive heart attack back to being sensible and sane and profitable for the majority involves taking some hits, just like being a cop dealing with a criminal does too. But the mistake that conformist economics of the Right makes is pretending that the global economy directed by Globalist psychopaths was healthy in the first place and will be just find if you leave it alone.

That’s not the case at all. And you don’t need Trump or the stock market to tell you that.

Visit an ordinary town instead.