Two thoughts on today’s tariffs. I could get into the substance of the decision. But I think that goes without saying.
Point one is that we should remember that Presidents have no inherent power over tariffs whatsoever. This isn’t like war powers or pardons where these are questions the Constitution assigns to the will of one person. They are entirely delegated by Congress and could be taken back at any moment. They are also explicitly reserved for emergencies. They aren’t meant to be used as to create entirely novel trade regimes. But Congress lets the President decide what constitutes an emergency. The logic of that delegation is based on the flexibility and convenience the delegation creates and the assumption that the president wouldn’t be nuts. The Republican Congress could bring this absurd gambit to a halt tonight. So it’s all on them, every one of them individually.
Point two is what happened today in the equities markets. In a more or less immediate response to Trump’s 4 p.m. speechlet they dropped precipitously. On first blush that makes sense. These tariffs at best represent a big shock to the economy. At worst, well … at worst it’s much worse. But this is actually very, very weird. Trump wasn’t coy. These tariffs have been telegraphed weeks in advance and with increasing certainty and specificity in recent days. While the precise details were somewhat up in the air, in broad outline Trump announced exactly what he’s been saying he was going to announce for days. This suggests the equities markets are still in the grip of quite a bit of magical thinking, especially about Donald Trump.
I’m not out far on a limb: the markets went spiraling upward after Trump’s second election and have been tumbling more or less from the moment he started doing what everyone should have known he would do, what he repeatedly said he would do. Fairly intense magical thinking is the only number you can plug into this equation and have the two sides equal out.
One might speculate that traders believed the economy is more resilient than people expect. So perhaps tariffs aren’t a worry. But that’s clearly not what they think. Since stock futures dipped hard on Trump’s announcement. There was some fairly robust and yet genuinely inexplicable belief that there was a rabbit hiding in the hat. Of course I’m not someone who believes markets have perfect or consistent rationality, at least not in the short run. So this is no great shock to me. But markets have periods of more or less magical thinking. And at the moment we seem to be heavily in the “more” direction.
