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Poisonous Tariff Uncertainty
Uncertainty (or volatility) is the live-blood of financial markets. If financial actors were certain about the development and strength of the underlying factors the markets would be predictable. There would be no need to hedge risks and no profits were to be made through speculation. Uncertainty is what keeps financial markets alive.
For those dealing with real products in the real economy uncertainty is a poison. When the prices of products become too volatile the risk of dealing with them and of investing in their production becomes too high. When volatility prevails real markets will falter.
This is where Trump’s tariff mania hits.
As a recent NY Times piece highlights (archived):
Businesses are rushing to cancel factory orders or halt shipping containers before they leave China, unable to afford the tariff when the ships arrive in America. They are pausing capital investments and new hiring, and scaling back spending to only the bare necessities. Future products are being scrapped, because they are no longer financially viable.
The Federal Reserve Bank St. Louis produces hundreds of economic statistics. It includes several which are measuring uncertainty:
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People’s confidence in anticipating the future dwindles during periods of major economic change. Economists and analysts try to gauge the level of uncertainty about economic conditions because it can affect economic decisions (saving, spending, investing, switching jobs…), which can affect aggregate economic outcomes.
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Many factors can cause uncertainty, such as structural economic shocks, global events, and financial crises. Policy actions can also drive economic uncertainty. In our second FRED graph above, we use the overall economic policy uncertainty index (EPU) to understand how important policy uncertainty is for the recent increase in overall uncertainty.
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The EPU also has values for subcategories such as taxes, regulation, and trade. By looking at these subcategories, we can identify the specific types of economic policy that are most associated with uncertainty. .. Until summer 2024, most types of economic policy uncertainty were at or below 100, meaning they were at normal or low levels. Recent uncertainty, which began rising in 2024, has been especially pronounced for trade policy. By February 2025, it had jumped to almost 2500, which implies close to 25 times more uncertainty than the norm.
Note that the FRED data only includes February. The additional uncertainty introduced by recent Trump shifts on tariffs have yet to be incorporated.
The larger aims behind Trump’s tariffs are to press the world to subsidize U.S. empire and, in a repeat of the cold war, to shun all trade with China. Neither is likely to work.
The cost introduced by the tariffs and the uncertainty will have to be carried by U.S. consumers as well as by a myriad of small and medium enterprises. The lack of imports from China on the shelves will be visible for everyone. The larger economic fallout will have nearly immediate effects.
In his recent interview with Time Trump seems totally unfazed by this. He is convinced that his tariff strategy will win.
Q: If we still have high tariffs, whether it’s 20% or 30% or 50%, on foreign imports a year from now, will you consider that a victory?
Total victory.
Q: Why so?
Because the country will be making a fortune. Look, that’s what China did to us. They charge us 100%. If you look at India—India charges 100-150%. If you look at Brazil, if you look at many, many countries, they charge—that’s how they survive. That’s how they got rich. Now, zero would be easy. Oh, zero would be easy, but zero, you wouldn’t have any companies coming in. They’re coming in because they don’t want to pay the tariffs. Remember this, there are no tariffs, if they make their product here. There are no tariffs, if they make their product here. There are no tariffs. This is a tremendous success. You just don’t know it yet, but this is a tremendous success what’s happening. We’re taking in billions and billions of dollars, money that we never took in before. We’re also, very importantly, because of that, because of the money we’re taking in, those companies are going to come back and they’re going to make their product here. They’re going to go back into North Carolina and start making furniture again. They’ve already started. In Mexico, many car plants that were under construction have stopped. They’re all coming into this country. We’re gonna, you’re gonna see car plants going at a level that you’ve never seen before.
But how long will it take to build those new plants? What if the machines needed to build them come from China? How long will it take to find and train new workers? Will they be able to produce at competitive prices?
The hoped for positive side of the tariffs are long term. The pain from them will hit immediately. Why Trump thinks he and the Republicans can survive this politically is beyond me.
But how can he change course when he is committed like this?
Likely the old can’t see the forest for the trees, or is it can’t see the trees for the forest?
Why Trump thinks he and the Republicans can survive this politically is beyond me.
Obviously so.
But how can he change course when he is committed like this?
Presuming he is “committed” is your second mistake. They know what they are doing and why. They planned it.
Some background might help a couple of people.
https://thetricontinental.org/studies-on-contemporary-dilemmas-4-hyper-imperialism/#toc-section-6-2
misc quotes tariffs
Modern imperialism fully inherits the history of the European project’s domination and exploitation of the world. Lenin defines super-profits, a result of modern imperialism, as ‘a surplus of profits over and above the capitalist profits that are normal and customary all over the world’.60
Post-WWI, international capitalist divisions again intensified during the Great Depression (1929–1939), as various imperialist powers locked their economies behind tariffs and other barriers. Before the end of WWII, the US-led reorganisation of the global financial system was agreed to in Bretton Woods in July 1944. The convertibility of the main currencies into the US dollar and the US dollar into gold established the supremacy of the new ‘green gold’. To make sure its regulations were implemented and followed, the International Monetary Fund and the International Bank for Reconstruction and Development (IBRD), later, the World Bank, were established. These two institutions have been key pillars of US domination over the Global South since then.
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The period from 1945 to 1971 was an expansionary phase of US imperialism. The US did suffer significant political losses during this period, including a number of newly formed socialist projects. However, confident of its own productive supremacy, the US began a radical reorganisation of the global capitalist system after WWII. It dismantled tariffs and other protectionist measures that it deemed unnecessary to its own advancement (but retained subsidy measures that advantaged its own capitalist firms). The post-WWII new ‘globalised’ organisation of world capitalism differed significantly in its international structure from the pre-1945 capitalist system. It achieved a more rapid development of the productive forces than the era of the previous colonial empires.
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NATO countries increased the number of their global military interventions but were confronted by a series of defeats such as in Afghanistan, Iraq, and even, to an extent, Syria.
The US decision to expand NATO into Eastern Europe and use Ukraine as a proxy at the centre of the move to control Russia resulted in an important military conflict between nuclear powers.
The US, facing relative economic and political hegemony, began to massively expand the use of sanctions, lawfare, tariffs, and seizure of foreign currency reserves.
To attempt to stop China’s technological advance, the US began using tariffs and protectionism. It began a full-fledged soft power attack on China and started a New Cold War.
Major voices in the US ruling class openly talk of the possibility of using its military hegemony to block China. Since they have also ‘lost’ Russia, at least with Vladimir Putin in power, the US is focused on planning how to complete their historic mission to subordinate Eurasia once and for all. This would ultimately entail the de-nuclearisation and potential dismemberment of both Russia and China.
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By 2009, the US began to plan its pivot to Asia to curtail China’s economic growth. Under the Obama period, the US began to move against the World Trade Organisation. This period also marked the increased reliance on tariffs, sanctions, protectionism, and hybrid warfare.
Given that it is now dependent on large scale net capital imports, which by 2022 reached US$ 1 trillion a year, the US has little internal economic ability to provide economic advantages to its Global North or Global South allies.111
Indeed, it needs to continue to attempt to hollow out even more surplus from them.
Under neo-liberalism, the relative autonomy of the US state eroded, and private capital exerted more direct control of much of the state. Today, however, faced with rising international economic threats to the US position, and the failure of neo-liberalism to maintain US economic dominance, the collective political interests of the ruling class are being asserted by an increasingly autonomous state (as opposed to representing the interests of individual capitalist groups). To borrow from Lenin, for the capitalists also, ‘politics must take precedence over economics’.112
Financialisation or accumulation under the phase of monopoly-finance capital is truly a parasitic development aimed at drawing blood from a sponge and marking the structural crisis of capital.
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Figure 34 shows that the US has had a long-term overall decline in average growth rate since 1953.
Confronted with this situation the US has subsequently turned to tariffs, economic sanctions, and technology bans, leading to an increasingly protectionist environment. However, despite this economic decline, as already analysed, the US still maintains a military lead over all other states. US Imperialism, therefore, now turns to a growing reliance on force.
[ good luck working anything out in this global house of mirrors and endless disinformation ]
Posted by: William | Apr 27 2025 5:32 utc | 65
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