Charles’ Note: There’s an old saying that when you find yourself in a hole, the first thing to do is stop digging. But if you’re a politician, apparently, the first thing to do is grab a bigger shovel.
Bill Bonner’s latest essay takes a hard look at America’s ongoing trade war with the world and how it’s now escalating in ways that make a mockery of free markets and sound economic policy.
Tariffs, Bill reminds us, aren’t a sign of strength. They are a sign of weakness that prop up noncompetitive businesses. They’re also a tax on American consumers, disguised as tough talk against foreign competition.
And as history has shown, trade wars don’t lead to prosperity – they lead to higher prices, inefficiency, and, often, outright economic decline.
Bill is one of the sharpest economic thinkers of our time. A New York Times bestselling author and founder of Bonner Private Research, he’s been cutting through the noise to expose the political and financial trends shaping our world for longer than I’ve been alive.
His ability to spot economic distortions – and call out the policymakers responsible – has made him a trusted voice for investors looking to navigate turbulent times.
Of course, Trump’s trade war is only a symptom of a deeper problem. As Bill points out, when an empire is in decline, politics takes precedence over economics.
Instead of businesses thriving through innovation and competition, they survive by gaming the system – lobbying for special treatment, tariffs, or subsidies that ultimately make the economy weaker.
This is the playbook of every fading superpower, from Rome to the Soviet Union. And now, it’s America’s turn.
Bill lays out the grim reality: As tariffs go up, so do consumer prices. As allies retaliate, American exports take a hit. And in the end, all of this political maneuvering does nothing to stop the broader decline of the American empire – it only speeds it up.
So grab a strong cup of coffee and settle in to read Bill’s insights below.
All Measures Necessary
By Bill Bonner, Bonner Private Research
President Trump wanted a trade war with the world, and Americans are getting it, good and hard.
– Wall Street Journal
This in on Thursday…
Bloomberg:
Trump Vows 200% Tariff on EU Wine, Escalating Trade Tensions
President Donald Trump threatened to enact a 200% tariff on European wine, champagne and other alcoholic beverages, the latest escalation in a brewing trade war between the U.S. and the EU.
What a wild and ridiculous ride. Whee!
The Primary Political Trend is headed down… and taking us down with it.
You’ll recall our unwelcome guess: That the real historical role for Donald Trump was not to arrest America’s decline… but to hasten it.
That is not to say that Mr. Trump is wrong about everything.
The Department of Education should have been abolished long ago; education is a local issue, not a national one.
Eliminating wokeism and DEI (diversity, equity, and inclusion), firing federal employees, etc. – much of what Trump is doing is a pleasure to watch.
But it doesn’t do any good to put a new label on the bottle if the wine is bad.
After Karine Jean-Pierre, we thought we might have seen the last of the air-head press secretaries at the White House.
But no.
Irish Times:
Tariffs proposed by U.S. President Donald Trump are a “tax cut for Americans,” White House Press Secretary Karoline Leavitt said on Tuesday at a tense press conference that included her regretting giving a reporter a question. Leavitt briefed reporters when she clashed with an Associated Press reporter who questioned her about Trump’s tax cut promises made on the presidential campaign trail.
Up is down.
War is peace.
And a tax increase is now a tax cut.
This is sour wine.
Yesterday, Trump imposed “tax cuts” all over the world… principally on steel and aluminum.
Canadians escaped a doubled levy… after threatening to cut off electricity to New York.
Trump accuses Canada of “ripping us off.” But Canada’s tariff protections are generally lower than those of the U.S.
No matter. This isn’t science. Or math. It’s politics. And tawdry politics is what we’re talking about today.
What “The People” or the Elites Want
An economy either produces what “The People” want… or the elites use politics to get what they want.
Typically, there’s a tolerable and fairly reliable middle ground, where the masses don’t mind being ripped off in exchange for the predictability of a stable ruling class.
In a free, honest economy, people make money by trading with each other, with exact outcomes largely unforeseeable.
In a politicized economy, on the other hand, hustlers make money by gaming government policies. They know exactly who will get the loot.
If they are big steel companies, with big steel-workers’ unions, located in “swing states,” for example, they might ask for tariffs… so they can sell their products at higher prices.
And in a declining empire, such as the Soviet Union in 1991, the opportunities for grift and self-dealing multiply.
The old Soviet Union had resources. They were administered by civil servants – apparatchiks and nomenklatura. Then, when the system imploded, these insiders were able to pick up the pieces and become fabulously rich “oligarchs.”
Broadly, the more politics the less real freedom and prosperity. That’s why, when politics is on the rise, the Primary Political Trend is down.
But none of the victims of these trade war attacks seems ready to roll over.
Tit for Tat
The BBC:
Canada’s government is announcing how it is hitting back after tariffs of 25% on steel and aluminum imports came into effect [on Thursday] morning. The three government ministers are expected to say Canada will impose more than $20bn in retaliatory tariffs. Canada is the biggest foreign supplier of steel and aluminium to the United States.
The EU says it will strike back with countermeasures on $28 billion worth of U.S. goods… putting tariffs on “everything from bourbon to motorbikes.”
“We deeply regret these measures,” said Ursula von der Leyen. “Tariffs are a tax. They are bad for business. And worse for consumers.”
China says it will take “all measures necessary” to protect its interests.
Antagonizing allies as well as enemies?
What is the point?
Whatever the aim, the result will probably weaken the old empire, turning it into a friendless pariah – raising consumer prices while making domestic industries less competitive and more in need of political protection.
And as the empire declines, so does the real value of its capital assets.
Look for continued, long-term, drift downward in both the Primary Political Trend (more politics)… and the Primary Market Trend (lower asset prices, in gold).
Regards,
Bill Bonner