How to Learn to Stop Worrying and Love the Bomb

A funny thing happened on the road to the White House.  The president who turned-up isn't the same guy as the candidate.

The US war against Iran is unpopular and becoming more unpopular as it continues; furthermore, the latest Economist/YouGov Poll also finds few Americans support deploying ground troops to the conflict.

Or do other Americans see it differently?

Brigadier General Jack D. Ripper - Dr. Strangelove

It depends-upon whom you ask.

Only 30% of Americans strongly or somewhat approve of President Trump's handling of the Iran war with 60% disapproving for a net approval of -30.

Almost all Democrats (88%) oppose the war while independents oppose it by a 3-to-1 ratio.  

But there is this: Collectively, most Republicans support the war (62%) yet there is a huge gap in support between MAGA Republicans and non-MAGA Republicans (70% support vs. 33%).  Inasmuch as there are more than twice as many MAGA supporters as non-MAGA supporters among the GOP, MAGA opinion is basically settled science.   

Furthermore, a recent CBS News poll found that 92% of MAGA Republicans expressed support for military action against Iran, compared with only 70% of non-MAGA Republicans.

Amongst my MAGA acquaintances, and mostly on account of my unwavering support for arming Ukrainians in defending their country from a Soviet invasion, I have been characterized as everything from an armchair general to a warmonger.  

Naturally, beginning three years ago and following Vladimir Putin's unprovoked assault on Ukraine these same individuals reminded me at most every opportunity that supporting Ukraine's defense was distinctly at odds with candidate Trump's America First platform.  I quote:  'No foreign entanglements', 'We haven't won anything since WWII', 'Donald Trump is the greatest patriot ever' and 'You like war too much'.    

Candidate Trump may have ridden to reelection with a pledge to avoid forever wars yet systematically blowing alleged drug-running vessels and crews out of the Gulf of Mexico, a birthday military parade, deploying the military on America's streets, Houthis in Yemen (Operation Rough Rider), 529 air strikes across the middle east, Africa and central Asia, aerial strikes against Iranian sites last summer including ISIS in Iraq, threats to take Greenland by force, masked and unidentified federal paramilitary forces killing three American citizens, a military toppling of Venezuela's government, seizure of Venezuelan oil at the point of a gun, threats against Cuba, the current Iran war and recent musings to ditch NATO suggest that America First pretty much means whatever President Trump says it is; on any given day.  My impression is it is exceedingly warlike.

I had always figured that MAGA supporters preferred candidate Trump's populist pitch while bemoaning old-school Reagan neocons and their propensity for an assertive foreign policy.  Deservedly or not it is a fact I have been derisively called a neocon; yet the polling seems to suggest that MAGA world agrees-with and, only a short fourteen months into a second term, seems to have developed a powerful thirst for Trumpian military adventurism - both domestically and abroad.  

Just as with the CBS poll, if you dig thru the data, MAGA world is overwhelmingly in favor of mounting a war with Iran; and, when specifically asked if the war counts as an America First policy, only a mere 9% of the president's loyalists say it does not.

The Ronald Reagan Presidential Foundation and Institute's 2025 National Defense Survey reveals that self-identified MAGA supporters were also the most supportive of all sorts of interventions in Taiwan with two-thirds supporting 'committing US forces in defense of Taiwan.'  That doesn't sound like isolationism does it?

Speaking for myself I happen to think that the Iranian Mullahs are a dangerous collection of twisted religious revanchists who would represent a threat to a peaceful world order if they had nukes and the capacity to deliver them.  I generally lose no sleep over dealing with bad actors by means of force.

Nevertheless, dealing with security threats deliberately and with forethought is not the same as impulsiveness.  And the world has no shortage of bad actors.  Most days I think the president has stepped in it this time and unleashed a cascade of destabilizing events that have dangerous consequences for global stability, security and the world's economy.  Let there be no misunderstanding, it is in my own self interest that things somehow work out for the best.  I'm also smart enough to know that five weeks into this the president's excursion is nowhere near a forever war.  Oh; and we don't have the highly-enriched stuff in our possession either.  Yet anyway.  There is that as a denouement.  

I have yet to hear what the exit strategy is.  You?

So for now I think we might be in for a stretch of rising energy costs, inflation and possibly some economic stagnation or contraction.  Only the passage of time will write the end to that chapter.

Meanwhile, there's a pile of the US population becoming grumpy over rising gasoline and diesel, increasing grocery prices due to supply chain disruptions and escalating transportation costs.  I'm beginning to believe that post-election MAGA world doesn't really care about that as much as they did a couple-three years ago.  Nobody's bitching about it at all on social media and not a single sole Trump supporter I speak with on a daily basis has yet to bring it up.  Loyalists are called that for a reason after-all.  Which is just fine; and it is perfectly OK to own what you have wrought.

It has occurred to me this might have something to do with ideological principles; dictated by whatever president Trump tells us to believe and the possibility that the beliefs of some reading this might be insincere.  Which is fine too; people are disingenuous all day long.  I understand that sometimes it is difficult to admit making a mistake.  I get it.  I make mistakes too.  Get over it.  Own it.

Or perhaps at its core the principle is to agree with the president in every respect; even if his actions contradict what he promised in order to get a voter's support.  No matter it damages their business and costs them the actual farm.  On that matter I can only speculate.

So, for any of my MAGA acquaintances reading this; if you want to call me an armchair general or a warmonger; have at it.  Throw neocon my direction for good measure.  I have a thick skin and since you're doing it from the warming glow of your device and not personally to my face I understand the context. Water off a duck's back.  Das macht nichts aus.  

Polling is science.  With growing awareness the rest of the world is learning that MAGA world likes war; and way the heck more than me.  Does MAGA like it too much?  That's hard to know as we're only fourteen months into President Trump's military adventurism.  I think we ain't seen nuthn' yet.  But I'm perfectly happy to be wrong.

I'm old enough to remember back to 1965 when a certain general famously pledged to eschew ground troops and use naval and air power to bomb the Vietnamese - Back into the stone age.  In his April 1st address to the nation it was fascinating to see and hear President Trump invoke the very same oath - verbatim.  Curious about from whom the president is taking his cues? 

A general splendidly associated with ruthless scorched-earth tactics against civilians.

Stay-tuned..... 

Open The Strait!

At long last, Japan answers America’s call to help reopen the Strait of Hormuz.

Fact or Fantasy?

As a major voice in the American Libertarian movement the Cato Institute focuses primarily on policy analyses and independent research of contemporary topics including subject matter related to foreign policy, regulations, taxes and libertarian-influenced public advocacy.  

 

Naturally, over the last decade most anyone I'm acquainted-with who previously self-identified as libertarian have, for the most part, gone full-on MAGA.  Any of the remaining few diehard libertarians have gone underground or silent. Either way you slice it none of them are engaged in any meaningful dialogue with me anymore.  Which is too bad.  Productive dialogue lost and in some instances friendships broken is a waste.  I'm not sure how to fix or repair that condition; or if it is even worth the effort.  Time will tell and apologies for the digression.  

 

The purpose of this post is to discuss a recently-published commentary from the Cato Institute titled:  Trump's $18 Trillion Fantasy.  This article also appeared in The Dispatch on February 19, 2026 immediately preceding the recent groundbreaking SCOTUS tariff ruling.  You'll find it linked more than once in the post and I encourage you to read it at your leisure.  What follows is a summary of Cato's critique of White House claims that tariff policies have secured more than $18 trillion of new investment in the United States. 

 

They've performed yeoman's work in producing this commentary and hopefully this summary will tweak your interest in rolling-up your sleeves and engaging in some cognitive dissonance.

 

The key criticism from Cato is that a purported $18 trillion in new investment into our economy claimed by the White House is unsubstantiated and doesn't hold-up under scrutiny.  Trump's hyperbole and puffery is famous; and Cato describes the figure alternately as fantasy or a hoax correctly pointing-out that the number is nearly as large as the entire GDP of China.  Lacking any published evidence from the departments of Commerce or Treasury, or the Federal Reserve the real number, whatever it may be, is naturally much, much smaller.

 

The White House lists 132 'deals' totaling approximately $9.6 trillion; the lion's share of that doesn't come close to meeting the definition of 'new investment'.  Significantly, this figure includes previously-announced or planned technology ventures, routine and on-going business expenditures, orders already in the pipeline and vague promises lacking any enforcement mechanism.  The later are basically a verbal IOU with a promise of 'we'll see'.  

 

Foreign 'deals' are even sketchier as most of the 'pledges' lack even the creditworthiness of a verbal IOU as they come from countries unable to afford them anyway; or the respective government lacks any authority to dictate private business investment.  Previous pledges to purchase military aircraft and equipment or those that come with an implied Trumpian threat of a 'protection racket' do not count.

 

In my own view much of this is political theater intended to pacify Trump's mercurial tendencies before the Supreme Court brought-down the hammer on inconsistent acts provoked by one sole personality. 

 

On tariffs alone, Trump's claim of a manufacturing boom doesn't jibe with the continued decline of direct investment in American manufacturing which, in reality, has been falling and is continuing to fall uninterrupted.  Sure, tariffs may induce some domestic investment through protectionism; nevertheless, this comes at the cost of higher prices for business and consumers.  The math doesn't work.

 

Cato's concludes that the $18 trillion figure is a politically-motivated exaggeration used to justify a flawed and inexplicably contorted obsession with a high tariff regime that is lacking any basis in recorded economic data or accounting.

 

But don't take my word for it.  Read the the commentary in its entirety and draw your own conclusions about how much of it is fact or fantasy.

 

We've been to this rodeo before. 

 

 

Fools and Lapdogs

The U.S. merchandise trade deficit hit a record $1.2 trillion last year, despite President Donald Trump’s promise to eliminate it by imposing the highest tariffs in eight decades on foreign-made products.

Thursday’s Commerce Department report represents the first full-year assessment of the president’s ambitious reordering of global trade. The persistence of the deficit in the face of steep new taxes on imports from China, the European Union and scores of other nations reflects the limits of Trump’s blunt policy tool.

As expected, the Supreme Court today nullified Donald Trump's signature economic policy this morning in a ruling that invalidated the president's arbitrary and capricious imposition of trillions of dollars of import taxes on our trading partners around the world.  

Naturally, the President's response was to be presidential and call the justices fools and lapdogs for ruling against him on tariffs.    

 

Back in August the president threatened the court stating that this ruling would: Literally destroy the United States of America. 

Well, it's happened and in the long term we're all likely to be better-off for the ruling.  Tariffs, on their own, are not likely to raise-up or destroy the country inasmuch as imported goods account for only about ten percent of our total economy.  Because we are largely a service economy tariffs don't have much direct impact on things like education and healthcare.  Manufacturing constitutes less than ten percent of the US economy.

Nevertheless, the imposition of import taxes at the sky-high levels the administration imposed are a tax on all consumers, business and manufacturers shrinking the country's Gross Domestic Product by an estimated .3 percent per year. If you put a number on that it amounts to roughly $90 billion a year in losses. That isn't insignificant but nowhere close enough to destroy America.  It just raises everyone's cost of living, jeopardizes farmers, ranchers, small business and contributes to inflation.

So where is this all going to lead us?  Too early to tell but I suppose there are companies for whom imports are a necessary part of doing business; and they're going to want a tax refund. 

Meanwhile, I guess none of us are getting the tariff dividend we were promised and the income tax isn't going to be replaced by tariff revenue.  Of course the DOGE dividend never showed-up in my checking account either.  

Money talks, baloney walks.....

Disinflation v. Deflation

Inasmuch as it is the start to a new year I figured this would be an opportune time to discuss something that has been on my mind and recently seems to be misunderstood by a significant number of lay individuals.

While the words in the title of this post may imply similarities they are differentiated by singularly unique identifiers and consequences.

Disinflation is a slowdown in the rate of price increases.  In the real world prices prices might be continuing to climb but they're rising at a slower pace.  Think: 18 months ago inflation was 6%; today it is 3%.  Causes of disinflation include central bank (Federal Reserve) policies that tighten credit by means of raising interest rates to cool consumer demand for goods and services.  If the policy is successful it results in slowing the growth of inflation by stabilizing growth in prices. 

Deflation is a decrease in the general price of goods and services (negative inflation) meaning prices are actually falling.  Think: 18 months ago the price of a gallon of unleaded regular was $3.15 a gallon; today it is $2.30 a gallon.  Causes of deflation can include oversupply or increased productivity as well as tightening of monetary policy leading to decreased demand.  Generally-speaking, deflation can be harmful as consumers naturally may delay purchases if their expectation is for lower prices in the future.  This can lead to a drop in demand, reduced business profitability, wage reductions and a deflationary spiral.

So, what does that have to do with the price of tea in China?  Not much.  It has more to do with perceptions and messaging. 

During his campaign, and since taking office a year ago, Donald Trump has made repeated promises to bring down the overall price level - a goal of price reductions.  He has made specific promises that the price of various and sundry goods: gasoline, groceries and utilities would decrease from their inflated, post-pandemic levels.  To be sure, the president has promised what would amount to deflation, or falling prices.  The ramifications of this is two-fold; consumer expectations and economic consequences.

Consumers would be better served by a steady dose of disinflation and slowing the growth of inflation.  The economy would be better served avoiding an across the board sustained decrease in prices; the unintended consequence of which might lead to a recession.

My sense is that consumers seem to have placed a higher value on prices actually coming down than they want inflation to slow and prices to stabilize.  In my view, they don't completely understand the consequences of these two choices; and if I had to hazard a guess it may be a result of the president's own rhetorical excess. 

Donald Trump has promised, Prices will come down.  You just watch;  They'll come down, and they'll come down fast, not only with insurance, with everything.   

He promised that: Starting on Day One, we will end inflation and make America affordable again, to bring down the prices of all goods.

Only last month the president suggested that inflation was essentially done but cautioned that he did not want actual deflation, saying this:  We don't want it to be deflation either.  You gotta be careful.  

In case your memory needs a refresh; the troubled period of time spanning The Great Recession gave us a taste of everything. 

Inflation-Disinflation-Deflation Illustrated - Data BLS

The bottom line is that since he took office Trump has begun to walk-back any number of his promises as a consequence of two incontrovertible truths.  First, price reductions are more easily said than done.  Second, broad price drops can expose the economy to self-inflicted and unintended consequences.  Moreover, with consumers smarting from rising pressures in the cost of living, Trump has begun to walk-back and delay implementation of many of his import taxes.

Where does this leave us?  Three things to watch.

The White House's unilateral use of executive authority to arbitrarily impose broad trade duties (tariffs) on imported goods has most certainly contributed to inflation.  Thus, prices for consumers and businesses have continued to increase while at the same time the rate of inflation has slowed.  Perhaps as early as Friday it is expected the Supreme Court will rule on this matter providing guidance to the administration and the rest of us going forward.

The US economy finished the year on a strong note - gross domestic product grew at a 4.3% annual rate, faster than the previous three months.  The president will try to laissez les bon temps rouler.  

I expect him to continue badgering the Fed to reduce interest rates and he'll be announcing a pick for a new Fed chair before too long.  At the same time, corporate tax cuts under the One Big Beautiful Bill will be kicking-in this year and could juice spending. Will this stimulus and tariffs goose inflation?  If so, how will the Fed respond?  

Since I lack the powers of clairvoyance my only prediction is that 2026 may shape-up to be an interesting year.  I'm sleeping very well lately; yet because we've all been to this rodeo before only time will tell.

More Agricultural Surrealism

President Trump announced yesterday a $12 billion bailout for struggling farmers as he looks to shore up the finances of some of his most loyal supporters whose financial fortunes have been hurt by his trade war.

During his first term, Mr. Trump directed more than $20 billion in economic support to farmers after China boycotted U.S. products in response to Mr. Trump’s tariffs.  Everything Agriculture Secretary Brooke Rollins is enumerating are higher in price today largely as a consequence of import taxes.  You know - tariffs. 

 

This bailout is not a rescue. It is the predictable outcome of a policy cycle that begins with tariffs, produces retaliation, and ends with federal money used to shield a loyal constituency from damage the administration created.  This is absolutely exhausting. 

 

Tariffs were sold as strength. They functioned as economic self-harm. China responded exactly as every trade economist predicted, and farmers absorbed the shock. Now public money is used to steady a group valued for its political loyalty while other sectors harmed by the same policies are left to navigate the fallout alone. 

 

This selective insulation needs to be called-out. When government protects one constituency from the costs of its own decisions while allowing others to bear the full impact, accountability collapses. Policy becomes performance. Consequences become optional for some and unavoidable for others. Neither an economy or a democracy can function for long on that kind of asymmetry.

Create a problem, then drop $12 billion on the people who voted for this problem. Then blame Biden.

After all the wailing and gnashing of teeth over NYC Mayor-Elect Zorhan Mamdani; Trump and MAGA are going full on socialist. 

Surreal.

 

Of course, we've been to this rodeo before.... 

 

 

More Soviet-Style Economics

Beef prices are up 15 percent over the past year according to federal inflation data released Friday.  One contributing factor is low supply and high demand.  The herd has shrunk as a consequence of recent droughts and high feed costs.  The second contributor is trade taxes (tariffs) on imported beef.  The high cost of beef has been a primary contributor to a price increase for groceries of 3.1 percent this year.

 

In another unsurprising example of his on-again, off-again trade policies - president Trump threw American ranchers under the bus with the announcement that he was unilaterally quadrupling beef imports from Argentina - tariff-free.  And that domestic beef producers should lower their beef prices in response.

 

The Cattle Ranchers, who I love, don’t understand that the only reason they are doing so well, for the first time in decades, is because I put Tariffs on cattle coming into the United States, including a 50% Tariff on Brazil, Trump wrote on social media.

It would be nice if they would understand that, but they also have to get their prices down, because the consumer is a very big factor in my thinking, also!

Soybean farmers were among the first to find themselves in the crosshairs of Trump’s tit-for-tat tariffs with China. Since May, China has effectively boycotted American soybeans as a response.  And now it's the cattlemen.  This is absolutely exhausting.

The domestic agriculture sector is already struggling with the rising cost of fertilizer as a consequence of tariffs and labor shortages driven by the president's immigration agenda.  The Center for Strategic and International Studies (CSIS) suggested; The result is not merely a short-term disruption, it could signal a sweeping reconfiguration of global agricultural trade stretching from Latin America to Europe and Australia.  

I'm not a big fan of conspiracies although I'm not surprised if some ranchers believe this is driven by the president's desire to help out his buddy, Argentina President Javier Milei.

It likely is some of the foregoing along with an extra helping of old school centralized economic planning at the whim of one guy.  You know; Soviet-Style.

Exhausting

Depending on your priorities a lot can be done with $30 to $40 billion.

President Donald Trump has prioritized his friendship with the president of Argentina.

Javier Milei, nicknamed El Loco for his eccentric manners, is one of the few world leaders who attended Trump’s inauguration. Now, with his country facing a dire economic crisis, Trump is sending El Loco $40 billion in a not-at-all subtle effort to help him win reelection later this month.  Given the fact that Argentina's credit rating is basically junk you can kiss our money good bye.

And here’s the conundrum:  during Trump’s first term in office he started a trade war with China. When China responded by buying soybeans from Brazil instead of American farmers the resulting bailout cost all of us more than $35 billion.

Now, Trump’s doing it again, and another ginormous bailout will follow. 

America’s soybean crop is worth at least $30 billion. And once again, China pulled back and hasn’t bought any of our soybeans. Not a single, solitary, bean; much less the $12.6 billion they would have purchased from us at this same time a year ago.

So, where did China get their soybeans? 

Argentina.

The country now getting $40 billion from us.

Trump might have used that $40 billion to reinstate health insurance premium tax credits he insists on letting expire. So the government is shut down, Americans are seeing skyrocketing health insurance bills and farmers are hoping for a bailout check because the president wants to help a friend in a country that’s taking our spot in the global marketplace.

If you're still convinced this puts America First or if Argentina is ever going to pay us back you might just be El Loco. 

I don't see how any of this advances your and my prosperity and general lot in life.  For you readers who are Trump devotees I'm waiting for the explanation.  Meanwhile, all this winning is exhausting....

Grift Or No Grift?

From Friday there was this...

In a retaliatory move, president Trump threatens 100% tariffs on Chinese goods.  The president made the threat after Beijing imposed new global restrictions on the use of rare earth minerals, which are vital supplies for U.S. makers of chips and batteries.

Just curious how many Trump family members and cronies shorted the market before his tantrum?

On a serious note, restrictions of rare earth minerals is a big deal with all sorts of implications.  Canada holds some of the world's largest known reserves of rare earth elements (REEs), with an estimated 15.2 million tons of rare earth oxide in 2023. Unfortunately, very little of this is being developed.  Rather than working co-cooperatively with our friendly neighbors to the north our president has adopted an adversarial and belittling attitude towards Canada; creating unprecedented resentment toward his administration by Canadians.  Naturally, what do I know?

This is revealing of the administration's lack of coherence on this subject.  And the only response is a Trumpian fit of pique and threatened tariffs?

Is it just a big grift?  Or sloppy deal-making?

Monday will reveal more..... 

EDIT TO ADD:

Jones Act

Peter suggests that if you tasked him with creating a list of the greatest threats to America, he’s not sure cabinets, name-brand drugs, and semi-trucks would be on there...but the President disagrees.

 

So, get ready for a massive economic bulldozer to hit the US due to these new tariffs. With 90% of all US cargo moving by truck, these higher costs will create a ripple effect through every sector. 

This all started back with the Jones Act, which made domestic shipping prohibitively expensive, causing a shift in freight from ships to rail to (almost entirely) trucks.

Since those trucks are made across an integrated North American supply chain, dipping into Canada, the US, and Mexico, tariffs are hitting hard. That means everything Americans consume, from your food to your clothes, will cost a whole lot more.

 

Cuppa Joe

If you're like me you likely enjoy a steaming cuppa joe; maybe two.  And you're sorta cheap frugal.   

Anyway, if your favorite morning beverage is an Americano or a Latte - coffee drinkers are steamed. 

Roasted coffee prices at the grocery store are up 22% in the past year, more than any other item tracked by the government. Prices at some coffee shops are going up too. $10 latte, anyone?   

The price increases are due to bad weather in the world’s coffee-growing regions and the Trump Administration’s 50% tariffs.

If you're paying $8 for a cup of anything only once a day you can save over $2500 per year by making it home. That vacation trip might be realistic if you buy your own beans and a Mr. Coffee.

Today’s challenge: Learn how to make a cup of coffee at home. I know you can do it. Be strong.

Bean Counter

President Trump's recent proposal to prop-up the troubled economy of his pal, Argentina President Javier Milei, with a $20 billion aid package his raised the hackles of Democrats and Republicans in farm states as farmers struggle under the burden of the president's on-again, off-again, tariff policies.  

China hasn't purchased a single soybean from the United States since May of 2025.  And following Treasury Secretary Scott Bissent's announcement of the aid package for Argentina the Chinese flipped us the bird and purchased 2.66 million tons of Argentinian soybeans after Argentina waived their grain export taxes.  

Naturally, American farmers who voted for Trump and elected Republican officials who represent them are becoming grumpy. 

In case you're wondering what this means in dollars and cents, a year ago China had already placed orders for 40% of our soybean exports.  This year; not a single shipment.  Not a single, solitary bean.  And because China retaliated for Trump's tariffs with tariffs on soybeans, US exports of the crop are already down 51% and $3.4 billion from 2024. 

I suppose I have to wonder if this is more about propping-up a Trump ally or a mercurial trade policy directed by executive order?  Your guess is as good as mine. 

Meanwhile, American soybean growers are struggling with balancing their checkbooks while White House trade policy has jacked-up the price of fertilizer (most of which comes from Canada), increased the cost of farm machinery and pretty much vaporized a significant segment of our agricultural export market.

What next?  The administration has already floated a plan to have US taxpayers bailout domestic farmers with billions upon billions of dollars for soybeans they cannot sell.   

Of course, we've been to this rodeo before; so I can predictably tell you how it likely plays-out.  Don't believe me?  Type: soybeans in the search box in the upper left corner of the blog homepage and you'll be privy to a walk down memory lane of Trump 1.0 agriculture policy.

Maybe some day we should have a discussion of old-school, Soviet-style, centralized economic planning.  Meanwhile, If you honestly believe any of this makes sense I'm all ears.....

Explain This To Me

When I had a day job I was a Certified Financial Planner™ practitioner.  In the financial advisory world a CFP^® would be the equivalent of a CPA in public accounting.  I held a half-dozen securities licenses, four insurance licenses and was associated with an SEC registered investment advisory firm; a fee-based fiduciary.  I am not an economist; yet I know my way around the subject and took some measure of pride in making difficult content matter easy for a client to understand.  Economic themes and investment markets continue to interest me.  

As I look across the economic landscape and the on-again, off-again, inconsistent tariff 'deals' personally and individually negotiated by the President no one has adequately explained why the import tax policy is even minimally beneficial or necessary in replacing the proven track record of free trade over the last 75 years. I am mystified as to how raising taxes on business and consumers creates wealth, advances commerce and contributes to the betterment of our financial lot in life. 

Recently a federal appeals court ruled that most of Donald Trump's tariffs are an overreach of his use of emergency powers as president.  The so-called reciprocal tariffs - imposed on nearly every country the US trades with - are being illegally imposed.  This case will come before the Supreme Court so we should know more before too long.

Most weeks the President says, does or provokes something like this that flies in the face of the most basic and incontrovertible economic fundamentals.

Tariff policy likely played a role in the July jobs report.  And because the report did not conform to the President's world view he killed the messenger.  Ironically the July numbers were revised upwards a couple of weeks ago.  August added a weaker than expected 22,000 jobs but shed jobs in June for the first time since the pandemic.  Yes, there will be further revisions as more data is collected.

The President's seeming failure to understand that tariffs are a tax is further complicated by his belief that a trade deficit is consistent with being taken advantage-of.  Consequently, our largest manufacturer of agricultural machinery, John Deere, is grappling with ever higher steel and aluminum tariffs adding more than $600 million this year alone to manufacturing costs.  And because China retaliated for Trump's tariffs with tariffs on soybeans, US exports of the crop are already down 51% and $3.4 billion from 2024.  The president's capriciousness as it pertains to import taxes means that unless something changes really quickly a host American soybean growers will have less money to purchase more expensive John Deere machinery.  

Canada supplies up to 85% of US fertilizer and a 35% import tax on Canadian imports has further burdened American farmers with unnecessary volatility.  I have a trade deficit with my local butcher.  He's never purchased anything from me.  Can anybody explain this madness to me?  

The President's mercurial personal style doesn't inspire much confidence either.  Trade negotiations result in different countries getting different terms and terms can change overnight on a whim or Trumpian fit of pique.  What corporation would undertake a 3 to 5 year plan to move an assembly plant to the US with the knowledge that:  (1) The president could change his mind or back out of the deal without advance notice, (2) The president is out of office long before the project is close to completion and, (3) Your shareholders may revolt as a consequence of both.  Look no further than the billions of dollars of losses suffered by domestic auto manufacturers as a consequence of import duties.  

Then there is the business of Federal Reserve Chair Jerome Powell and interest rates.  One of the reasons our economy hasn't tipped into recession is its ginormous size, diversification and complicated resiliency.  Someone needs to maybe explain to the President that you micromanage the US economy at your own peril. Nothing new under the sun in that regard.  Naturally, with the economy flashing warning signs The Fed cut rates 25 basis points just the other day; and hinted at more of the same.

Speaking of interest rates, the Big Beautiful Bill that was recently signed into law is going to blow-up our mounting debt by an estimated figure north of $3.4 trillion. Government borrowing crowds out commercial borrowing; always.  Will this drive interest rates north further down the road?  Time will tell.

I'll close with the President's manic understanding of supply/demand economics and his conflicting and incomprehensible messaging on energy.  On one hand the President calls for cheaper prices at the pump all the while falling back on the refrain Drill Baby Drill.  Someone needs to take the President aside and explain that lower prices discourage drilling.  Which explains why business drills for oil or gas; not the government.

Lest you get the mistaken impression that much of this lunacy is discouraging to me; perish the thought. Every day is another opportunity to observe the President wave his cape like a matador and produce another bright shiny object with which to distract.  The singularly madcap economic stuff is priceless. 

As long as the training wheels don't fall off it's a never-ending source of new material.

The Math Doesn't Work

 We're going to make a lot of money and we're going to cut taxes for the people of this country.  It will take a little while before we do that, but we're going to be cutting taxes and it's possible we'll do a complete tax cut because I think the tariffs will be enough to cut all of the income tax. 

- President Trump, April 27, 2025  

The line from the White House Information Minister, various Cabinet Secretaries and the President himself is that we are awash in tariff revenue wealth.  Millions, billions and trillions of dollars; all willingly paid by other countries.  The president has even floated the notion about creating an External Revenue Service to collect the tariffs and replacing the Internal Revenue Service in collecting income taxes.

We were at our richest from 1870 to 1913.  That's when we were a tariff country.  Perhaps the president has drawn his inspiration from 19th century America immediately before the establishment of the federal income tax.

Of course if you know your American history when tariffs were the primary source of federal revenue government was much smaller; federal spending was barely two percent of Gross Domestic Product (GDP).   Nowadays, federal spending is north of 23% of GDP.  It would be impossible to rely on tariffs to meet current spending levels.  Heck, we're already running ginormous annual deficits that are slated to increase further with the passage of recent legislation. 

Tariffs (sometimes called a duty) are a tax imposed on imported goods and services.  The tariff is not paid by other countries; the US import company is required to pay the tax.  This makes imported goods more expensive to US companies and consumers. Consequently, domestic producers may benefit from reduced competition potentially protecting domestic jobs and industries.  Decreased competition may also result in domestic producers raising their prices as we have seen in the steel industry. 

In 2024 individual income taxes generated roughly $2.4 trillion in revenue to the government representing nearly half of all federal revenue.  Because tariffs apply to the narrow sector of imported goods they would likely generate only a fraction of that amount resulting in ballooning deficits.

Furthermore, because tariffs apply to imports (as opposed to broad-based income) this would result in a disproportionate economic impacts with industries relying on imported materials or components being hit the hardest.  

Tariffs also increase costs to domestic companies and consumers. 

Conversely, if tariffs replaced the income tax your wages/salary would theoretically become tax-free.  This shift would allow you to keep more of what you make.  Sound appealing?  As a trade policy tool tariffs are probably more effective than as a revenue generator.  

The economic reality is the challenge of replacing income tax revenues with tariffs would require import taxes on a scale of enormity so high as to become disruptive to consumers, business, supply chains, trade relationships and the US dollar.  They won't fix our country's  persistent problem with annual deficits or balance the budget.  The notion of issuing everyone a government check and calling it a tariff rebate is absurd.  Tax the citizenry with import duties and then return a small piece and call it a tariff dividend?  PT Barnum had a term for this so if you have a rational explanation I want to hear it.

Meanwhile, the best summation of this challenge can be found over here at the Tax Foundation.  It's a short read of only a few minutes and worth your while.  

Finally, revenues from import taxes have been growing for months, and the latest data shows that the U.S. has collected $130 billion from them as of August 15.  That is $73.8 billion, or 131.2% more, than the same time last year. But that’s still far short of the $2.4 trillion federal income taxes brought in last year.  The running totals are updated daily and can be found here at the Trump Tariff Income Tracker.  You might want to bookmark this web page so you can follow along.

Bottom line?  The math doesn't work.....

 

Tariff Impacts Auto Industry

Import duties subtracted $800 million from Ford’s profit in the second quarter, leading to a slight loss for the period. For the whole year, Ford estimated that tariffs would cost the company $2 billion.

General Motors, the largest U.S. carmaker, said last month that tariffs would cost the company as much as $5 billion for the full year, although it hoped to offset about a third of that amount by cutting costs and moving some manufacturing to the United States. Still, the company expects retail prices to rise 1 percent or less this year, Paul Jacobson, the chief financial officer of G.M., told investors last month.

Toyota, which makes many cars in the United States but also imports them from Japan, Mexico and Canada, said on Thursday that tariffs would cost it $9.5 billion. A day earlier, Honda pegged its tariff cost at $3 billion.

No one has adequately explained why the tariff tax policy is even minimally beneficial or necessary in replacing the proven track record of free trade of the last 75 years. 

Anyway, import taxes are causing billions of dollars of losses.  According to Cox Automotive, as of mid-July carmakers had 82 days of supply in the United States, roughly enough to last until the beginning of October. That gives you a rough idea of how long they can avoid raising prices. 

You can read more about this here - no paywall either.  You're welcome..... 

 

Picking Winners and Losers - Part 2

Who’s winning?

Domestic US automobile manufacturers are subject to a 50% tariff on steel - resulting in the highest steel prices on the planet, a 25% tariff on parts imported from Mexico and Canada along with a 65%+ tariff on Chinese LCDs and electronics. 

The European Union can manufacture cars with zero steel tariffs, 4% Chinese tariffs, and zero tariffs on imports from Mexico and Canada. 

EU auto exports to the US are subject to a 15% tariff.

The Art of the Deal.......