A classic motif of comedy is the small lie that requires ever-bigger lies to maintain the deceit, until the whole fraud collapses with the deceivers exposed.
This is what President Trump’s trade policy is starting to feel like. First, Trump told us his trade wars would be “easy to win.” Just trust him. Then he launched his trade wars, with tariffs on steel and aluminum imports and a separate group of imports from China.
Those trade partners retaliated with similar tariffs on U.S. exports, hurting sales of agricultural exports and some other products. So now Trump has unveiled a counter-retaliatory un-tariff, to make American farmers whole.
The Agriculture Department said it will offer $12 billion worth of aid to farmers, ranchers and others hurt by the escalating trade wars. It’s not what farmers asked for. They simply wanted Trump to rescind his tariffs and make nice with trading partners—er, enemies. Instead, Trump has found a way to address some of the political damage his trade wars are causing in states crucial to the upcoming midterm elections, while maintaining his leverage against China and other trade-war participants. Trump can disburse the money without Congressional action.
He might need a lot more money, though, because a lot more pain is coming—according to Trump himself. So far, Trump has imposed tariffs on about $91 billion worth of annual imports. That’s worrisome, but it’s a tiny portion of the total economy. Trump has threatened tariffs, however, on another $620 billion worth of tariffs, or so. That’s big. If affected nations retaliate, it will compound the damage, and easily cross the threshold at which financial markets quake.
Trump keeps saying he has all the leverage in these trade disputes, presumably because he can dole out “farmer’s welfare,” as some farm-state legislators derided the new Agriculture program. Trump obviously thinks he can apply bandages wherever his trade wars are starting to hurt, neutralizing mounting opposition to his trade policy that threatens to tip the scales to Democrats in the upcoming midterm elections.
Trump needs to keep doling. Whirlpool needs a hand, because Trump’s steel and aluminum tariffs have dented profits, with a Trump tariff on imported laundry equipment—which was supposed to help Whirlpool—failing to mitigate the damage.
Harley-Davidson has famously said it will have to move some production outside the United States, because of the Trump trade war with Europe. So Trump will need some handouts for Harley workers who lose their jobs because of him. Many other U.S. manufacturers coping with higher costs will be cutting production as well; bailout, please.
The hush money—sorry, protection bribes—will really start to flood out of Washington when Trump slaps tariffs on imported cars and auto parts, which General Motors said would make it a smaller and weaker company. Assume the same holds for every other automaker, if only because people will buy fewer cars as they get more expensive. And as Trump taxes a larger and larger portion of Chinese imports, the hundreds of U.S. companies doing business in China will probably find their licenses revoked or their doors shuttered. Congress will have to pass an emergency Trump Trade War Compensation Act.
In Trump’s mind, his trade targets will soon find the pain unbearable and cave to his demands. There’s no chance they’ll bide their time until the U.S. midterms, to see if American voters send a message telling Trump to knock it off. And farmers will be happy receiving Great Depression-style handouts instead of farming.
In reality, Trump is triggering exactly the sort of countermeasures and counter-countermeasures many economists predicted would happen. He’ll probably have to resort to counter-counter-countermeasures soon, and after that … well, you get the drift. It’s almost comical.
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Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman