Trade Policy Incoherence, Updated

I mentioned in my last post on the trade topic that Trump enunciates three inconsistent goals in regard to trade.  That continues, as yesterday he referred to removing trade barriers, eliminating the trade deficit and bringing manufacturing “back.”  Those are inconsistent goals, they cannot all be achieved.  Various administration figures, who claim to be speaking on Trump’s behalf, say inconsistent things.  The extremists, led by Luttnick and Navarro (I agree with Musk that this is a real pair of idiots) seem to thing they can literally just make everyone stop buying stop from other countries and that we will magically overnight be able to find replacements inside the US.  That is far beyond delusional.

Others, and I assume Bessent is in this camp, have become alarmed at the reaction in the markets, and among the citizenry.  What is happening in the US debt market has to be especially concerning, and because of the complex nature of many financial transactions, we could be headed toward a real crisis, including liquidity issues.  Bessent wants ten-year Treasury debt to have a yield of under 4%.  The rates skyrocketed far above that in the last two days.

And of course Trump personalizes this by insulting other countries and stroking his own ego, talking about countries calling to “kiss my ass” and begging for deals.  This is the worst version of Trump, the one I hoped I learned something and would tone it down.  Apparently not.  The best outcome here is that he quickly gets a couple of deals in place and firmly agreed to, preferably with large trading partners like Japan, Korea or Taiwan.  And that he stops the wrong-headed focus on eliminating the trade deficit or bringing manufacturing back to the US.  Gettting true free trade would be great, but I fear that isn’t really what he wants.

Update–so Bessent appears to have prevailed, and Trump is going to generally pause the tariffs for “negotiations”.  Bessent is smart enough to see where the markets and yields were headed and what that really meant.  And to my great relief, Trump appears to have listened.  Long way to go to successfully put this behind us, but this is a good start.