In Trump’s first term, he was his own worst enemy, with an inability to control the boorish behavior toward other public figures. It also was apparent that he relies on his own “gut” for decisions and rarely has an actual well thought-out plan on major policy issues. Those flaws are on full display this week in his second term. For all those who think he is steps ahead of others on how to get what he wants, that is obviously not true. There is typically no plan, and the trade issue demonstrates this. A plan would identify all possible outcomes and contingencies and how they would be addressed if they arose. That allows you to be and appear to be in control of events. Instead we get chaos, with constant changes of course and uncertainty.
The response of the bond and stock market to the tariff nonsense should have been anticipated. The market is not stupid, it is extremely intelligent. And whether it were smart or not, it drives the financial system that underpins the economy. Anyone could have, and many did, predict the turmoil that would result from the massive tariffs and the incoherence of trade objectives. So of course the President had to reverse course or risk the US having a major liquidity crisis akin to 2008. And in reversing course the President gave up all his negotiating leverage. Foreign countries hold a very significant part of our national debt and they now know that they can use that to inflict pain.
A well-functioning Administration would also have a team of trusted advisors who work well with each other and who work out disagreements in private and come to a harmonious consensus on policy and how it will be advanced. That clearly is not happening, as various department heads and others publicly feud with and insult each other. Just embarrassing. And there is no clear objective on trade; those three conflicting goals that keep getting mentioned by various players keep getting enunciated with no recognition that they are conflicting. The Administration needs to settle on one–preferably true reciprocal free trade–and stick to it. My choice would be to put Bessent in charge of everything relating to trade and fire Navarro and Luttnick immediately.
The worst part of all this is that it gives hope and new life to the real enemies of democracy and economic well-being in the US–the whacked Dem party, which has gone as far looney left as is possible. I obviously hope Trump will learn from this and stop the chaos and become more disciplined, but we all know the old saying about a leopard.
I’m not sure the markets are as “intelligent” as you suggest. In my experience there is a lot of emotional input and algorithm trading that effects the market. Just sayin’
overall the market is a pretty active predictor of where the economy is headed
I hate to say it, but I think you are drinking your bathwater on this one.
can you be more specific, happy to consider any points that you think are contrary to the notion that there was no clear plan and the administration is just reacting to the market at this point