The 4 factions of Trump 2.0
And why they’re producing chaos on tariffs.
Are you confused by President Trump’s constantly changing tariff policy? Don’t feel bad: the most highly paid traders on Wall Street are, too. The implied volatility in stock prices is several times higher than during Joe Biden’s final year in office.
And I’d suggest that this is probably the right response. We’ll continue to do the best we can at Silver Bulletin to interpret the mixed signals and constant policy shifts. But tariffs differ from the White House’s other objectives in that the main constituent for them is simply Trump himself and not the other people in his orbit.
At best, some minority of people within the MAGA universe have coherent-ish views on tariff policy that differ from the broad economic consensus. Still, even they mostly advocate for tariffs that are narrower, more modest and more strategic than the ones Trump has implemented so far.
The tariffs violate longstanding conservative economic precepts — they’re essentially a tax! They also aren’t popular even among Trump’s base. A large majority of manufacturing workers, including many Trump voters, were skeptical of tariffs in a recent Washington Post survey. I can’t recall seeing this degree of opposition among rank-and-file GOP voters at any other point in the now four-plus years that Trump’s been in office. Meanwhile, recent consumer sentiment data printing near its worst numbers ever1, and Trump’s approval rating is in decline, potentially undermining the rest of his agenda.
And although tariffs could be a mechanism to dole out favors or even manipulate markets, they’ve also raised opposition from some of Trump’s newest and most enthusiastic supporters such as Elon Musk. So the truth is probably something closer to Trump being a “mad king,” as Noah Smith writes, with everyone else using what leverage they have to limit the damage to the economy and Trump’s political standing.
Cronyism, capitulation — or confusion?
On Friday evening after market close, President Trump exempted imports of electronic equipment, including mobile phones, semiconductors, and computers, from his recently implemented tariffs, including his triple-digit tariffs on China.2 This is hardly a narrow carve-out. Electronic equipment is our biggest category of imports from China, reflecting $127 billion in purchases in 2024, or about $400 per American consumer.
There are three ways to look at the latest move. One is as an example of cronyism: the change particularly figures to help Apple, along with other Silicon Valley stalwarts whose stocks have been battered lately. Indeed, as a matter of having a coherent tariff policy, this change is dubious at best. Because it mostly pertains mainly to finished products but not components or equipment purchased at an earlier stage of the supply chain, American companies actually have a disincentive to reshore manufacturing because they can buy finished goods more cheaply than assembling the parts themselves.
I’m skeptical that Trump would want to do a favor for Apple in particular. Although Apple CEO Tim Cook paid his tribute, donating $1 million to Trump’s inauguration fund and attending the proceedings, Apple hasn’t embraced the conservative vibe shift to the extent other tech companies have, and its employees gave overwhelmingly more to Democrats last cycle than to Trump or other Republicans. I’d be more inclined to endorse the theory that the move is catering to consumers instead: iPhones are highly visible and popular products, and AAPL and other tech stocks are popular with retail investors. Other popular retail stocks like Tesla and Nvidia are down so far on the day, however.
Still, it’s hardly a crazy theory. The Silicon Valley 50 stock index that we’re now keeping track of — we hope to get a permanent version of this up soon — fell more than broader market indices after Trump’s “Liberation Day” announcement two weeks ago. But it’s also now rebounded more. (Data in the chart is as of 1:45 p.m. on Monday.) If you’d invested in an SV50 index fund on the day before last year’s election3 you’d now have a -4% return, slightly better than the NASDAQ (-7%) or S&P 500 (-5%).
The second reading is that it’s just a capitulation. That even though the S&P 500 finished last week ahead, there’s enough turmoil in bond markets, in the consumer data, and from what Trump is inevitably hearing from his Mar-a-Lago buddies that he had to pull the brakes on a path toward a recession that he’ll rightly get blamed for. If so, the move could signal more softening ahead: Trump isn’t particularly inclined to drive a hard bargain after all, even with China.
If I’d published this story on Friday night, shortly after the announcement, I’d have leaned more heavily into this explanation. Unlike with his tariff “pause” last week, which raised tariffs on China while lowering them for the rest of the world, there’s no obvious attempt to rebalance the scales here. If nothing else, Trump has severely limited his leverage in future rounds of negotiations. China has no incentive to play Let’s Make A Deal if Trump negotiates against himself because of domestic political pressure or pressure from the markets.
But the White House’s inconsistent messaging over the weekend and allusions of future tariffs have curbed the market’s enthusiasm, undermining what was initially expected to be a big rally. As I write this partway through the trading day, it’s not clear that broader markets will finish the day ahead.
So Occam’s Razor is that this hardly reflects any sort of coherent strategy at all. And you probably wouldn’t expect it to. Trump has few allies on tariff policy. Unlike, say, immigration restrictions, which Elon Musk might oppose but most other parts of the Trump coalition are somewhere between on board with and thrilled about, support for exceptionally high tariffs is mostly just a Trump thing and not part of any broader ideological agenda.
The four factions of Trump’s second term
So, let’s take an inventory of the different power centers within Trump’s broader orbit. As you’ll see, only one of them has a lot of enthusiasm for tariffs — and that’s the one led by man sitting behind the Resolute Desk.
Faction #1: The Chief Executive
Who it is: Mostly just President Trump and perhaps some but not all of his immediate family, plus some Cabinet members and inner circle advisors most loyal to Trump.
Main objectives:
Vanquishing enemies, especially among liberal elites.
But also proving the doubters wrong and winning grudging respect from the establishment, especially by demonstrating “The Art of the Deal.”
Self-preservation and self-enrichment.
Expanding executive power and testing its limits.
Improving the relative standing of Trump voters vis-à-vis others, particularly a certain “type” of Trump voter (i.e. native-born, blue-collar).
Views on tariffs: Trump’s infatuation with tariffs might just be one of those deep-seated things, like his fear of sharks. In 2018, Trump scrawled a note to himself simply reading “TRADE IS BAD” during a speech he gave following the G20 summit, according to Bob Woodward’s reporting. In particular, Trump views trade deficits as being inherently a bad thing, regardless of how they arise. That was reflected in the perhaps ChatGPT-inspired formula for his Liberation Day tariffs that almost no economist would have endorsed.