To oversimplify, I see three possible outcomes, I don't know which one is most likely.
1) Trump takes back some of the tariffs, claims that Vietnam or Spain or whoever "totally surrendered" after some B.S. symbolic concession, and things somewhat recover. His supporters brag about how Trump totally owned everyone, which is annoying, but they are 45% of the country so they also somewhat get to create their own reality.
2) Some of these countries actually do come to the table, though honestly I'm not sure what a lot of them are supposed to do since the "retaliation" is based on imaginary tariffs and not actual tariffs that can be lowered. Probably a middle case in terms of economic effect, where we have a completely unnecessary slowdown, but not necessarily a recession or an apocalypse.
3) The "humpty dumpty" scenario. Even if everyone finally realizes how dumb this is in 3-6 months, it's way too late to put the pieces of the global trade system back together, and we see a serious global recession. And frankly, a possible complete reordering of the global system. Bonus points if this initial stress causes a black swan event elsewhere in the economy that leads to cascading failure.
The black swan event probability is unfortunately not zero, not even close. The one thing that underpins "life as we know it and take for granted in America" is the greenback being the world's reserve currency. Current account deficits and world leadership are a large part of this. What if others lose faith in the USD? Borrowing costs skyrocket, we default on debt, and the country goes into a deep tailspin.
And yet Trump constantly talks about how we need a "weak" dollar. Why? So we can sell a few more goods overseas that we don't even manufacture, at the expense of everything else that we've come to rely on?
Unfortunately, I think you are thinking along the right track. A black swan event is, by definition, something not obviously predictable beforehand, even if it is seen by Monday morning quarterbacks to have been foreshadowed.
So, maybe promoting crypto as the new reserve currency? That might start some sort of cascade.
Countries can't lower their trade deficit without massive structural changes that would take years--and yet that's what Trump based his tariff math on. So countries have no ability to "come to the table" based on his current rules.
I personally put the chance of a total reversal on tariffs at 70% right now. Subtract 2% from that probability every day he doesn't flip.
The damage has already been done through: all business activity in the last several months has had to stop because of the nonsense.
There's also a "purgatory" scenario where he postpones implementation for 4 weeks. Decides on countries A,B,C it should actually be 5% lower. Then the leader of country D has a "very productive" phone call. And it's kind of a mess where he tries to climb down slowly and save face, but it's an open question whether it's too late to salvage the global trade system in its current form.
To me, that's what flipping will look like. Obviously he's not going to say, "I was wrong" or whatever--the flip will be carefully choreographed by the media in order to telegraph the flipping ONLY to the people who matter to the markets.
But yeah, the problem with this plan is that massive damage has already been done, so even a complete (defacto) flip won't reverse the slide of the economy, most likely.
I think people are missing something important about this. Just because the "reciprocal" tariff is based on a trade imbalance calculation doesn't mean that this is how the tariff will continue to be calculated in the future. If you read the text of the WH fact sheet, it says that the reciprocal tariffs go away at Trump's discretion.
So their plan is that the country will call up Trump with concessions (reduce tariffs and non-trade barriers on U.S. exports), and Trump will go "ok" and then drop the tariff. It's not "the tariff will remain at the level of the U.S. trade deficit in perpetuity".
The problem with *actual* reciprocal tariffs is that in many cases that would have only been something like 3-5%. In order to have these huge 20 and 40% tariffs they had to come up with some totally insane formula that had nothing to do with tariff rates, since that fundamentally wouldn't have worked for what Trump wants to do.
For sure. Execution and clarity has been poor. I just don’t think it’s quite as unworkable or unstrategic as a lot of the commentariat is claiming. I might work. It might not.
You sound delusional: "They did a historically bad job at planning, execution, and communication. But it just might work!". There is nothing workable here and clearly no strategy is in place.
I am on the left, and yes, I absolutely want manufacturing in the US. Also yes, tariffs can be a part of that (tariffs are just a tool and you can use them wisely or no). But, obviously, you cannot just randomly impose tariffs(especially absurd ones that you got from ChatGPT the night before, because you and your team are just that stupid, incompetent and evil) and the rest happens by magic.
On the contrary, for Trump & co, they are doing everything they can to increase joblessness and worker insecurity. They have offered no path to manufacturing in the US other than crazed flip flopping on their deranged and indefensibly dumb tarrifs.
Trump doesn't care about actual policy, he wants the optics of being able to look like he's big-dicking everyone at Davos that he thought looked down on him (with good reason) for decades. He wants to play the Big Man on the world stage and too many other leaders are willing to indulge him.
Just the fact that the US is demoing this autarchy trade war is probably enough to permanently change the global order of trade. No takiebacksies on this one.
You left one out: our tariffs are "fair," other countries' retaliatory tariffs are unfair, which means they are trying to destroy America by declaring economic war on us when all we were trying to do was protect ourselves from their depradations. So we esacalate to military threats and possibly ultimately find ourselves at war.
I wouldn't go that low, I could see us stumbling into war with Mexico, for example, even if it just starts as drone strikes and commando missions against cartels. Firstly, cartels may retaliate and trigger an incident where people would demand a larger action against Mexico (like what does Trump do if they kidnap a diplomat or soldier and chop them apart with a chainsaw). Secondly, all of this could drive Mexico to enter formal or informal deals with other nations (like China) that Trump could portray as an act of war. I think with so much else going on so far this is one of the underrated risks, though I put the probability at more like 20% than "likely".
War requires one side to shoot back. If Trump did violate Mexico's territorial integrity they would probably roll over. If I am not mistaken they are one of the tariff targets that currently have no plan to institute retaliatory tariffs of their own.
As for China, or any of the other great powers, direction confrontation with another superpower is unthinkable for obvious reasons.
p.s. to be fair, the U.S. could become more self-reliant in the long-term, and if not necessarily as rich as it could have been, perhaps more egalitarian and still better off than most countries in the world. But I think this is on the 5-15 year time scale, i.e. Orange Man will probably be dead before this really happened, with lots of pain in the meantime.
Plenty of Americans used to do it. If those jobs start paying a lower-middle class wage, people will do them. Not saying it would be great for everyone else, but Americans do some pretty crappy jobs already. Of course, they will also have to compete with robots and AI to a much larger extent than 50 years ago, so I don't know how that would shake out.
You would either have very expensive low quality shoes with lots of makework factory workers or still significantly more expensive, decent shoes with very few American workers because the factories are heavily automated.
" If those jobs start paying a lower-middle class wage, people will do them. "
Americans already have better things to do for a lower middle class wage.
This is why this whole tariff "plan " is so mindblowingly stupid. The only way the US becomes a manufacturing powerhouse of cheap goods again is if the economy collapses to a point where labor becomes CHEAPER here than overseas- how does that in any way translate into more middle-class jobs? And even if it happens- who will buy all our newly cheap American goods? We will have just put a bunch of Chinese, Vietnamese, and Indian factory workers out of a job, and somehow they'll be the new consumer powerhouse of the globe?
Yeah, the key question re: tariffs is whether a tradeoff between average national wealth versus extra local support for specific subgroups is a good one.
Trump's primary concern with Russia right now is getting them to the bargaining table to negotiate a peace treaty with Ukraine. And in that sense his hand is terrible. All of the arrows in the sanctions quiver have been fired off, meaning that Trump has no sticks and is left with just carrots.
I think it's obvious by now (if it wasn't always) that Russia's goal is to string Trump along as long as they can, and then cut off the whole pretense once it's no longer possible to maintain.
They believe they have the upper hand in Ukraine and that time is on their side. They don't have any desire to end things in the current state when they think it will be more favorable to them in 1-2 years. Also a huge objective of the war (regime change) remains unresolved.
Even Trump's somewhat big concessions are nowhere close to what Russia needs to see to end the war in 2025 with a negotiated settlement.
It is important to remember that Putin would not have abided by any peace treaty he signed. When has he ever? So there really was no point--and is no point today--to a "peace treaty."
I don't expect that Russia will take the entire country, but allowed to just continue his offensive Putin will go for another year or two, probably seizing all of Donetsk and Luhansk. The real worry is that he will get to Odessa and cut Ukraine entirely off from the Black Sea.
I agree. Unfortunately it was the other way around two years ago. Hindsight is 20/20 but Ukraine and the U.S. were in no mood to negotiate when they believed that one more counteroffensive was going to breakthrough and recapture a large part of the occupied territory. I remember Mark Milley made one tentative statement that negotiations should be considered in late 2022, and he was pretty strongly attacked for it.
I was skeptical, but gave them the benefit of the doubt at the time because, firstly, they had access to a huge amount of information that I didn't have access to. Because of this I assumed that perhaps the Russian military really was on the verge of collapse. And secondly, I had underestimated Ukraine several times in a row and they had (through early 2023) exceeded my expectations every time. However, it now seems like this overconfidence was driven by political and not military realities.
The mainstream media narrative was absolutely shameful. Look at the obfuscation regarding casualty figures. At roughly the same time the news outlets reported that US intelligence estimates put the number of Ukrainian KIA at 70k and the total number of Russian casualties at 210k. This was presented as some kind of evidence that Ukraine was winning the war.
Ok, except that of course "casualty" counts included the wounded as well as the dead. And then of course the general rule of thumb for military operations is that the number of wounded is typically 3-5x the number of those killed in action. Extrapolate that out to Ukraine that means 280k (at the low estimate) casualties to Russia's 210k.
And then of course there is another rule of thumb that the attacker in offensive operations typically suffers 2-3x the casualties of the defender. The math just didn't work out.
Most recent estimates of casualties have Russia at over 500k total and well over 100k KIA. However, I still think this is too close to Ukraine's numbers, which are like 75k KIA. Ukraine needs to be inflicting a 2-3x casualty ratio, not like 1.5x.
A big part of the gap there is that after Republicans took the House in the 2022 elections, the US was unable to continue supporting Ukraine as it had been, and so Russia was able to keep the lead. If Democrats had kept the House, the war would probably have been over in 2023.
I think the better comparison is to the American Civil War. Initially the South had some successes due to being more highly motivated but in the long term the North's larger economy/industrial base and population won out.
There is a huge amount of room to maneuver on sanctions. There are many gradations of enforcement and we are far from maxed out, if anything they have gotten more lax under Trump. Many secondary and some primary sanctions could also be added as well.
Of course Trump seems completely uninterested in actually putting the screws to Russia and there's almost no chance he does anything more than the occasional tough guy social media post, without backing it up with actions.
Even if he wanted to put more pressure on Russia he's made that much more difficult by attacking and alienating every single country that we would coordinate with on doing so.
How many hundreds of thousands of Ukrainians have died? How many millions have had to flee the country?
If there is room to maneuver on sanctions then why wasn't the maximum amount of pressure applied years ago? Maybe all those dead and crippled Ukrainians could have been saved?
Then this entire project was doomed from the get go.
But yeah, when the Biden administration was warning the Ukrainians not to target Russian oil production that should tell you everything that you need to know.
At first I thought it made sense that sanctioned countries were excluded. But I learned we did $3 billion of exports from Russia last year, which while not that much, is still substantially more than some other places that made the list.
So why are we tariffing Iranian goods and not Russian goods? What do tariffs on penguins achieve? What do tariffs on tiny diamond exporting impoverished African nations achieving? $3 billion in Russian imports last year.
Texas is fully behind Trump, even though oil prices have dropped almost 20% since "Liberation Day". If there is one group of people that should be supporting sustainable oil prices between $70-80/barrell, it's Texans, yet I haven't heard a word of protest for what's going on.
I can't even imagine the outrage if Biden had made moves to unilaterally tank the American equity (S&P down 9%) and oil markets in a matter of 2 days, with no rationale except that "watching things burn is fun!". Yet what I'm hearing from the right is akin to justifying the loss in everyone's net worth with buying war bonds. Simply a sacrifice. Except that the former is like cutting your own hand off as a sacrifice to the gods (Wormtail for Voldemort) whereas the latter is an investment that will likely be paid back and is a sacrifice to get war-winning gear to the troops.
It is just a theoretical sacrifice right now for most people. Plus anyone over 30 has seen the S&P drop by over 10% several times, or seen oil prices bounce all over. For someone predisposed to have a good view of Trump, this is nothing so far.
Also worth noting, this is pretty much what a lot of people predicted would happen during the *first* term, and it really didn't. So a lot of people on the right are trained to ignore the naysayers and have been somewhat vindicated in doing so for many years.
Yes-the difference that was noted during the first term was that Trump had guardrails. Actual experts, people who weren't living in an alternate reality. People who took an oath to the Constitution, not a man. Lara Loomer would never have been allowed near the WH.
Well, yes, people care, but if you are a Trump supporter, then you are necessarily bombarded daily with "whatabout" analysis that focuses not on how great the Republicans are but rather how terrible things are / would be if Harris won. Hence the only thing that will change a person's *vote*--not just their current mood--is Trump being demonstrably worse than Biden. That means the markets dropping below Biden levels and this making Trump voters long for the days Biden was in office.
I wouldn't say TSLA is up since Trump won. Down or maybe flat, but not up. It closed at 251 on election night, and 239 today. And it closed even lower a few times in March. It did spend some time between 210 and 220 in October, so maybe that's what you're referring to for your pre-Trump valuation, but it also spent time above 250 in September.
Throw out all the other baggage and the Dems should have one message for the remaining special elections and the midterms:
"Trump promised to lower costs, but now he's flip-flopping and adding a $7200/year import tax on a family of four. You can't afford more of Trump's taxes. Put the adults back in charge."
Agree, but you need to adjust your thinking because the old rules of politics no longer apply.
When it comes to "messaging", the Democrats *lose* right now, and are going to lose for the foreseeable future. The GOP controls the media now, and thus they are always going to win on "messaging" regardless of what the Democrats do.
The only thing--the ONLY thing--Democrats can win on today is... reality. Voters (i.e. the 5% of voters needed to flip US politics) need to **actually go broke** in order to change their vote. If the economy does not tank, then the GOP wins, and no amount of "messaging" is going to make any difference.
So yes, they should drop the culture war stuff, but don't center your thinking around "messaging" is all I'm saying...
But you need your message to match reality, and that's why Biden/Harris failed. They were trying to sell "actually, your finances are pretty great" to the voters, when that wasn't the reality for a lot of people.
The new administration is even worse by saying, "this will require some short-term pain"- when has that ever been a political winner in the US? Mayyyybe in early days of WW2, but the circumstances aren't even remotely the same now.
The election swings on Tuesday were significant back to the Dems (look at the WI map- they improved in every county and ended up at +10 with fairly high turnout)- and that was BEFORE the stock market crash.
I'm arguing for a simple, laser-focused strategy on Trump bungling the economy.
But that's a message that Democrats don't have to send because it sends itself.
Understand that, for 51% of US voters right now, **absolutely everything the Democrats say is a lie**. Hence they can only *lose* when they try to say something to them right now.
Our situation reminds me of being on the plane back from Vegas, and listening to people say they, "probably broke even" during their stay even though they lost a ton. If you start in on how, mathematically, Vegas odds are inherently against you, bla bla bla, they aren't going to hear it. All you can do is let them stew in their losses and hope they learn their lesson.
If you study cults, you see that outsiders *cannot* break a cult, they only fall apart from within.
Democrats like Corey Booker should probably do their politician thing and make noise, but that will just help secure the voters Democrats already have (and it's important to remember that only 5% of voters really matter in the USA today in terms of power flipping from one side to another).
That's all fair enough- i think we're kind of on the same page. When your opponent lights himself on fire just getting out of the way is usually the smart play. But, like you mentioned in your earlier post about the skewed media, i highly doubt the Dems can plausibly just stay silent until Nov 2026- eventually they'll have to make their case to the voters again and that's why i'm arguing for a simple strategy and absolute message discipline. "No more Trump Taxes"
Except that for the majority of the country, it was a fact that their finances were "pretty great", and they even told that to pollsters (Pew research, 41% "Excellent or good", 39% "fair").
And yes, 40% of R's were in the "Excellent or good" slice.
If people had voted based on their personal economic situation it would have been a blowout for Harris.
That didn't matter to the "can't vote for a Black woman" idiocracy.
They voted on the relative difference between Trump's and Biden's terms, which were roughly equivalent for most voters (the pandemic notwithstanding). This allowed voters to basically ignore economics altogether than vote on "culture".
If millions start losing their retirement plans and/or jobs because Trump willfully screwed up the world economy, that will change a lot of votes.
It specifically means the stock market, Bitcoin, oil prices (lower is worse for the Republicans), and certain job markets.
As for a pre-defined economic cycle that all recessions follow, well, that's not how it works :-). The cycle could last six months or six years. Looking at history of the past 20 years is meaningless when the changes being made are the biggest in a century.
But even if it did follow that pattern, the GOP would badly lose the 2026 elections and would be very weak with a non-Trump candidate for president.
The average length for a recession since WWII is between 18 and 24 months. Could it be longer? Sure, anything could happen. Is it likely? I doubt it.
If I was Trump I would blow off 2026. Historically the party out of power does very well in the first midterm after a presidential election. Plus the Democrats now have an advantage with the educated voters that disproportionately vote in midterms and special elections (see the Wisconsin judicial election).
For 2028 the Democrats will need to fight their civil war to decide if the woke or the centrists lead the party. I expect they're at a disadvantage in that election because of the infighting.
If we're talking about a scenario where a recession hits now (and again, if I put on my conspiracy hat I think there's a good chance that the view of the Trump administration is that a recession is coming no matter what) then the most likely outcome afaict is recovery by 2028.
Will the tariffs do permanent damage to the US economy, or at least long term damage that will extend out to the 2028 election? I have no idea--there are certainly points to be made for each side.
You need to go back much further than WWII since the changes here at far far bigger than anything in that period.
And lest we forget that Smoot Hawley itself was blamed for the Great Depression, which of course lasted far longer than any mere "recession". Personally I wouldn't use *history* here to make a prediction like that.
I agree that the Dems are going to win 2026 for all of those reasons and more.
2028 depends on one man: Trump Jr. He may or may not be a strong candidate for the GOP, as he does not have the temperament that Trump Sr. has in terms of his personal ruthlessness. If he's a strong candidate, then the GOP will compete. But he could fail badly as well.
(And yes, 100%, Trump Jr. will be the GOP nominee for president in 2028).
Smoot Hawley was a contributing factor to the Great Depression but it was not the main cause. Claiming otherwise is historical revisionism.
I suspect that Trump and Bessent believe that a recession is inevitable no matter what they do so they might as well out tariffs now. As to how severe the downturn will be I have no idea. If somebody wants to build a model and run the numbers I am all for it.
I honestly don't see how Vance doesn't get the nod if he wants it. He's the sitting VP. Plus the Trump kids have shown zero inclination to get involved in politics.
The person who used ChatGPT to define the tariff calculations hopefully saved that conversation so they can ask a follow-up question: “so this is the effect on the global economy of your proposal. What now?”. I mean I’ve used that approach to refine some python code and a recipe for pancakes, so I could easily see it working for global economic policy.
The tariffs are the "revenue" side of the BS Republicans are going to hide behind in order to pass massive, deficit-exploding tax cuts (with DOGE being expense side). In this scenario, the stories don't have to be true, or even that believable--they just need to be good enough to flip a few remaining R votes who pretend to care about fiscal deficits.
2. THE MARKETS ARE DOWN RIGHT NOW--BUT THEY ARE *STILL* PRICING IN A TRUMP FLIP.
The current market downturn is not, "oh no, tariffs", but rather, "oh no, there is a 30% chance of tariffs now". I think the market is still convinced that Trump may well reverse all of this (and I think the market is right here). The longer Trump fails to flip, the lower the markets will go as the 30% chance turns into a 40% chance and so on.
3. THIS IS NOT SMOOT HAWLEY. IT'S A THOUSAND TIMES WORSE.
The human race is now completely dependent on the globalized economic system. This was not the case a century ago, or even 30 years ago. Today, almost all manufacturing and supplies of vital goods are interdependent with global trade. Comparing damage to global trade in the 1930s to that same damage today would be like comparing a major telecommunications disruption in the 1930s to what it would mean today. Trade was a relative "nice to have" back then. Now it's simply the way human beings do business. The pandemic gave us a *tiny* taste of what a global supply disruption looks like. Tariffs will have a much larger impact than the pandemic in scope alone, but it is a EVEN WORSE THAN THAT because businesses could plan on the pandemic being *over* at some point whereas the trade wars are potentially permanent.
4. DAMAGE HAS BEEN DONE ALREADY.
This has *already* disrupted the world economy, even if Trump abandons the idea, because all business planning in the last months has had to stop, and individually, every business in the world--not just a tiny few--have been put on notice that their business can be severely disrupted at the whim of the US president. This will severely effect business planning, and thus finance, and thus job creation. In other words, ever new expansion of business has to now ask a major "what if?" before commit funds to a new venture.
For the past half century, the world has relied on a stable US government to be at the center of a relatively stable global financial system. This created a baseline "risk premium" for trade and investment that was relatively low. Now investors must price in a much higher risk premium, and this a cost that is in the "inside loop" of the economy as a whole--under Trump and his party, the *entire system* is now far less efficient.
Your last point is especially correct. Canada is sorting their inter province barriers, the citizenry is becoming rabidly anti American in purchasing, and they are building a stronger trade agreement with the EU. Apparently Japan, China, and South Korea have formed a new trade agreement, which given the historical issues there, is a massive change. There's certainly more out there as well.
For point #1... My timeline for really worrying a fiscal debt crisis in the United States had been the 2040s, up until COVID. It was the late 2030s up until around a month ago. Frankly, Biden didn't help here at all, being extremely profligate compared to Obama or Clinton.
But if there's a $4 trillion tax cut extension, "paid for" by $10 billion in DOGE savings and tariff revenue that won't come close to covering the lost income taxes from a recession, then I don't know how long we have until there's a sovereign debt blowout. We're starting from a really bad spot, can the U.S. run $3 trillion deficits for very long before it implodes?
Trump didn't do it in his first term because he was largely surrounded by competent, if awful, handlers. But during that time he's been able to use the MAGA crowd to practically eliminate everyone from the GOP expect a bunch of craven obsequious fucks.
RE: "Trump just basically has to hope that Wall Street is wrong", arguably he has already responded on that point with "I don't care". He's a lame duck POTUS who is on a mission to completely destroy "globalism" and "multilateralism" because he thinks that "god spared him" during two assassination attempts. And despite his textbook-example narcissism he no longer cares about "popularity" --- his rampant delusions of grandeur and his belief that he is a "Genius" and that "Only He Can Fix It" have completely taken over what passes for his mind. Mere stock-market declines are not going to change the idée fixes and obsessions of a dunning-kruger lunatic who thinks he's on a "Mission From God". :-(
Fun tangential fact: the shopping center pictured at the top of the article was built on top of an improperly-sealed landfill. Shortly after the retail tenants moved in, methane alarms started going off right and left, and 80% of the tenants (including Wal-Mart) bailed out.
What’s really frustrating among everything is those pathetic sycophants has pathological inability to acknowledge mistakes (at least publicly) and demand to see them as serious intellects as well - like Shaun, my guy, just acknowledge you fuck up and please don’t deride us for not understanding your “masterful understanding of economics unlike anybody else”
Yep. Studies show the most successful people are the ones that constantly strive to learn and gain perspective from others, growing their base of knowledge and problem solving skills. All of life is learning: what works, what doesn't, and tailoring your approach to be more effective next time.
At one time we called this Darwinism; folks that couldn't do this, those that dismissed dangers and refused to change their opinions in the face of new facts, were eaten by lions. We no longer have lions eating the illogical stubborn types.
Casting no shade on this piece - I dig it - but “Trump-supporting sycophants in Silicon Valley” made me immediately think of Sylvester the cat.. you could have started with “Sufferin succotash!”
The Wall Street focus on neoliberal economics and outsourcing to China, led by Republicans and Democrats both (Clinton), only benefits large corporations and companies that import cheap goods to consumer mad American. We have been under the spell of an economic theory that has failed, overlooks mercantilism, and cannot last much longer. But Trump's tariff approach is excessive and unfocused, rather than being more effective in dealing with specific countries and products. We may have a great recession. But Biden triggered Trump's election by running for re-election as a debilitated geezer, out of touch and arrogant.
Biden did nothing to alter America's long-term trajectory towards a destabilizing sovereign debt crisis, and in fact made it even worse with his orgy of spending. On substance and on politics (he basically handed the 2024 election to Trump on a silver platter) he was a bad President.
Only now we've gone from bad to terrible, in my opinion. Still, it irritates me when people act like Biden was somehow this amazing President who we were lucky to have.
A good index to follow as opposed to the S&P, the NASDAQ or the Dow is the Russell 2000. Composed of the smaller companies that are often less international / don’t make the big headlines. Perhaps closer to a Main Street index than the others. It’s off 25% since it hit 2442 in November last year and is off 12% over the course of a full year. The Dow, S&P, NASDAQ have yet to make new lows over a 1y period.
So Project 2025 really is all about America late 1800s / America 1930s. And yes, the biggest issue to worry about is which gender bathroom the kids have to worry about, and which "shithole" countries are sending us their "rapists and murderers" (/s)
Admittedly, I did not (yet) read your entire post as I had to pause at "fifth-largest point drop in the history of the Dow Jones Industrial Average". I expect that kind of rhetoric from biased click-bait propaganda, but definitely not you Nate! As you (more than most people) understand, the actual "point drop" is meaningless as compared to the overall percentage (see https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart). Also, the immediate reaction to a LIMITED SET OF DATA is not prudent. Even Fed Chair Powell is taking a wait and see approach. (For the record, I have always despised tariffs of any kind, but at least this allowing the public to understand it's a financial engineering game that nearly all countries participate.)
You should've read the rest of the post, because he like almost immediately remarked that percentages usually say more than point drops. I checked again, and the sentence was visible without scrolling down after loading the article. Read a bit more of the post before commenting bro lol
Thanks, and yes I did notice that comment when I continued reading, but I still believe it's overshadowed by the majority of the post that IMHO has a Chicken Little vibe based on only a few days of data. I would never suggest its not reasonable to sound early alarms, but it's way too early to suggest the sky is falling.
Actual economic knowledge is sufficient to predict the outcome of a tariff fight. Kindergarten morals from fables need not apply.
And the total point drop does in fact track the loss in market cap. Sure the total size of the market matters, but not to companies that no longer have a business model.
"But it’s also because more than 80 percent of Goodyear’s tire sales come from replacement tires. You go to Goodyear because you’re hoping to another good year or two out of your existing vehicle because you don’t think it’s prudent to buy a new car."
Uhhhh, do people actually buy new cars because they don't want to replace the tires???
You've got Nate's cause and effect backwards. Like he said, you go to Goodyear because you can't afford a new car and you want to get another couple of years out of your existing one.
If fewer people are buying new cars, more people will pay for the more expensive maintenance options on their car. If the average American holds their vehicle for 12 years instead of 9 (rounding to make the numbers easier). They'll have to change their tires twice instead of 1.5 times. Dealerships will have more incentive to sell older, used cars (that they'll have to replace the tires on) because they'll be cheaper and more affordable to the average consumers. The argument is not "Hmmm, am I going to buy new tires or a new car?" It's that more people are going to hold onto their vehicles or buy older, refurbished, used cars instead of buying new ones, which should increase the number of tire changes an individual car experiences before being scrapped
I mean that the phrasing is peculiar. Most people see changing the tires as something that they're going to have to do multiple times over the lifetime of their car, not as a binary choice between getting a new car and changing the tires.
The point of that was that more people are going to hold cars longer, which will necessitate *more* tire changes (I said 1 change/6 years, internet says ~1 change/6-10 years depending on mileage), which is good for Goodyear.
Look at it this way, if the average age of the car on the road increases because Americans are more likely to hold their car or buy a cheaper used one, the average number of tire changes per vehicle increases.
In the contrary case, if Americans are more willing to buy new cars and the average age of car on the road decreases, that means fewer tire changes per vehicle, which is bad for Goodyear because most of their business is replacement tires.
People aren't making the decision between "Buy new car or change tire". They're choosing "Buy new car or buy/keep old car." The longer that an old car is on the road the more tire changes it needs. More tire changes are a direct consequence of the decision people are actually making, but they're not directly deciding to change their tires instead of buying a new car.
What is the difference between Goodyear selling tires that will be used for new cars versus selling tires to consumers that will be used on their existing cars? If the consumer market shifts so that people hold on to their existing cars for longer does that change the total number of tires that Goodyear is selling? Or does it just mean that they're still selling a million tires a year but now a lower percentage are going to new cars?
The difference is that 80% of Goodyear's business is selling replacement tires. Most car companies do not use Goodyear tires in their new vehicles, but Goodyear makes tires that can be used with most makes and models.
So yes, the more tire changes people go through, the more likely they are to choose Goodyear tires vs non-Goodyear tires because it's easier to put Goodyear tires on aftermarket (i.e. during a tire change) than it is to get them when you buy a new car.
Now, some of Goodyear's rally may also be that they're an American company, though many of their tires are produced abroad and thus subject to tariffs, so probably not enough to drive such a strong performance on its own.
Sure, you take it to the dealership for your 40k mile service and the tech tells you it's $1000 for a set of new tires, $400 to replace the brake pads and fluid and $100 for an oil change. Or you can put that $1500 towards a brand new car!
Which is what, $30k these days at the low end for a decent ride? If you can afford $30 every four years or so that might be a good indication that you are far removed from the media consumer.
Unless you're totalling your car every time you want a new one you're not spending $30k; most people are paying $400/month for their car on lease or credit, or trading in their old car.
Yes, leasing obviously makes a great deal of economic sense.
Look, most people who are intent on actually saving money will buy used and then take care of their car for as long as possible. Getting the oil changed, tune ups and replacing tires is just part of that. Buying a new car is something that happens when the car is old, not something that happens because you don't want to replace the tires.
I promise that the car industry and all of the jobs that rely on it—dealers, manufacturers, marketers, everyone down the chain—is relying on some people leasing or buying new cars before they need to because their old car is falling apart. It may not make rational economic sense, but neither does a trip to Disneyland. If the argument is, "all these tariffs are going to do is make people subsist frugally," well, yeah, that's what a recession is.
Go back and read the original post. Silver, AFAICT, is putting forth the bizarre assertion that Goodyear is up primarily because the binary choice between consumers is to either get a new car or replace the tires on their existing one.
If you say so. Based on my personal experience there are plenty of people that will roll a $400/month lease into a new lease for a new car at $600/month because they don't want to pay a one-off expense. Does it make financial sense? No! But they hear they can pay $1500 to keep driving their current car at $400/month, or pay an extra $200 a month for a brand new car. Then they end up paying $1200/month to lease a Honda Civic because they've done that four times.
"Plenty" != "a majority". Yes, there are financially illiterate idiots out there and there are entire industries that rely on victimizing people who failed junior high school math classes.
But tire companies probably do not fall into that category.
To oversimplify, I see three possible outcomes, I don't know which one is most likely.
1) Trump takes back some of the tariffs, claims that Vietnam or Spain or whoever "totally surrendered" after some B.S. symbolic concession, and things somewhat recover. His supporters brag about how Trump totally owned everyone, which is annoying, but they are 45% of the country so they also somewhat get to create their own reality.
2) Some of these countries actually do come to the table, though honestly I'm not sure what a lot of them are supposed to do since the "retaliation" is based on imaginary tariffs and not actual tariffs that can be lowered. Probably a middle case in terms of economic effect, where we have a completely unnecessary slowdown, but not necessarily a recession or an apocalypse.
3) The "humpty dumpty" scenario. Even if everyone finally realizes how dumb this is in 3-6 months, it's way too late to put the pieces of the global trade system back together, and we see a serious global recession. And frankly, a possible complete reordering of the global system. Bonus points if this initial stress causes a black swan event elsewhere in the economy that leads to cascading failure.
The black swan event probability is unfortunately not zero, not even close. The one thing that underpins "life as we know it and take for granted in America" is the greenback being the world's reserve currency. Current account deficits and world leadership are a large part of this. What if others lose faith in the USD? Borrowing costs skyrocket, we default on debt, and the country goes into a deep tailspin.
And yet Trump constantly talks about how we need a "weak" dollar. Why? So we can sell a few more goods overseas that we don't even manufacture, at the expense of everything else that we've come to rely on?
A large orange man once said, "Trade wars are good, and easy to win."
Unfortunately, I think you are thinking along the right track. A black swan event is, by definition, something not obviously predictable beforehand, even if it is seen by Monday morning quarterbacks to have been foreshadowed.
So, maybe promoting crypto as the new reserve currency? That might start some sort of cascade.
Countries can't lower their trade deficit without massive structural changes that would take years--and yet that's what Trump based his tariff math on. So countries have no ability to "come to the table" based on his current rules.
I personally put the chance of a total reversal on tariffs at 70% right now. Subtract 2% from that probability every day he doesn't flip.
The damage has already been done through: all business activity in the last several months has had to stop because of the nonsense.
There's also a "purgatory" scenario where he postpones implementation for 4 weeks. Decides on countries A,B,C it should actually be 5% lower. Then the leader of country D has a "very productive" phone call. And it's kind of a mess where he tries to climb down slowly and save face, but it's an open question whether it's too late to salvage the global trade system in its current form.
I submit it is already too late to salvage the part of the global trade system that includes the United States.
Countries will balk at signing trade agreements that depend on Trump keeping his word.
To me, that's what flipping will look like. Obviously he's not going to say, "I was wrong" or whatever--the flip will be carefully choreographed by the media in order to telegraph the flipping ONLY to the people who matter to the markets.
But yeah, the problem with this plan is that massive damage has already been done, so even a complete (defacto) flip won't reverse the slide of the economy, most likely.
I think people are missing something important about this. Just because the "reciprocal" tariff is based on a trade imbalance calculation doesn't mean that this is how the tariff will continue to be calculated in the future. If you read the text of the WH fact sheet, it says that the reciprocal tariffs go away at Trump's discretion.
So their plan is that the country will call up Trump with concessions (reduce tariffs and non-trade barriers on U.S. exports), and Trump will go "ok" and then drop the tariff. It's not "the tariff will remain at the level of the U.S. trade deficit in perpetuity".
Still, wouldn't it have been better to impose *actual* reciprocal tariffs? For clarity in the message being sent, if nothing else?
The problem with *actual* reciprocal tariffs is that in many cases that would have only been something like 3-5%. In order to have these huge 20 and 40% tariffs they had to come up with some totally insane formula that had nothing to do with tariff rates, since that fundamentally wouldn't have worked for what Trump wants to do.
I guess that’s right: what he wants is not to promote free trade but to get rid of the “trade deficit”, which is senseless.
For sure. Execution and clarity has been poor. I just don’t think it’s quite as unworkable or unstrategic as a lot of the commentariat is claiming. I might work. It might not.
You sound delusional: "They did a historically bad job at planning, execution, and communication. But it just might work!". There is nothing workable here and clearly no strategy is in place.
I am on the left, and yes, I absolutely want manufacturing in the US. Also yes, tariffs can be a part of that (tariffs are just a tool and you can use them wisely or no). But, obviously, you cannot just randomly impose tariffs(especially absurd ones that you got from ChatGPT the night before, because you and your team are just that stupid, incompetent and evil) and the rest happens by magic.
On the contrary, for Trump & co, they are doing everything they can to increase joblessness and worker insecurity. They have offered no path to manufacturing in the US other than crazed flip flopping on their deranged and indefensibly dumb tarrifs.
Why are you replying to a comment I left 6 days ago as if I left it this morning? That was a lifetime ago in this saga.
Trump doesn't care about actual policy, he wants the optics of being able to look like he's big-dicking everyone at Davos that he thought looked down on him (with good reason) for decades. He wants to play the Big Man on the world stage and too many other leaders are willing to indulge him.
Inflation came in hot and the jobs report featured more hiring than expected.
It’s all going very well so far.
Just the fact that the US is demoing this autarchy trade war is probably enough to permanently change the global order of trade. No takiebacksies on this one.
You left one out: our tariffs are "fair," other countries' retaliatory tariffs are unfair, which means they are trying to destroy America by declaring economic war on us when all we were trying to do was protect ourselves from their depradations. So we esacalate to military threats and possibly ultimately find ourselves at war.
I put the odds of military action at 0%.
I wouldn't go that low, I could see us stumbling into war with Mexico, for example, even if it just starts as drone strikes and commando missions against cartels. Firstly, cartels may retaliate and trigger an incident where people would demand a larger action against Mexico (like what does Trump do if they kidnap a diplomat or soldier and chop them apart with a chainsaw). Secondly, all of this could drive Mexico to enter formal or informal deals with other nations (like China) that Trump could portray as an act of war. I think with so much else going on so far this is one of the underrated risks, though I put the probability at more like 20% than "likely".
War requires one side to shoot back. If Trump did violate Mexico's territorial integrity they would probably roll over. If I am not mistaken they are one of the tariff targets that currently have no plan to institute retaliatory tariffs of their own.
As for China, or any of the other great powers, direction confrontation with another superpower is unthinkable for obvious reasons.
p.s. to be fair, the U.S. could become more self-reliant in the long-term, and if not necessarily as rich as it could have been, perhaps more egalitarian and still better off than most countries in the world. But I think this is on the 5-15 year time scale, i.e. Orange Man will probably be dead before this really happened, with lots of pain in the meantime.
What are we trying to become self reliant in? What Americans are going to go into the factory to make some low quality, expensive shoes?
Plenty of Americans used to do it. If those jobs start paying a lower-middle class wage, people will do them. Not saying it would be great for everyone else, but Americans do some pretty crappy jobs already. Of course, they will also have to compete with robots and AI to a much larger extent than 50 years ago, so I don't know how that would shake out.
You would either have very expensive low quality shoes with lots of makework factory workers or still significantly more expensive, decent shoes with very few American workers because the factories are heavily automated.
" If those jobs start paying a lower-middle class wage, people will do them. "
Americans already have better things to do for a lower middle class wage.
This is why this whole tariff "plan " is so mindblowingly stupid. The only way the US becomes a manufacturing powerhouse of cheap goods again is if the economy collapses to a point where labor becomes CHEAPER here than overseas- how does that in any way translate into more middle-class jobs? And even if it happens- who will buy all our newly cheap American goods? We will have just put a bunch of Chinese, Vietnamese, and Indian factory workers out of a job, and somehow they'll be the new consumer powerhouse of the globe?
It's a farce!
America imports people without legal status to do those crappy jobs at salaries way under minimum wage. Or at least we used to.
Yeah, the key question re: tariffs is whether a tradeoff between average national wealth versus extra local support for specific subgroups is a good one.
He seems to be pursuing your purgatory approach outlined a comment you made. Which might manage to get us the worst possible combined outcomes.
The Russia Hoax is being completely diluted. Zero tariffs on….. Russia ! Really !
Trump's primary concern with Russia right now is getting them to the bargaining table to negotiate a peace treaty with Ukraine. And in that sense his hand is terrible. All of the arrows in the sanctions quiver have been fired off, meaning that Trump has no sticks and is left with just carrots.
I think it's obvious by now (if it wasn't always) that Russia's goal is to string Trump along as long as they can, and then cut off the whole pretense once it's no longer possible to maintain.
They believe they have the upper hand in Ukraine and that time is on their side. They don't have any desire to end things in the current state when they think it will be more favorable to them in 1-2 years. Also a huge objective of the war (regime change) remains unresolved.
Even Trump's somewhat big concessions are nowhere close to what Russia needs to see to end the war in 2025 with a negotiated settlement.
Yeah, I agree 100%. The time to negotiate a peace treaty was two years ago after Russia experienced a couple of large setbacks.
Now they believe that they're winning, and when was the last time you saw somebody winning a fight call it off early?
It is important to remember that Putin would not have abided by any peace treaty he signed. When has he ever? So there really was no point--and is no point today--to a "peace treaty."
What's the alternative then? Ukraine is losing.
I don't expect that Russia will take the entire country, but allowed to just continue his offensive Putin will go for another year or two, probably seizing all of Donetsk and Luhansk. The real worry is that he will get to Odessa and cut Ukraine entirely off from the Black Sea.
I mean, the real answer is for Europe to step up its support for Ukraine.
Why wouldn't a peace treaty also lead to the outcomes you worry about?
I agree. Unfortunately it was the other way around two years ago. Hindsight is 20/20 but Ukraine and the U.S. were in no mood to negotiate when they believed that one more counteroffensive was going to breakthrough and recapture a large part of the occupied territory. I remember Mark Milley made one tentative statement that negotiations should be considered in late 2022, and he was pretty strongly attacked for it.
I was skeptical, but gave them the benefit of the doubt at the time because, firstly, they had access to a huge amount of information that I didn't have access to. Because of this I assumed that perhaps the Russian military really was on the verge of collapse. And secondly, I had underestimated Ukraine several times in a row and they had (through early 2023) exceeded my expectations every time. However, it now seems like this overconfidence was driven by political and not military realities.
The mainstream media narrative was absolutely shameful. Look at the obfuscation regarding casualty figures. At roughly the same time the news outlets reported that US intelligence estimates put the number of Ukrainian KIA at 70k and the total number of Russian casualties at 210k. This was presented as some kind of evidence that Ukraine was winning the war.
Ok, except that of course "casualty" counts included the wounded as well as the dead. And then of course the general rule of thumb for military operations is that the number of wounded is typically 3-5x the number of those killed in action. Extrapolate that out to Ukraine that means 280k (at the low estimate) casualties to Russia's 210k.
And then of course there is another rule of thumb that the attacker in offensive operations typically suffers 2-3x the casualties of the defender. The math just didn't work out.
Most recent estimates of casualties have Russia at over 500k total and well over 100k KIA. However, I still think this is too close to Ukraine's numbers, which are like 75k KIA. Ukraine needs to be inflicting a 2-3x casualty ratio, not like 1.5x.
A big part of the gap there is that after Republicans took the House in the 2022 elections, the US was unable to continue supporting Ukraine as it had been, and so Russia was able to keep the lead. If Democrats had kept the House, the war would probably have been over in 2023.
I think the better comparison is to the American Civil War. Initially the South had some successes due to being more highly motivated but in the long term the North's larger economy/industrial base and population won out.
There is a huge amount of room to maneuver on sanctions. There are many gradations of enforcement and we are far from maxed out, if anything they have gotten more lax under Trump. Many secondary and some primary sanctions could also be added as well.
Of course Trump seems completely uninterested in actually putting the screws to Russia and there's almost no chance he does anything more than the occasional tough guy social media post, without backing it up with actions.
Even if he wanted to put more pressure on Russia he's made that much more difficult by attacking and alienating every single country that we would coordinate with on doing so.
How many hundreds of thousands of Ukrainians have died? How many millions have had to flee the country?
If there is room to maneuver on sanctions then why wasn't the maximum amount of pressure applied years ago? Maybe all those dead and crippled Ukrainians could have been saved?
Didn’t want to upset energy prices.
Then this entire project was doomed from the get go.
But yeah, when the Biden administration was warning the Ukrainians not to target Russian oil production that should tell you everything that you need to know.
At first I thought it made sense that sanctioned countries were excluded. But I learned we did $3 billion of exports from Russia last year, which while not that much, is still substantially more than some other places that made the list.
Also implementing tariffs on Iran.
We don’t import anything from Iran, barely anything from Russia. What would tariffs on nothing achieve?
So why are we tariffing Iranian goods and not Russian goods? What do tariffs on penguins achieve? What do tariffs on tiny diamond exporting impoverished African nations achieving? $3 billion in Russian imports last year.
Texas is fully behind Trump, even though oil prices have dropped almost 20% since "Liberation Day". If there is one group of people that should be supporting sustainable oil prices between $70-80/barrell, it's Texans, yet I haven't heard a word of protest for what's going on.
I can't even imagine the outrage if Biden had made moves to unilaterally tank the American equity (S&P down 9%) and oil markets in a matter of 2 days, with no rationale except that "watching things burn is fun!". Yet what I'm hearing from the right is akin to justifying the loss in everyone's net worth with buying war bonds. Simply a sacrifice. Except that the former is like cutting your own hand off as a sacrifice to the gods (Wormtail for Voldemort) whereas the latter is an investment that will likely be paid back and is a sacrifice to get war-winning gear to the troops.
We're in the 1st inning right now.
It is just a theoretical sacrifice right now for most people. Plus anyone over 30 has seen the S&P drop by over 10% several times, or seen oil prices bounce all over. For someone predisposed to have a good view of Trump, this is nothing so far.
Also worth noting, this is pretty much what a lot of people predicted would happen during the *first* term, and it really didn't. So a lot of people on the right are trained to ignore the naysayers and have been somewhat vindicated in doing so for many years.
Yes-the difference that was noted during the first term was that Trump had guardrails. Actual experts, people who weren't living in an alternate reality. People who took an oath to the Constitution, not a man. Lara Loomer would never have been allowed near the WH.
That's all gone now.
Yes. It's relying on Navarro instead of Lighthizer (right-wing but not crazy), for example.
Agreed, and the key numbers to watch are the market valuations before Trump won in November. As of this moment, TSLA is still UP from that number.
The markets are down, but they aren't down enough to make people truly care.
As for voters, they will care more about layoffs when (not if) they start happening...
You must have a much bigger portfolio than I do.
Well, yes, people care, but if you are a Trump supporter, then you are necessarily bombarded daily with "whatabout" analysis that focuses not on how great the Republicans are but rather how terrible things are / would be if Harris won. Hence the only thing that will change a person's *vote*--not just their current mood--is Trump being demonstrably worse than Biden. That means the markets dropping below Biden levels and this making Trump voters long for the days Biden was in office.
I wouldn't say TSLA is up since Trump won. Down or maybe flat, but not up. It closed at 251 on election night, and 239 today. And it closed even lower a few times in March. It did spend some time between 210 and 220 in October, so maybe that's what you're referring to for your pre-Trump valuation, but it also spent time above 250 in September.
Yes, I didn't see that it was that close. But in my opinion, it needs to be considerably below when Trump took office for voters to truly flip.
Throw out all the other baggage and the Dems should have one message for the remaining special elections and the midterms:
"Trump promised to lower costs, but now he's flip-flopping and adding a $7200/year import tax on a family of four. You can't afford more of Trump's taxes. Put the adults back in charge."
Don't engage on culture war BS.
Agree, but you need to adjust your thinking because the old rules of politics no longer apply.
When it comes to "messaging", the Democrats *lose* right now, and are going to lose for the foreseeable future. The GOP controls the media now, and thus they are always going to win on "messaging" regardless of what the Democrats do.
The only thing--the ONLY thing--Democrats can win on today is... reality. Voters (i.e. the 5% of voters needed to flip US politics) need to **actually go broke** in order to change their vote. If the economy does not tank, then the GOP wins, and no amount of "messaging" is going to make any difference.
So yes, they should drop the culture war stuff, but don't center your thinking around "messaging" is all I'm saying...
Disagree bigly, respectfully.
You definitely need a message
But you need your message to match reality, and that's why Biden/Harris failed. They were trying to sell "actually, your finances are pretty great" to the voters, when that wasn't the reality for a lot of people.
The new administration is even worse by saying, "this will require some short-term pain"- when has that ever been a political winner in the US? Mayyyybe in early days of WW2, but the circumstances aren't even remotely the same now.
The election swings on Tuesday were significant back to the Dems (look at the WI map- they improved in every county and ended up at +10 with fairly high turnout)- and that was BEFORE the stock market crash.
I'm arguing for a simple, laser-focused strategy on Trump bungling the economy.
But that's a message that Democrats don't have to send because it sends itself.
Understand that, for 51% of US voters right now, **absolutely everything the Democrats say is a lie**. Hence they can only *lose* when they try to say something to them right now.
Our situation reminds me of being on the plane back from Vegas, and listening to people say they, "probably broke even" during their stay even though they lost a ton. If you start in on how, mathematically, Vegas odds are inherently against you, bla bla bla, they aren't going to hear it. All you can do is let them stew in their losses and hope they learn their lesson.
If you study cults, you see that outsiders *cannot* break a cult, they only fall apart from within.
Democrats like Corey Booker should probably do their politician thing and make noise, but that will just help secure the voters Democrats already have (and it's important to remember that only 5% of voters really matter in the USA today in terms of power flipping from one side to another).
That's all fair enough- i think we're kind of on the same page. When your opponent lights himself on fire just getting out of the way is usually the smart play. But, like you mentioned in your earlier post about the skewed media, i highly doubt the Dems can plausibly just stay silent until Nov 2026- eventually they'll have to make their case to the voters again and that's why i'm arguing for a simple strategy and absolute message discipline. "No more Trump Taxes"
General Secretary Trump says the coddled American people must learn to eat bitterness
Except that for the majority of the country, it was a fact that their finances were "pretty great", and they even told that to pollsters (Pew research, 41% "Excellent or good", 39% "fair").
And yes, 40% of R's were in the "Excellent or good" slice.
If people had voted based on their personal economic situation it would have been a blowout for Harris.
That didn't matter to the "can't vote for a Black woman" idiocracy.
They voted on the relative difference between Trump's and Biden's terms, which were roughly equivalent for most voters (the pandemic notwithstanding). This allowed voters to basically ignore economics altogether than vote on "culture".
If millions start losing their retirement plans and/or jobs because Trump willfully screwed up the world economy, that will change a lot of votes.
The problem is what does "tanking" mean? A recession?
If one starts this year it will most likely be over by 2026. And then by 2028 the country will have entered the recovery period.
It specifically means the stock market, Bitcoin, oil prices (lower is worse for the Republicans), and certain job markets.
As for a pre-defined economic cycle that all recessions follow, well, that's not how it works :-). The cycle could last six months or six years. Looking at history of the past 20 years is meaningless when the changes being made are the biggest in a century.
But even if it did follow that pattern, the GOP would badly lose the 2026 elections and would be very weak with a non-Trump candidate for president.
The average length for a recession since WWII is between 18 and 24 months. Could it be longer? Sure, anything could happen. Is it likely? I doubt it.
If I was Trump I would blow off 2026. Historically the party out of power does very well in the first midterm after a presidential election. Plus the Democrats now have an advantage with the educated voters that disproportionately vote in midterms and special elections (see the Wisconsin judicial election).
For 2028 the Democrats will need to fight their civil war to decide if the woke or the centrists lead the party. I expect they're at a disadvantage in that election because of the infighting.
Chances of the leftists coming though to lead are rising the more backlash to this Trumpist mismanagement abetted by docile Republicans festers.
If we're talking about a scenario where a recession hits now (and again, if I put on my conspiracy hat I think there's a good chance that the view of the Trump administration is that a recession is coming no matter what) then the most likely outcome afaict is recovery by 2028.
Will the tariffs do permanent damage to the US economy, or at least long term damage that will extend out to the 2028 election? I have no idea--there are certainly points to be made for each side.
And if the leftists end up leading the chances of a victory in 2028 go down dramatically.
You need to go back much further than WWII since the changes here at far far bigger than anything in that period.
And lest we forget that Smoot Hawley itself was blamed for the Great Depression, which of course lasted far longer than any mere "recession". Personally I wouldn't use *history* here to make a prediction like that.
I agree that the Dems are going to win 2026 for all of those reasons and more.
2028 depends on one man: Trump Jr. He may or may not be a strong candidate for the GOP, as he does not have the temperament that Trump Sr. has in terms of his personal ruthlessness. If he's a strong candidate, then the GOP will compete. But he could fail badly as well.
(And yes, 100%, Trump Jr. will be the GOP nominee for president in 2028).
Smoot Hawley was a contributing factor to the Great Depression but it was not the main cause. Claiming otherwise is historical revisionism.
I suspect that Trump and Bessent believe that a recession is inevitable no matter what they do so they might as well out tariffs now. As to how severe the downturn will be I have no idea. If somebody wants to build a model and run the numbers I am all for it.
I honestly don't see how Vance doesn't get the nod if he wants it. He's the sitting VP. Plus the Trump kids have shown zero inclination to get involved in politics.
The person who used ChatGPT to define the tariff calculations hopefully saved that conversation so they can ask a follow-up question: “so this is the effect on the global economy of your proposal. What now?”. I mean I’ve used that approach to refine some python code and a recipe for pancakes, so I could easily see it working for global economic policy.
“Apologies for the error! Yes, it does seem that this has tanked the global economy. I will incorporate that into my training data for the future!”
"You are right, I did forget to include Russia on this list! I apologize. Let me generate a new list for you including Russia and North Korea."
(second list also fails to include Russia and North Korea)
1. THE TARIFFS ARE JUST A MEDIA TOOL.
The tariffs are the "revenue" side of the BS Republicans are going to hide behind in order to pass massive, deficit-exploding tax cuts (with DOGE being expense side). In this scenario, the stories don't have to be true, or even that believable--they just need to be good enough to flip a few remaining R votes who pretend to care about fiscal deficits.
2. THE MARKETS ARE DOWN RIGHT NOW--BUT THEY ARE *STILL* PRICING IN A TRUMP FLIP.
The current market downturn is not, "oh no, tariffs", but rather, "oh no, there is a 30% chance of tariffs now". I think the market is still convinced that Trump may well reverse all of this (and I think the market is right here). The longer Trump fails to flip, the lower the markets will go as the 30% chance turns into a 40% chance and so on.
3. THIS IS NOT SMOOT HAWLEY. IT'S A THOUSAND TIMES WORSE.
The human race is now completely dependent on the globalized economic system. This was not the case a century ago, or even 30 years ago. Today, almost all manufacturing and supplies of vital goods are interdependent with global trade. Comparing damage to global trade in the 1930s to that same damage today would be like comparing a major telecommunications disruption in the 1930s to what it would mean today. Trade was a relative "nice to have" back then. Now it's simply the way human beings do business. The pandemic gave us a *tiny* taste of what a global supply disruption looks like. Tariffs will have a much larger impact than the pandemic in scope alone, but it is a EVEN WORSE THAN THAT because businesses could plan on the pandemic being *over* at some point whereas the trade wars are potentially permanent.
4. DAMAGE HAS BEEN DONE ALREADY.
This has *already* disrupted the world economy, even if Trump abandons the idea, because all business planning in the last months has had to stop, and individually, every business in the world--not just a tiny few--have been put on notice that their business can be severely disrupted at the whim of the US president. This will severely effect business planning, and thus finance, and thus job creation. In other words, ever new expansion of business has to now ask a major "what if?" before commit funds to a new venture.
For the past half century, the world has relied on a stable US government to be at the center of a relatively stable global financial system. This created a baseline "risk premium" for trade and investment that was relatively low. Now investors must price in a much higher risk premium, and this a cost that is in the "inside loop" of the economy as a whole--under Trump and his party, the *entire system* is now far less efficient.
Your last point is especially correct. Canada is sorting their inter province barriers, the citizenry is becoming rabidly anti American in purchasing, and they are building a stronger trade agreement with the EU. Apparently Japan, China, and South Korea have formed a new trade agreement, which given the historical issues there, is a massive change. There's certainly more out there as well.
For point #1... My timeline for really worrying a fiscal debt crisis in the United States had been the 2040s, up until COVID. It was the late 2030s up until around a month ago. Frankly, Biden didn't help here at all, being extremely profligate compared to Obama or Clinton.
But if there's a $4 trillion tax cut extension, "paid for" by $10 billion in DOGE savings and tariff revenue that won't come close to covering the lost income taxes from a recession, then I don't know how long we have until there's a sovereign debt blowout. We're starting from a really bad spot, can the U.S. run $3 trillion deficits for very long before it implodes?
That is a more aggressive tone that I’ve seen Nate take in a while. Oof.
I mean, this is a bigger self-inflicted, unprompted, grade-A shitstorm than we've seen in a while. A long while.
This is what a lot of people *said* Trump was going to do back when he won in 2016, and he really didn't do it his first term.
Agree this is one of the biggest own goals in the last 90 years of U.S. economic history. I hope it's recoverable and not a "humpty dumpty" scenario.
Trump didn't do it in his first term because he was largely surrounded by competent, if awful, handlers. But during that time he's been able to use the MAGA crowd to practically eliminate everyone from the GOP expect a bunch of craven obsequious fucks.
But he did do some, and bailed out the farmers.
RE: "Trump just basically has to hope that Wall Street is wrong", arguably he has already responded on that point with "I don't care". He's a lame duck POTUS who is on a mission to completely destroy "globalism" and "multilateralism" because he thinks that "god spared him" during two assassination attempts. And despite his textbook-example narcissism he no longer cares about "popularity" --- his rampant delusions of grandeur and his belief that he is a "Genius" and that "Only He Can Fix It" have completely taken over what passes for his mind. Mere stock-market declines are not going to change the idée fixes and obsessions of a dunning-kruger lunatic who thinks he's on a "Mission From God". :-(
Fun tangential fact: the shopping center pictured at the top of the article was built on top of an improperly-sealed landfill. Shortly after the retail tenants moved in, methane alarms started going off right and left, and 80% of the tenants (including Wal-Mart) bailed out.
laughed when i saw the caption, as my immediate reaction to that picture was, "hey that looks like Garbage Heights..."
What’s really frustrating among everything is those pathetic sycophants has pathological inability to acknowledge mistakes (at least publicly) and demand to see them as serious intellects as well - like Shaun, my guy, just acknowledge you fuck up and please don’t deride us for not understanding your “masterful understanding of economics unlike anybody else”
Yep. Studies show the most successful people are the ones that constantly strive to learn and gain perspective from others, growing their base of knowledge and problem solving skills. All of life is learning: what works, what doesn't, and tailoring your approach to be more effective next time.
At one time we called this Darwinism; folks that couldn't do this, those that dismissed dangers and refused to change their opinions in the face of new facts, were eaten by lions. We no longer have lions eating the illogical stubborn types.
Casting no shade on this piece - I dig it - but “Trump-supporting sycophants in Silicon Valley” made me immediately think of Sylvester the cat.. you could have started with “Sufferin succotash!”
The Wall Street focus on neoliberal economics and outsourcing to China, led by Republicans and Democrats both (Clinton), only benefits large corporations and companies that import cheap goods to consumer mad American. We have been under the spell of an economic theory that has failed, overlooks mercantilism, and cannot last much longer. But Trump's tariff approach is excessive and unfocused, rather than being more effective in dealing with specific countries and products. We may have a great recession. But Biden triggered Trump's election by running for re-election as a debilitated geezer, out of touch and arrogant.
Biden did nothing to alter America's long-term trajectory towards a destabilizing sovereign debt crisis, and in fact made it even worse with his orgy of spending. On substance and on politics (he basically handed the 2024 election to Trump on a silver platter) he was a bad President.
Only now we've gone from bad to terrible, in my opinion. Still, it irritates me when people act like Biden was somehow this amazing President who we were lucky to have.
A good index to follow as opposed to the S&P, the NASDAQ or the Dow is the Russell 2000. Composed of the smaller companies that are often less international / don’t make the big headlines. Perhaps closer to a Main Street index than the others. It’s off 25% since it hit 2442 in November last year and is off 12% over the course of a full year. The Dow, S&P, NASDAQ have yet to make new lows over a 1y period.
So Project 2025 really is all about America late 1800s / America 1930s. And yes, the biggest issue to worry about is which gender bathroom the kids have to worry about, and which "shithole" countries are sending us their "rapists and murderers" (/s)
And merit only applies to white guys. Anyone else is just a “DEI” hire. Just ask Hegseth.
Admittedly, I did not (yet) read your entire post as I had to pause at "fifth-largest point drop in the history of the Dow Jones Industrial Average". I expect that kind of rhetoric from biased click-bait propaganda, but definitely not you Nate! As you (more than most people) understand, the actual "point drop" is meaningless as compared to the overall percentage (see https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart). Also, the immediate reaction to a LIMITED SET OF DATA is not prudent. Even Fed Chair Powell is taking a wait and see approach. (For the record, I have always despised tariffs of any kind, but at least this allowing the public to understand it's a financial engineering game that nearly all countries participate.)
You should've read the rest of the post, because he like almost immediately remarked that percentages usually say more than point drops. I checked again, and the sentence was visible without scrolling down after loading the article. Read a bit more of the post before commenting bro lol
Thanks, and yes I did notice that comment when I continued reading, but I still believe it's overshadowed by the majority of the post that IMHO has a Chicken Little vibe based on only a few days of data. I would never suggest its not reasonable to sound early alarms, but it's way too early to suggest the sky is falling.
Actual economic knowledge is sufficient to predict the outcome of a tariff fight. Kindergarten morals from fables need not apply.
And the total point drop does in fact track the loss in market cap. Sure the total size of the market matters, but not to companies that no longer have a business model.
"But it’s also because more than 80 percent of Goodyear’s tire sales come from replacement tires. You go to Goodyear because you’re hoping to another good year or two out of your existing vehicle because you don’t think it’s prudent to buy a new car."
Uhhhh, do people actually buy new cars because they don't want to replace the tires???
You've got Nate's cause and effect backwards. Like he said, you go to Goodyear because you can't afford a new car and you want to get another couple of years out of your existing one.
If fewer people are buying new cars, more people will pay for the more expensive maintenance options on their car. If the average American holds their vehicle for 12 years instead of 9 (rounding to make the numbers easier). They'll have to change their tires twice instead of 1.5 times. Dealerships will have more incentive to sell older, used cars (that they'll have to replace the tires on) because they'll be cheaper and more affordable to the average consumers. The argument is not "Hmmm, am I going to buy new tires or a new car?" It's that more people are going to hold onto their vehicles or buy older, refurbished, used cars instead of buying new ones, which should increase the number of tire changes an individual car experiences before being scrapped
I mean that the phrasing is peculiar. Most people see changing the tires as something that they're going to have to do multiple times over the lifetime of their car, not as a binary choice between getting a new car and changing the tires.
The point of that was that more people are going to hold cars longer, which will necessitate *more* tire changes (I said 1 change/6 years, internet says ~1 change/6-10 years depending on mileage), which is good for Goodyear.
Look at it this way, if the average age of the car on the road increases because Americans are more likely to hold their car or buy a cheaper used one, the average number of tire changes per vehicle increases.
In the contrary case, if Americans are more willing to buy new cars and the average age of car on the road decreases, that means fewer tire changes per vehicle, which is bad for Goodyear because most of their business is replacement tires.
People aren't making the decision between "Buy new car or change tire". They're choosing "Buy new car or buy/keep old car." The longer that an old car is on the road the more tire changes it needs. More tire changes are a direct consequence of the decision people are actually making, but they're not directly deciding to change their tires instead of buying a new car.
What is the difference between Goodyear selling tires that will be used for new cars versus selling tires to consumers that will be used on their existing cars? If the consumer market shifts so that people hold on to their existing cars for longer does that change the total number of tires that Goodyear is selling? Or does it just mean that they're still selling a million tires a year but now a lower percentage are going to new cars?
The difference is that 80% of Goodyear's business is selling replacement tires. Most car companies do not use Goodyear tires in their new vehicles, but Goodyear makes tires that can be used with most makes and models.
So yes, the more tire changes people go through, the more likely they are to choose Goodyear tires vs non-Goodyear tires because it's easier to put Goodyear tires on aftermarket (i.e. during a tire change) than it is to get them when you buy a new car.
Now, some of Goodyear's rally may also be that they're an American company, though many of their tires are produced abroad and thus subject to tariffs, so probably not enough to drive such a strong performance on its own.
Goodyear owns Dunlop, Cooper, Kelly, etc. Two, most of the tires sold on cars are from major brands--including Goodyear.
Sure, you take it to the dealership for your 40k mile service and the tech tells you it's $1000 for a set of new tires, $400 to replace the brake pads and fluid and $100 for an oil change. Or you can put that $1500 towards a brand new car!
Which is what, $30k these days at the low end for a decent ride? If you can afford $30 every four years or so that might be a good indication that you are far removed from the media consumer.
Unless you're totalling your car every time you want a new one you're not spending $30k; most people are paying $400/month for their car on lease or credit, or trading in their old car.
Yes, leasing obviously makes a great deal of economic sense.
Look, most people who are intent on actually saving money will buy used and then take care of their car for as long as possible. Getting the oil changed, tune ups and replacing tires is just part of that. Buying a new car is something that happens when the car is old, not something that happens because you don't want to replace the tires.
I promise that the car industry and all of the jobs that rely on it—dealers, manufacturers, marketers, everyone down the chain—is relying on some people leasing or buying new cars before they need to because their old car is falling apart. It may not make rational economic sense, but neither does a trip to Disneyland. If the argument is, "all these tariffs are going to do is make people subsist frugally," well, yeah, that's what a recession is.
Go back and read the original post. Silver, AFAICT, is putting forth the bizarre assertion that Goodyear is up primarily because the binary choice between consumers is to either get a new car or replace the tires on their existing one.
If you say so. Based on my personal experience there are plenty of people that will roll a $400/month lease into a new lease for a new car at $600/month because they don't want to pay a one-off expense. Does it make financial sense? No! But they hear they can pay $1500 to keep driving their current car at $400/month, or pay an extra $200 a month for a brand new car. Then they end up paying $1200/month to lease a Honda Civic because they've done that four times.
"Plenty" != "a majority". Yes, there are financially illiterate idiots out there and there are entire industries that rely on victimizing people who failed junior high school math classes.
But tire companies probably do not fall into that category.