Thanks Adam, helpful, I thought Varoufakis’s bit on how it could work out Trump also insightful,
“Central to this new global order would be a cheaper dollar that remains the world’s reserve currency — this would lower US long-term borrowing rates even more. Can Trump have his cake (a hegemonic dollar and low-yielding US Treasuries) and eat it (a depreciated dollar)? He knows that the markets will never deliver this of their own accord. Only foreign central banks can do this for him. But to agree to do this, they need to be shocked into action first. And that’s where his tariffs come in.
This is what his critics do not understand. They mistakenly think that he thinks that his tariffs will reduce America’s trade deficit on their own. He knows they will not. Their utility comes from their capacity to shock foreign central bankers into reducing domestic interest rates. Consequently, the euro, the yen and the renminbi will soften relative to the dollar. This will cancel out the price hikes of goods imported into the US, and leave the prices American consumers pay unaffected. The tariffed countries will be in effect paying for Trump’s tariffs.
But tariffs are only the first phase of his masterplan. With high tariffs as the new default, and with foreign money accumulating in the Treasury, Trump can bide his time as friends and foes in Europe and Asia clamour to talk. That’s when the second phase of Trump’s plan kicks in: the grand negotiation.”
The US has finally been captured by an out and out psychopath. His flunkies are systematically attempting to crush all other centers of power, the judiciary, the legislative, universities, law firms, the civil service, the military and you name it. Money has always been the measure of all things in this country. The New Deal mitigated predatory capitalism for almost a century but that seems to have collapsed now. The best way out of this I can see is a sharp recession that breaks MAGA before it can completely consolidate control and break apart popular democratic governance.
YES...and... The primary mission of the current regime is to ASSURE that the 2017 tax cuts are extended! Ignore what they "say" and focus on what they "do"! Tariffs = huge revenue source to "shield" the ~$4T+ in tax cut extensions! If the goal was to promote local manufacturing, the tariffs would be on specific products, not countries. Also: with costs skyrocketing and assets "tanking", they'll claim that tax cuts will soften these blows. Rubbish. ALL savings and new revenue should go to reducing the deficit, not to rewarding "donors" who own politicians.
I think Adam Tooze can do better. Why is there no mention of the drive to war and the strategy of maintaining U.S. dominance over the world economy, including the acknowledged “privileged” position of the USD?
—
FYI: Here is what the Marxists have to say:
Tariffs driven forward by two interconnected objectives
The imposition of the new US tariff regime unveiled by President Trump yesterday is a declaration of economic war against the rest of the world.
It has been driven forward by two interconnected objectives. On the economic front, it seeks to extract hundreds of billions of dollars in tariff hikes, ultimately paid for by US companies and consumers, to shore up the ever-worsening trade and financial position of the US, while weakening its global economic rivals, particularly China, to improve its trade position.
It also aims to enhance US military capacity by using tariffs to force companies, foreign and domestic, to increase the level of their operations on American soil, much of which is needed to supply the military.
Trump’s “reciprocal tariffs” escalate economic war against the world - World Socialist Web Site
... the wider objectives of the tariff war ... above all its drive against China.
... [Trump] indicated that while there could be negotiations, “there are things that we need beyond tariffs.”
This comment points to one of the wider objectives of the tariff war, which is to align countries with the foreign policy of US imperialism, above all its drive against China.
This was indicated in the Fact Sheet on the tariff announcement of April 2, which said there could be an adjustment to decrease tariffs “if trading partners take significant steps to remedy non-reciprocal trade arrangements and align with the United States on economic and national security matters.”
The biggest “national security” issue as far as the US is concerned is the economic rise of China, which it considers the greatest threat to its global dominance and which it is determined to crush by all means it considers necessary, including war.
The objectives of the administration were set out by Trump’s senior counselor for trade and manufacturing, Peter Navarro, in a comment piece published in the Financial Times (FT).
Navarro, the leading anti-China hawk in the Trump entourage, said the international trading system was broken. It was “rigged against America,” resulting in a “national emergency threatening our economic prosperity and national security.”
Trump threatens to hike anti-China tariffs again amid growing financial turmoil - World Socialist Web Site
The US and the western world is "a house divided on itself". Plutocracy wants the sky, including other people's skies - see China, Russia, Iran, etc. - doesn't make any effort for that - one would need a human and material base for that. One cannot have the cake and eat it at the same time, which is likely beyond magic...
So let's see how much deal is in the ruin of a nation. Popcorn and beer!
It all appeared very much like the Brexit-madness to me but I have learnt much more about the economic background in US-non-strategy from your post, as always 👍 (I will chomp on this for a bit).
Thanks!
The great tweet from yesterday (on the delay of your planned book on climate problems/solutions) really seems to nail it ;) There was a great Brexitcast on the BBC which I used to listen to religiously just to get my head around all the strange details. Good to have your newsletter now.
The accusation of Brexit-madness was always a failure to understand the mood of the nation which was very strongly aniti-elitists and very angry with both Westminster and Brussels. Quite rightly so as was evident then and much more evident since.
And the costs of Brexit, mad or otherwise, turned out to be small.
It was very similar to Trump Derangement Syndrome of 2017.
I have little patience for those that failed to understand voters then or even now. 35 years of GDP more than doubling while median incomes barely shifted 10% is guaranteed to upset voters! Nothing has changed since Brexit/Trump 1 other than a stream of ever worse leaders in both UK and US. Think Liz Truss, Starmer and most Americans voted for the embarrassingly incompetent, plain stupid, Kamala Harris (one interview in a Presidential campaign and that was a disaster).
Tarriffs is not a voter lead idea like Brexit or the Wall. Tarriffs are an oligarch lead idea (they are now going for an end to capital gains tax - who does that benefit!!)
This is Liz Truss again. The failure of competent people to stand up and compete for office. And the abuse of money and power to elect idiots who will accept single issue ideas, like Make Israel Great Again or (in UK) take on Russia with poor middle aged Ukrainian proxies.
The UK had two recessions and massive inflation since leaving. It also mitigated the impact by signing up to a bad free trade agreement. Crucially though it also massively increased its borrowing, far more than peer countries. And taxes are up too. To European levels I dare say...
It's grimly amusing to see people now saying the costs weren't so bad instead of talking about the benefits. The best they've got at the moment is the 10% tariff - I don't remember anyone campaigning on that basis. Non-tariff barriers with the EU and 10% tariff with the US - that's your brexit benefits.
Meanwhile all of the things that voters cared about and were upset about are just as bad or worse than before. The only benefit has been destroying the Tory party but of course whatever comes out the other end will be worse.
And that's before we consider the cost in NHS data, the loss of its ability to tax the tech oligarchs, and agricultural/pharmaceutical permissiveness in any trade deal.
The UK trashed its actually special relationship with the EU for the myth of one with the US. And it looks like Trump is treating the UK just like he has treated many others who enjoyed special relationships with him...
And so did everyone else. I'll stick to that - the costs of Brexit were small.
Not that anyone cared about the economy. Economy doubled in 30 years pre-Brexit - median wage was barely changed. You can't blame anyone in bottom half of wages for thinking GDP has zero correlation with their wealth. Indeed most people celebrate a recession because it is the only time they can laugh at the rich.
If you understood how the economy really works, or knew more people you might understand that.
Of course it was the elites (on both sides) that went on to stuff ordinary people. Brexit was a token protest against the elites - which is the most that most Brexit voters ever expected.
By the way you might want to re-write that last paragraph after the last week. Not that I think it is a good thing but it appears a special relationship does exist. Despite what MI6 did over Russiagate to get Biden in 2020.
I am reminded of an anecdote that Mark Blyth tells about a visit of a Remain campaigner to a Nissan plant in Sunderland. When he tried to explain to the blue collar workers assembled the consequences for GDP should the Leave campaign succeed, a voice yelled out, "YOUR GDP! That's not OUR GDP!"
Much of the bleating about Trump's tariffs reliably come from a class of persons not unlike that Remain campaigner -- they don't appear to realize how badly they are outnumbered (certainly in America) by an immiserated underclass impatient for change, ANY change ...
Exactly. Despite having had a mostly priviliged life, I find the inability of so many to see the difference between "our lives" and most lives quite insulting. Gross.
Yeah and you are the every man in touch with the real people and in tune with the real economy who simultaneously has not perceived any impact from leaving the EU.
If it truly was "Your GDP. Not our GDP!" then how was leaving the EU, primarily an economic relationship, supposed supposed to bring any meaningful change?
The immiserated underclass do not want "ANY" change. They want to preserve all the things they like (green and pleasant lands, pensions and healthcare, state schooling) without themselves having to make any sacrifice.
The change Britain needs is not the change they want. If we actually made the reforms that might align us with the fast-growing or high-taxing nations that are actually able to provide for their citizens the Brexit crowd would revolt again.
How many American workers, excluding those with an MS in robotics, will be assembling cars, appliances or phones in 2035? Google Samsung phone assembly robot or Boston Dynamics Atlas robot. And how many years does it take to build, equip, staff, train & debug a new auto plant? Inflation by Q3, then much lower employment before 2030.
Although I'm not a fan of the Euro Union cartel, the driving force behind Brexit was in effect the first step toward WWIII. Trump's coming $1T defense budget, along with whatever tariffs he settles on, especially toward China, will help push the process along. He and his supporters have nothing else to offer.
If this were only bad policy we could probably withstand the next four years. But the ‘tech bros’ give me pause as they talk about demolishing our democracy and replacing it with their AI and their version of autocracy. And of course all the devalued government assets can be sold at depressed prices.
This is a really smart analysis. Yes, it's likely to be a long slow deterioration in terms of the economy and the US position in the world, whatever happens with more immediate recession and/or inflation. And, use of tariffs has to be predicated on an industrial/sectoral set of policies and strategies for development, whether supply chains or skilled labor force (or batteries). Bidenomics did begin this process, with chips, climate, and infrastructure, though relying on tax breaks is a like a tariff or carbon tax, not likely to be fully effective on its own. Very thought-provoking, thanks!
I'm with Varoufakis -- the nearest recent analogue to the Trump tariff regime is the "Nixon shock." If it can be made to stick, it will mean an entirely new international trade architecture with entirely new winners and losers.
"The fact that we are even asking the question, tells you a lot about the degree of autonomy US politics actually enjoys", is a decisive observation. TINA NeoLiberalism has been systematically obscuring this point for four decades. Of course, Trump may be providing a (false) proof in the negative by failing dramatically with idealistic acts motivated by taking that systematically obscuring ideology at face value.
Ironic.
So, while Trump has significant policy space, in large part because of the "exorbitant privilege (for whom? needs asking)" he inherited without understanding, when he went from a serially bankrupt developer and casino mogul who's balance-sheet depended on exogenous money to POTUS, who's balance-sheet is built in endogenous money, he seems hell bent on maximally narrowing that policy autonomy. He appears committed to driving an "advanced economy" into "the middle income trap" by instantiating primacy for incumbent oligarchs at the expense of the pitchfork crowd that elected him. It's a Zelensky bait and switch: run on peace and prosperity, govern on war and austerity. MAGA will be disproportionality hit by DOGE seizing up SS and Medicare and the former maps tightly to veterans and the well armed while the latter to oligarchs. Those snapped in the middle income trap may snap back.
They’re not manly. They’re just cosplaying as manly men for some performative BS for Trump’s ignorant, delusional supporters and the establishment media who still believe he attracts an audience.
My bleacher-seat prognostication: Trump will change the subject and spin the stock dive as profit-taking ahead of a long boom. A spoonful of palate-clearing sorbet before the next sumptuous course. The media (his captured media) will let him slip the noose. His "attention" will pivot to the catastrophes in Gaza and Ukraine, with phony progress and unctuous, fulsome (in the negative sense of the word) praise from colluding counterparties (partners in crime) Putin and Netanyahu.
Thanks Adam, helpful, I thought Varoufakis’s bit on how it could work out Trump also insightful,
“Central to this new global order would be a cheaper dollar that remains the world’s reserve currency — this would lower US long-term borrowing rates even more. Can Trump have his cake (a hegemonic dollar and low-yielding US Treasuries) and eat it (a depreciated dollar)? He knows that the markets will never deliver this of their own accord. Only foreign central banks can do this for him. But to agree to do this, they need to be shocked into action first. And that’s where his tariffs come in.
This is what his critics do not understand. They mistakenly think that he thinks that his tariffs will reduce America’s trade deficit on their own. He knows they will not. Their utility comes from their capacity to shock foreign central bankers into reducing domestic interest rates. Consequently, the euro, the yen and the renminbi will soften relative to the dollar. This will cancel out the price hikes of goods imported into the US, and leave the prices American consumers pay unaffected. The tariffed countries will be in effect paying for Trump’s tariffs.
But tariffs are only the first phase of his masterplan. With high tariffs as the new default, and with foreign money accumulating in the Treasury, Trump can bide his time as friends and foes in Europe and Asia clamour to talk. That’s when the second phase of Trump’s plan kicks in: the grand negotiation.”
The US has finally been captured by an out and out psychopath. His flunkies are systematically attempting to crush all other centers of power, the judiciary, the legislative, universities, law firms, the civil service, the military and you name it. Money has always been the measure of all things in this country. The New Deal mitigated predatory capitalism for almost a century but that seems to have collapsed now. The best way out of this I can see is a sharp recession that breaks MAGA before it can completely consolidate control and break apart popular democratic governance.
YES...and... The primary mission of the current regime is to ASSURE that the 2017 tax cuts are extended! Ignore what they "say" and focus on what they "do"! Tariffs = huge revenue source to "shield" the ~$4T+ in tax cut extensions! If the goal was to promote local manufacturing, the tariffs would be on specific products, not countries. Also: with costs skyrocketing and assets "tanking", they'll claim that tax cuts will soften these blows. Rubbish. ALL savings and new revenue should go to reducing the deficit, not to rewarding "donors" who own politicians.
I think Adam Tooze can do better. Why is there no mention of the drive to war and the strategy of maintaining U.S. dominance over the world economy, including the acknowledged “privileged” position of the USD?
—
FYI: Here is what the Marxists have to say:
Tariffs driven forward by two interconnected objectives
The imposition of the new US tariff regime unveiled by President Trump yesterday is a declaration of economic war against the rest of the world.
It has been driven forward by two interconnected objectives. On the economic front, it seeks to extract hundreds of billions of dollars in tariff hikes, ultimately paid for by US companies and consumers, to shore up the ever-worsening trade and financial position of the US, while weakening its global economic rivals, particularly China, to improve its trade position.
It also aims to enhance US military capacity by using tariffs to force companies, foreign and domestic, to increase the level of their operations on American soil, much of which is needed to supply the military.
Trump’s “reciprocal tariffs” escalate economic war against the world - World Socialist Web Site
https://www.wsws.org/en/articles/2025/04/03/jziz-a03.html
—-
... the wider objectives of the tariff war ... above all its drive against China.
... [Trump] indicated that while there could be negotiations, “there are things that we need beyond tariffs.”
This comment points to one of the wider objectives of the tariff war, which is to align countries with the foreign policy of US imperialism, above all its drive against China.
This was indicated in the Fact Sheet on the tariff announcement of April 2, which said there could be an adjustment to decrease tariffs “if trading partners take significant steps to remedy non-reciprocal trade arrangements and align with the United States on economic and national security matters.”
The biggest “national security” issue as far as the US is concerned is the economic rise of China, which it considers the greatest threat to its global dominance and which it is determined to crush by all means it considers necessary, including war.
The objectives of the administration were set out by Trump’s senior counselor for trade and manufacturing, Peter Navarro, in a comment piece published in the Financial Times (FT).
Navarro, the leading anti-China hawk in the Trump entourage, said the international trading system was broken. It was “rigged against America,” resulting in a “national emergency threatening our economic prosperity and national security.”
Trump threatens to hike anti-China tariffs again amid growing financial turmoil - World Socialist Web Site
https://www.wsws.org/en/articles/2025/04/08/odyo-a08.html
The US and the western world is "a house divided on itself". Plutocracy wants the sky, including other people's skies - see China, Russia, Iran, etc. - doesn't make any effort for that - one would need a human and material base for that. One cannot have the cake and eat it at the same time, which is likely beyond magic...
So let's see how much deal is in the ruin of a nation. Popcorn and beer!
It all appeared very much like the Brexit-madness to me but I have learnt much more about the economic background in US-non-strategy from your post, as always 👍 (I will chomp on this for a bit).
Thanks!
The great tweet from yesterday (on the delay of your planned book on climate problems/solutions) really seems to nail it ;) There was a great Brexitcast on the BBC which I used to listen to religiously just to get my head around all the strange details. Good to have your newsletter now.
The accusation of Brexit-madness was always a failure to understand the mood of the nation which was very strongly aniti-elitists and very angry with both Westminster and Brussels. Quite rightly so as was evident then and much more evident since.
And the costs of Brexit, mad or otherwise, turned out to be small.
It was very similar to Trump Derangement Syndrome of 2017.
I have little patience for those that failed to understand voters then or even now. 35 years of GDP more than doubling while median incomes barely shifted 10% is guaranteed to upset voters! Nothing has changed since Brexit/Trump 1 other than a stream of ever worse leaders in both UK and US. Think Liz Truss, Starmer and most Americans voted for the embarrassingly incompetent, plain stupid, Kamala Harris (one interview in a Presidential campaign and that was a disaster).
Tarriffs is not a voter lead idea like Brexit or the Wall. Tarriffs are an oligarch lead idea (they are now going for an end to capital gains tax - who does that benefit!!)
This is Liz Truss again. The failure of competent people to stand up and compete for office. And the abuse of money and power to elect idiots who will accept single issue ideas, like Make Israel Great Again or (in UK) take on Russia with poor middle aged Ukrainian proxies.
The UK had two recessions and massive inflation since leaving. It also mitigated the impact by signing up to a bad free trade agreement. Crucially though it also massively increased its borrowing, far more than peer countries. And taxes are up too. To European levels I dare say...
It's grimly amusing to see people now saying the costs weren't so bad instead of talking about the benefits. The best they've got at the moment is the 10% tariff - I don't remember anyone campaigning on that basis. Non-tariff barriers with the EU and 10% tariff with the US - that's your brexit benefits.
Meanwhile all of the things that voters cared about and were upset about are just as bad or worse than before. The only benefit has been destroying the Tory party but of course whatever comes out the other end will be worse.
And that's before we consider the cost in NHS data, the loss of its ability to tax the tech oligarchs, and agricultural/pharmaceutical permissiveness in any trade deal.
The UK trashed its actually special relationship with the EU for the myth of one with the US. And it looks like Trump is treating the UK just like he has treated many others who enjoyed special relationships with him...
And so did everyone else. I'll stick to that - the costs of Brexit were small.
Not that anyone cared about the economy. Economy doubled in 30 years pre-Brexit - median wage was barely changed. You can't blame anyone in bottom half of wages for thinking GDP has zero correlation with their wealth. Indeed most people celebrate a recession because it is the only time they can laugh at the rich.
If you understood how the economy really works, or knew more people you might understand that.
Of course it was the elites (on both sides) that went on to stuff ordinary people. Brexit was a token protest against the elites - which is the most that most Brexit voters ever expected.
By the way you might want to re-write that last paragraph after the last week. Not that I think it is a good thing but it appears a special relationship does exist. Despite what MI6 did over Russiagate to get Biden in 2020.
I am reminded of an anecdote that Mark Blyth tells about a visit of a Remain campaigner to a Nissan plant in Sunderland. When he tried to explain to the blue collar workers assembled the consequences for GDP should the Leave campaign succeed, a voice yelled out, "YOUR GDP! That's not OUR GDP!"
Much of the bleating about Trump's tariffs reliably come from a class of persons not unlike that Remain campaigner -- they don't appear to realize how badly they are outnumbered (certainly in America) by an immiserated underclass impatient for change, ANY change ...
Exactly. Despite having had a mostly priviliged life, I find the inability of so many to see the difference between "our lives" and most lives quite insulting. Gross.
'costs of brexit' turned out to be small by what metric ? the views from your ivory tower unchanged ?
Large by what metric? You seemed convinced by your own pre-Brexit arguments
Yeah and you are the every man in touch with the real people and in tune with the real economy who simultaneously has not perceived any impact from leaving the EU.
If it truly was "Your GDP. Not our GDP!" then how was leaving the EU, primarily an economic relationship, supposed supposed to bring any meaningful change?
The immiserated underclass do not want "ANY" change. They want to preserve all the things they like (green and pleasant lands, pensions and healthcare, state schooling) without themselves having to make any sacrifice.
The change Britain needs is not the change they want. If we actually made the reforms that might align us with the fast-growing or high-taxing nations that are actually able to provide for their citizens the Brexit crowd would revolt again.
You need to understand
1. voters,
2. Not the idiots they vote for but why they voted for them
3. The idiots they chose not to vote for.
Being angry your lot got ignored is not going to help you.
How many American workers, excluding those with an MS in robotics, will be assembling cars, appliances or phones in 2035? Google Samsung phone assembly robot or Boston Dynamics Atlas robot. And how many years does it take to build, equip, staff, train & debug a new auto plant? Inflation by Q3, then much lower employment before 2030.
Although I'm not a fan of the Euro Union cartel, the driving force behind Brexit was in effect the first step toward WWIII. Trump's coming $1T defense budget, along with whatever tariffs he settles on, especially toward China, will help push the process along. He and his supporters have nothing else to offer.
Brilliant, and thanks for the link to the blog post!
If this were only bad policy we could probably withstand the next four years. But the ‘tech bros’ give me pause as they talk about demolishing our democracy and replacing it with their AI and their version of autocracy. And of course all the devalued government assets can be sold at depressed prices.
This is a really smart analysis. Yes, it's likely to be a long slow deterioration in terms of the economy and the US position in the world, whatever happens with more immediate recession and/or inflation. And, use of tariffs has to be predicated on an industrial/sectoral set of policies and strategies for development, whether supply chains or skilled labor force (or batteries). Bidenomics did begin this process, with chips, climate, and infrastructure, though relying on tax breaks is a like a tariff or carbon tax, not likely to be fully effective on its own. Very thought-provoking, thanks!
I'm with Varoufakis -- the nearest recent analogue to the Trump tariff regime is the "Nixon shock." If it can be made to stick, it will mean an entirely new international trade architecture with entirely new winners and losers.
Buckle up ...
"The fact that we are even asking the question, tells you a lot about the degree of autonomy US politics actually enjoys", is a decisive observation. TINA NeoLiberalism has been systematically obscuring this point for four decades. Of course, Trump may be providing a (false) proof in the negative by failing dramatically with idealistic acts motivated by taking that systematically obscuring ideology at face value.
Ironic.
So, while Trump has significant policy space, in large part because of the "exorbitant privilege (for whom? needs asking)" he inherited without understanding, when he went from a serially bankrupt developer and casino mogul who's balance-sheet depended on exogenous money to POTUS, who's balance-sheet is built in endogenous money, he seems hell bent on maximally narrowing that policy autonomy. He appears committed to driving an "advanced economy" into "the middle income trap" by instantiating primacy for incumbent oligarchs at the expense of the pitchfork crowd that elected him. It's a Zelensky bait and switch: run on peace and prosperity, govern on war and austerity. MAGA will be disproportionality hit by DOGE seizing up SS and Medicare and the former maps tightly to veterans and the well armed while the latter to oligarchs. Those snapped in the middle income trap may snap back.
They’re not manly. They’re just cosplaying as manly men for some performative BS for Trump’s ignorant, delusional supporters and the establishment media who still believe he attracts an audience.
Well done. It helps clarify the unclarifiable.
My bleacher-seat prognostication: Trump will change the subject and spin the stock dive as profit-taking ahead of a long boom. A spoonful of palate-clearing sorbet before the next sumptuous course. The media (his captured media) will let him slip the noose. His "attention" will pivot to the catastrophes in Gaza and Ukraine, with phony progress and unctuous, fulsome (in the negative sense of the word) praise from colluding counterparties (partners in crime) Putin and Netanyahu.