Our Best Stuff From the Week the Trade War Started

Hello and happy Saturday. I hope you’re enjoying better weather than we’re having in the Ohio bureau and that you’ve avoided checking the status of your retirement accounts. 

Back in February, Jonah Goldberg wrote that he was grateful for the stock mark because, while President Donald Trump could bully lawmakers and business leaders and journalists, “the markets are the exception.” The markets have weighed in on Trump’s “Liberation Day” tariffs, and the reviews are … not good. The Dow Jones dropped more than 1,600 points on Thursday and another 2,200 on Friday. The S&P 500 and Nasdaq dropped similarly. Stocks lost $6.6 trillion in value, creating the worst two-day drop in history.

Trump unveiled sweeping tariffs Wednesday from the Rose Garden at the White House. He announced a baseline tariff of 10 percent on most goods coming into the country, and he declared what he described as “reciprocal” tariffs on countries with whom we have a trade deficit. Funny thing, though. The reciprocity is not based on the tariff rates charged by our trading partners but based on our trade deficit with them. As business writer James Surowiecki figured out, the administration divided our trade deficit with a given country by its exports to the United States and claimed the resulting number was the rate that countries charge us. See Peter Gattuso’s fact check for a full explanation of the math.

Kevin D. Williamson complained that the whole process was just lazy—which would explain why the administration levied tariffs on a remote island territory that is home to lots of penguins and seals but no people—and he explained why trade benefits are often benign. He wrote: “U.S. firms and consumers buy a lot of tropical fruit and low-cost goods from firms in poor countries where the people do not buy a lot of Boeing products or $300 selvedge jeans made in the United States on account of their being, you know, poor.” 

If you’ve listened to the Dispatch Podcast more than once or twice, you know about Steve Hayes’ affection for Spanish wines. On Wednesday, before the tariffs dropped, he attended a wine tasting—strictly for reporting purposes, of course—and spoke to some of the participants about how the coming tariffs would affect them. Importers had already been reducing orders in anticipation of new tariffs, and overseas purveyors are seeking out new markets. Many predicted hard times for U.S. businesses that depend on wine sales. “On the surface, it’d probably be hard to find a less sympathetic industry for tariff opponents to focus on than those in the wine importing business,” Steve wrote. “Nobody’s going to shed any tears for the rich guy with a French wine fetish whose $500 bottle might soon cost $600. But while it’s true that fine wine collectors and those who sell to them can adjust to higher costs, many smaller companies that work in the wine business cannot.”

In the G-File, Jonah walked through one example showing how the tariffs are impractical. If a company like Nike were to make its shoes in the United States instead of, say, Vietnam, well, it would create a few jobs here, but Americans would be paying more for sneakers and Vietnam’s economy would suffer.  And then he pulls back and looks at the wider ramifications. “This dynamic will apply to electronics, clothes, auto parts, and other goods Vietnam produces,” he wrote. So by following through on this plan, we will have dealt a devastating blow to Vietnam’s economy, which will make any chance of pulling Vietnam out of China’s economic and strategic orbit infinitely more difficult. Why should the Vietnamese believe they are better off aligning with us, when aligning with us has led to this?”

Meanwhile, in Boiling Frogs, Nick Catoggio tried—really, really hard—to find an upside to angering our trade partners and jolting the markets. He found a couple, namely that all the backlash is likely to make free trade more popular, and that it might inspire Congress to reclaim its authority over trade policy. But those pale in comparison to what the moves say about America and its place in the global order.

There’s too much rot in the American character to believe that our country can sustain the will, clarity, or cunning to defeat an enemy as formidable as modern China. On the contrary, from threatening near-abroad satellites like Greenland to pointlessly offending allies like Canada to declaring a global trade war that will isolate the United States, Trump in his first 75 days has done more to strengthen Beijing than any president in decades.

Moronic, groin-punching American authoritarianism will not solve Chinese totalitarianism. The silver lining of “Liberation Day” is that the whole world understands that now and can proceed accordingly.

On that cheery note, thanks for reading and have a good weekend.