Trump’s Tariff Netherworld

Trump’s Tariff Netherworld

Forecasting the amount of economic change caused by a change in tariff rates requires a chain of data. The data would be prices and quantity of sales preferably by the month and over many years. When forecasters predict a change in sales from a price change the price changes typically come in modest or small changes. The percent change in quantity of sales per month is divided by the percent change in price, which economists define as elasticity.  Elasticity mostly varies by a small amount above or below -1. An elasticity of -1.5 would forecast a 1.5 percent decrease in quantity from a one percent increase in price. Applied to Trump’s 25 percent tariff the forecast would be a 37.5 percent decline in quantity. However, an immense change like 25 percent is totally outside the range of data or any experience for more than a 100 years. It is not a legitimate forecast. It could be much more or much less. The only reasonable forecast if tariffs go forward will be a steep decline into depression and more in the United States than elsewhere.

Trump talked and tweeted his way through his first term while others like Federal Reserve Chair Jerome Powell managed the economy. Corporate America got what it wanted in his first term and had the media promote him daily through Biden’s term, which put him in office for a second term. Corporate officials have made only tepid public comment against Trumps erratic trade war threats. No president at least since the end of reconstruction in 1877 has ever been able to defy corporate America. The recent 90-day tariff suspension suggests some positive influence, so it remains hard to think America’s CEO’s will sit by for him to ruin the economy, but we continue waiting for a more frank response.

Since January 20, 2025 the Trump tariff announcements have come day by day with erratic and often draconian changes in no apparent pattern or detectable plan. They have no resemblance to an economic policy. Always announcements come with his fabricated belief that other countries cheat the United States; beliefs without basis in history or fact. Given he thinks of the United States as an extension of his himself and his ego, his unpredictable paranoia has become a substitute for managing the economy. 

Trump appears increasingly deranged pushing conspiracies while corporate media refuses to call evil by its true name and corporate America refuses to employ its money bags to put a stop to it. Don’t be fooled, their money and determination put him in office and they can put him out. We can only wonder how far the economy and what remains of civil society will descend if they do not.