The Tariff Storm Hits – The Dispatch

But Wall Street seemed to disagree. On Thursday, the U.S. stock market suffered its worst day since 2020, with all three major indices cratering in the wake of the announcement: The Dow Jones Industrial Average dropped 3.98 percent, the S&P 500 sank 4.84 percent, and the NASDAQ plummeted 5.97 percent. 

The long-awaited tariffs, declared in the name of a “national economic emergency,” included 10 percent “baseline” duties on most foreign goods, as well as higher, tailored tariffs targeting countries Trump accuses of “cheating” the United States. Together with the president’s previous rounds of levies, the expansive tariffs package will bring the U.S.’s effective tariff rate even higher than it was during the Great Depression. Economists are now warning the administration’s dramatic break from the conservative movement’s longtime embrace of free trade could isolate the U.S. economy and plunge the country into a recession. 

Trump’s 10 percent flat duties are set to take effect on Sunday, while his higher tariffs—what the administration describes as “reciprocal”—will go into place on April 9. But the latter levies don’t actually correspond with the alleged offenders’ restrictions on U.S. imports. Rather, the government calculated the rates by dividing the country in question’s 2024 bilateral trade deficit by its exports to the United States, and then dividing the result by two. “Reciprocal tariffs are calculated as the tariff rate necessary to balance bilateral trade deficits between the U.S. and each of our trading partners,” the U.S. Trade Representative said in a statement explaining the algorithm. 

The problem with this calculation, economists say, is that it relies on the false assumption that uneven bilateral trade balances are a reasonable proxy for foreign trade barriers. In reality, deficits are not always reflective of unfair trade practices or an unhealthy economic relationship. As Kevin Williamson wrote today in a piece for the site: 

Tariffs are not the only reason—or even the main reason—for imbalanced trade among nations. 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.

At the same time, the metric failed to factor in the United States’ own existing restrictions on buying foreign goods, from sugar quotas to the 1920 Merchant Marine Act. “It simply assumes that the United States is some sort of free trade paradise that’s being abused by foreign countries,” The Dispatch’s own Scott Lincicome told TMD. “Trump imposed hundreds of billions of dollars in new taxes without any congressional authorization or public input, and he did so based on a methodology that is utterly detached from economic reality.”

Using trade deficits for the formula has led to some “bizarre outcomes,” he added. For example, even countries with free trade agreements with the United States—including Singapore, South Korea, and Australia—have been caught up in the tariff spree. As did countries with which the U.S. has a trade surplus. Meanwhile, a handful of countries—including Russia, Cuba, Belarus, and North Korea—were spared on the grounds that sanctions already prevent a meaningful trade relationship.

For Trump, the sweeping tariffs—together with 25 percent duties on cars and car parts that took effect this week—are a way to usher in another “golden age” of American manufacturing. According to the U.S. Trade Representative, more than 90,000 plants have closed and upwards of 6.6 million manufacturing jobs have been lost since 1997.  By intentionally driving up the price of foreign goods, the administration hopes to encourage foreign companies to move their factories to the United States, spurring new job creation in a long-declining sector.

But because the U.S. still relies heavily on foreign suppliers for intermediate goods like raw materials and car components, economists worry the tariffs will have the opposite effect. “For this to be successful, you need to have long-term stability in the trade policy. I think what’s problematic here is that we have recently seen that actual investment in the U.S. has declined,” Felix Tintelnot, an associate professor of economics at Duke University, told TMD. “The cost of doing production in the U.S. just went up.”

Experts also worry this latest move could expedite a looming recession. The U.S. dollar fell against most major currencies on Thursday—contrary to conventional wisdom that tariffs strengthen the value of the local currency—as investors seek out safe assets. “In past waves of tariffs or tariff announcements by the administration, usually the U.S. dollar strengthened relative to other currencies. Now we are seeing the opposite: Capital is leaving the United States,” Tintelnot said. “How can you plan your business operations in this way? It’s really astonishing.”

Already, an internal blame game has begun to play out among top U.S. officials. According to a Tuesday report by Politico, many people within the administration are preparing to point the finger at Commerce Secretary Howard Lutnick—a main champion of the sweeping tariffs plan—should the fallout persist. Lutnick is “a new voice at the table pushing crazy shit,” a person familiar with the situation told the outlet. “I don’t know anyone that isn’t pissed off at him.”

But for stalwart supporters of the protectionist trade policy, upending the global economy is the whole point. Through tariffs, they argue Washington should accept—and even embrace—the decline of the U.S.-led liberal world order. 

“China is now rising as a pure competitor. The U.S. cannot be a unipolar hegemon like it was when the Cold War ended,” Oren Cass, the founder of the think tank American Compass, told Jon Stewart on a Monday episode of The Daily Show. “We absolutely want a strong economic and security alliance. It’s not going to be the whole world, because China’s going to have its own sphere as well. But what we want to have within our sphere is a few things that, in the past, the U.S. didn’t necessarily ask for. We’re going to want balanced trade, where in the past we were happy to let the manufacturing go elsewhere.”

But experts warn sweeping tariffs, far from shoring up the U.S.’s existing alliances, actually risk pushing longtime partners into China’s orbit. On Monday, for example, Beijing announced plans to coordinate its response to the new American duties with South Korea and Japan.

“It’s just a massive gift to America’s adversaries,” Lincicome said. “By isolating the United States economically, it makes us weaker—it makes our manufacturing industry weaker, it makes our economy weaker. But it also gives close trading partners more incentive to cozy up to the second biggest dog on the planet, and that’s China, because they have no economic alternative.”

• Writing for the New Atlantis, M. Anthony Mills argued that the Trump administration’s efforts to gut the National Institutes of Health before the recent swearing in of its director, Jay Bhattacharya, may end up sinking the chances of serious reform. “What we have seen these last two months is not an extreme version of past Republican efforts to rein in the federal bureaucracy; it is a challenge to the basic social contract underlying federal science,” he wrote. “As in other domains of public policy, from trade to national security, the Trump administration has upended half a century or more of bipartisan consensus—in this case, regarding the federal government’s role in supporting academic science.” As a well-credentialed outsider, Bhattacharya is well-positioned to productively challenge the status quo, Mills argued: “But the extreme actions taken by the administration prior to his directorship have created an altogether different problem: a breach of trust with the scientific community, both inside the NIH and in the wider biomedical research enterprise, that may hamper efforts to implement enduring reforms, including those preferred by Trump’s supporters.”  

CNN: NYC Mayor Eric Adams Says He Will Run for Reelection as an Independent

NOTUS: Republicans in Congress Can Stop Trump’s Tariffs—But They Don’t Want To

Republican Sen. Josh Hawley … blamed Congress for taking a backseat, but he told NOTUS he would want to use legislation to set tariff rates even higher.

“If Congress doesn’t like it, they should ask themselves why they’ve given presidents, not this one, but presidents, this authority over 50 years,” Hawley said. “It’s like, ‘Hello, wake up, smell the coffee; this is what Congress has done for 50 years.’ Some of my colleagues suddenly just discovered it, it’s like, ‘Wait, he has this authority?’ It’s like, ‘Yeah, you gave it to him.’”

On Thursday, Bruce Springsteen announced plans to release seven “lost” albums this June. The albums will include 74 unreleased songs recorded throughout the Boss’ five-decade career, and frankly, we can’t wait.

How are the new tariffs shaping up to affect your daily life?