Poof! What Happened To The Trade War? And What's Trump Up To?

It looks like the trade war with China will continue for the time being. Trump just raised tariffs drastically on “de minimis” mailed products from China—which means that the price of popular items like Zenni eyeglasses could go through the roof (but probably still cheaper than what you’d pay at US optometrists). I’m sure there are many other similar high quality low price products in this category, and these tariffs will prove highly unpopular with older Americans, in particular.

But for the rest of the world? It looks like the war is over—Trump has declared victory and everyone is going home. According to the Trumpian newspaper of record, the NYPost, here’s what happened. The other day the spokesgirl what’s-her-name famously dismissed rumors of regime infighting as “boys will be boys,” but one boy in particular one over two other boys. What was behind this is important, so I’ll quote the article at some length. Some (many?) readers will be aware of this, but for those like me it could prove enlightening:

Why Trump decided to take the win and paused tariff war

Trump’s trade intransigence was a reflection of his own oft-stated desire to level the playing field, ending our perpetually large trade deficits with the world.

...

He was also goaded by two of the most hawkish and protectionist advisers to have ever set foot in the White House: Howard Lutnick, the commerce secretary, and Peter Navarro, who holds the title of senior counsel to the president.

Pushed aside, until recently, was Bessent, a veteran Wall Street financier who sought a middle ground, doing deals with countries but not engaging in outright war.

The hawks seemed to be firmly in control even as markets around the world continued to crater, the US stock indices losing trillions of dollars in value.

Trump continued to ignore olive branches from the EU, which stated publicly it wanted zero tariffs with the US on many goods. ...

That long game came to an end Tuesday night in the form of a bond market rout for the ages. Main Street can weather some stock market falls. But the US has $36 trillion in bonds in circulation, much of it in foreign hands, that we use to finance government operations.

The bond market is also the plumbing of the economy because it sets interest rates on consumer and business loans. If the US can’t sell its debt, it can’t pay for stuff like Social Security, the military or plug our enormous deficit.

In other words, when bond prices fall and their interest rates spike, it could spell economic disaster. That’s what the bond market was signaling Tuesday night, bringing real panic as the yield on the 10-year bond shot to 4.51% and the yield on the 30-year bond jumped above 5%.

Someone was unloading bonds en masse amid the trade turmoil.

A recent Treasury auction didn’t go so well, adding to the upheaval.

Market experts speculated that hedge funds were unwinding some complex trades.

Even worse, I was told by the CEO of a major financial institution that one of our biggest foreign holders of treasuries, the Japanese, were unloading US debt in huge quantities.

Many fingers pointed to China, our long-term adversary economically and militarily, but it was a friendly country, selling in huge quantities and sending interest rates into dangerous territory.

That type of instability clearly made an impression on Bessent, I am told.

What happened next is one for the history books.

It was Bessent, not Lutnick or Navarro, who held a press conference Wednesday saying our trade war with the world — except a hyper-belligerent China — was over, or at least on pause.

He attributed it to Trump’s negotiating style, playing the long game and getting people to the table to discuss lowering trade barriers.

Here’s one thing that I find very interesting. When Trump first started the tariff hikes there was an announcement that China, South Korea, and Japan would respond jointly. That’s our two closest and most important Asian partners—from an economic as well as a military standpoint—who are cooperating with our Main Enemy (according to Trump appointees like Hegseth and ‘Bridge’). You have to assume that this Treasury dumping was part of that cooperation—after all, China is easily Japan’s largest trading partner. What’s Trump gonna do—tell Japan to take all their US based automotive assembly plants back home? If the NYPost knows this, then everyone in the world who matters knows it. That’s not a good look for Trump, when he’s starting a trade war with China.

Look, I’m in sympathy with what Trump says he wants to accomplish. I’ll even pay more from my eyeglasses if it comes to that, if that will help. God help me, I might even pay more for my made in South Korea Guild guitars. But telling the world, ‘Hey, ya’ll can line up and kiss my ass, and then we’ll do a deal,’ definitely seems like the wrong way to go about this. And that’s the message Trump got from the usually subservient Japanese—who have been reliable allies—for all the world to see: We’ll do a deal, but not on those terms, gaijin. What’s important to remember is that the Trumpian narrative that America is the good guy victim of conniving furriners is far from the full story. The world is a complicated place and stuff happens, often despite good intentions. However, the fact that Japan holds so much US debt—and they’re far from the only ones, as we all know—is a clear indication that the US shares culpability in the trade imbalance. Trump says he wants fair trade, but that will only come with, at minimum, a rejiggering of America’s role as a global hegemon. Trump seems unwilling to address this issue. (Putin, by the way, was laughing at Trump over this the other day, saying that it’s too late in the day for Trump to be launching a trade war on the world.) There’s got to be a smarter and more honest way to go about this.

On that last note, here’s what Larry Johnson was saying to Danny Davis today:

I have spoken with a good friend that's had several meetings with Trump. I asked him directly, "How are Trump's critical thinking skills?" “Not good.” I'll leave it in that charitable way. Trump's just not a good critical thinker. He's street smart in some areas, but he's emotional and he often lets his emotions overcome his good judgment. I mean we're seeing that with the tariff stuff right now, but that's a whole ‘nuther discussion.

We can argue about some of that evaluation. Trump has certainly demonstrated political savvy and shrewdness (street smarts?) that are far above average—we’ve all seen that. That level of street smarts is usually accompanied by significant IQ levels. However, his 2.0 tendency to engage in deceptive negotiating tactics in high stakes situations, flirting with brinkmanship that could and up in war, is disturbing in a system like our constitutional order that’s supposed to be representative. I thought making America great again would involve leveling with We the People. Not just by declassifying certain files, important as that may be, but with regard to where we’re going as a nation and how we’re going to get there. A bit like Putin does with the Russian people.

Here’s John Mearsheimer—a mild mannered professor if ever there was one—addressing Trump’s recent statements about Gaza, but speaking in more general terms about Trump himself:

Let me make two points about Trump. The problem with Trump is, he makes misstatements or false statements or tells lies at such a rapid pace you can't keep up with them. He makes one false statement, you try to correct it, and he's on to another one. But the more important point, in my opinion, about Trump is that he has no moral compass. How can anybody who has watched what's happened in Gaza—whether you want to call it genocide or mass murder, just watching what has happened, and you listen to him describe the destruction; he's fully aware of what's happened there—treat it in such a cavalier way? How is it that he doesn't have any basic sympathy for the Palestinians? I just find this hard to understand on a purely human level.

What’s frustrating is that Trump does exhibit a keen moral compass at times, or does a very good impression of possessing such a compass. And yet, at other times, he appears willing to sacrifice that compass in grotesque ways. And he’s all too willing to elide the truth to sell his program. I think we can all agree that a politician can’t engage the public in all the complexities of policy matters, but Trump is taking things to an extent that seems to be breaking faith with his supporters. He needs to bring We the People into his confidence to a greater extent than he currently seems willing to do.