This administration is either intentionally performing market manipulation or is simply incompetent. Either way, we all lose.
Hope the general populous is happy with their choice, lol.
Hope the general populous is happy with their choice, lol.
The on/off tariffs are just as bad as imposing them for market confidence (if not worse).
> Higher interest rates generally reduce inflation by reducing spending, which in turn slows the economy and can lead to mass unemployment.
> One of the people who denounced Volcker’s moves was then-Senate Majority Leader Robert Byrd, who declared after Volcker announced his new effort in October 1979, “Attempting to control inflation or protect the dollar by throwing legions of people out of work and shutting down shifts in our factories and mines is a hopeless policy.“
The question is if the recession can be structured to disproportionately hit financialized and knowledge industries while sparing manufacturing.
But higher interest rates aren't what the Whitehouse wants.
The White House wants to reduce prices without raising interest rates. So you need some other way of slowing down the economy. There’s lots of ways to do that, such as laying off federal workers.
Higher interest rates are about shifting investment priorities and loan rates. It increases the cost of lending, which results in people making choices about taking on risk and debt.
The reduction in loans being written, and the increase in interest being paid means that people start moving their money into savings, reducing the velocity of Money.
Laying off people from the government reduces the amount of money being used productively, but doesn’t do a thing to stop loans being written or money being printed.
It destroys the ability of the system to be efficient, resulting in more waste, and with more risk appetite + weaker regulators it results in the ability for people to break laws with impunity, resulting in captured or rent seeking markets.
This results in a recession, and a failed economy.
To be fair to them (even if they're likely unaware), that was effectively a thing back in the 1800s: https://en.wikipedia.org/wiki/United_States_Revenue_Cutter_S...
> The federal government desperately needed revenue, and determined to raise it chiefly from tariffs on imports. Strong enforcement of tariff laws could blunt rampant smuggling. Urged on by Secretary of the Treasury Alexander Hamilton, the United States Congress on 4 August 1790 established the Revenue-Marine, later renamed the Revenue Cutter Service by act of 31 July 1894 (28 Stat. 171)
and that was just to curry favor as well as get in front of the tariff plans
we'll see if they follow through, but those count as American entrepreneurs too
if there are disruptions on smaller scales, some people will take the risk, and there will be winners and losers as with everything else.
Manufacturing is now increasingly automated, so it doesn’t employ as many people anymore. This is an issue India faces as does every developing economy. Economic growth is increasingly dependent on service sector growth.
Moving supply chains also requires weaker labor laws, and lower salaries for workers, than minimum wage, to be competitive.
OSHA is a problem for factory owners, because it increases costs with the tradeoff of higher worker safety. In contrast, there are suicide nets around factories in China.
The American populace doesn’t want to work jobs at lower wages. The price for competitive goods requires firms to be cheap.
You are going to be subsidizing people to work in factories, for decades, if not a full century. All the while people will take aim at the subsidy, and then blame minimum wages and people who support labor laws. Ad infinitum.
In this specific sector, the entire industry including retail has shown they will pay many multiples of a higher price for GPUs and cloud services. So if a US grown supply already cost that much out the gate, there is already examples of the market being able to bare that.
There is definitely an unserved market. Even now, there’s many people who want to purchase the service and can’t afford to.
However, even if we concede your point in its strongest sense - the revenue is a different beast from the profit margins.
Higher labor and compliance costs mean that making things in america is more expensive.
The solution is usually to not pay people that much
In the end a company is measured by its stock performance. Their incentive is to maximize profit.
If the solution is to pay people less, most voters balk.
I say take it a step further - not everyone is excited by sitting in front of a computer and doing intellectual exercises. People like different things and are suited to doing different things as well.
But if there is only one way forward, which is Engineering, Medicine and Law - then you have essentially recreated 1970s India and China.
But this is 2025 - not only do we have automation we have GenAI, which threatens to take away tons of low level service work. Education is something that takes years to result in blooms. Decades of nurturing.
(Hey - thats a useful analogy. Societies plant and harvest crops of trained professionals.)
Can people discuss these difficult topics? Nope. Besides, if you do - people start becoming more “liberal”, “disconnected” from ground reality. Code for people not voting the way leadership would like.
There’s an issue of raw materials supply as well and I’m curious if this is more of an “assembled in USA” type of thing or the whole chain will move. Time will tell.
Candidates would include "actual impact of tariffs enacted" or "uncertainty about future tariffs" or the same things but with "geopolitical decisions" instead of tariffs. Or similarly "fiscal solvency" or "profile of government spending" etc. It's all well and good to make untestable post facto explanations based on vibes but I'd be interested in whether you (or other people in the thread) have specifics, so we can think about backtesting and prediction. Do you predict that these phenomena will have long-term implications or if they will self-correct?
Any assertion of the causation of a market movement is itself pretty economically tenuous. I think any of the above policies can be criticized on principled grounds; if the stock market is the arbiter of whether economic policy is correct I do not think that anyone would be happy with where this leads.
Even if you build the factory in the US to avoid tariffs on the goods you sell, did all your inputs also get built in the US? Are the tariffs on your inputs going to wipe out your profits?
To build a factory you want to predict out the cost vs benefit. But if the costs are highly uncertain, then the numbers in your spreadsheet fluctuate wildly. So you just sit on the money you have and wait to build the factory until things are more certain.
They are simply the addition of inefficiency to a market. You are taught this in any 101 Econ course, its part and parcel of learning how to draw supply and demand curves.
It is SO basic, that discussion of this on educated forums, is fear inducing.
Furthermore, this is a trade war based on vibes. This is not implemented with something like anti-dumping in mind. It’s not based on real flaws that the target countries can address.
It’s based on a fabricated alternate reality. This means that retaliatory tariffs have no economic cut off / threshold. It is only measured in behavioral and political stances. This is now a question of faith and pain tolerance, and not economic rationality.
This was already a possibility, known in November. At this point, for many institutional investors, worst case scenario contingency plans are being put into play.
Markets are a well known measure of whether economic policy is sound. IT isn’t the ONLY measure however, but it is one of several markers that are tracked to understand what people forecast outcomes, growth and expectations of the future are.
But attributing short-term market movement to a specific phenomenon is, to put it bluntly, plain foolishness. Ex post facto reasoning is almost always an absurd task and it's important to push back on it, *especially* when it confirms your own biases.
This is the actions people I know are taking to manage investments.
Look - I can’t help you if you wish to believe something.
That’s an issue of faith.
I have no idea why you believe that this is ex post facto reasoning.
Tariffs cause recessions, it’s not even correlation.
Let me elaborate - the moment Trump was elected, I knew that he was going to impose tariffs, and that it was going to tank the US economy.
If you want logic, I can debate. If this is a matter of faith and belief that this is some error on my part and that no one can know things are causative - then that’s a matter of faith and religion.
Blaming the current stock market movement on a reaction to the tariffs is not a valid argument. Saying that tariffs have a negative economic impact is totally valid, and has a lot of evidence to support it.
Trying to offer narrative explanations for market movements is a suckers game; it's just the bloomberg headline generator "Markets <insert direction markets moved> on news of <insert current news>", with no predictive value.
> Saying that tariffs have a negative economic impact is totally valid, > narrative explanations for market movements is a suckers game
So let me be clearer - I knew in November, that Trump's style of tariffs, were going to tank the economy, which would tank the stock markets which reflects the stock market.
The causatory force (not correlatory) of tarriffs is well known, and I've lived in the era where tariffs were commonplace. I've seen an entire economy rise from the ashes when tariffs and protectionism was removed.
You are hiding behind an intellectualism in a world where these kinds of blind spots mean someone else is taking your money.
Deliberately diminishing the importance of the richest and most powerful nation in the world doesn't seem like the move if you want to inspire confidence.
Not sure what does it mean in the context of the economy in general.
Consider what high tariffs would do, for example, to Apple. Since Steve Jobs died, Tim Cook has focused on increasing profits by building a hyper-optimized Chinese supply chain. That doesn’t help American workers, and I’d argue in the long run it hurts innovation. But imagine if Apple had to be an exorbitant tariff for every foreign-made iPhone. Had such a policy been in place 20 years ago, we may have dramatically changed the direction the cell phone industry went in the country.
Depends on your definition of 'help,' no kid in school thinks "Gosh I hope I can become a factory laborer when I grow up."
Let's be realistic, it doesn't help US geopolitical strategy and doesn't maintain US hegemony. The US doesn't need or want factory workers, it wants citizens who are self-actualized. It might need some factory workers to realize that aim, but human drudgery powering factory production isn't an end in itself.
Ideally the US leapfrogs all this and gets to fully automated production before anyone else. People want purpose in life, and being a factory drone is a pretty lousy purpose.
The revealed preference suggests you're wrong. That's why the messaging of every politician that has resonated with the working class, from Bernie to Obama to Trump, it's focused on bringing back manufacturing jobs.
> The US doesn't need or want factory workers, it wants citizens who are self-actualized.
You can't be a citizen in a participatory democracy if you're not needed. The cognitive elites that call half the country "deplorables" might choose to give you a dole, but they'll hold it over your head and it'll come with strings attached.
Everyone focuses on bringing them back, because you're correct that it resonates. However, what goes unsaid is that everyone hopes it'll be someone else going to work in those factories.
> You can't be a citizen in a participatory democracy if you're not needed. The cognitive elites that call half the country "deplorables" might choose to give you a dole, but they'll hold it over your head and it'll come with strings attached.
The 'cognitive elites' never called half the country deplorables. One person called half of Trump supporters that, referring to an undeniably real subset of that voting block that is racist/homophopic/xenophobic. The (Number of Trump Voters) * 0.5 is nowhere near half the country.
This is of course a derail from the derail, which is the claim that you can't be a citizen if you're not 'needed.' You can be and are, and 'needed' is a value judgement by the ruling class who can divide and conquer the citizenry by manufacturing mass media telling citizens who is 'needed' and who is not.
According to whose value system? By the standards of your typical knowledge worker, almost everyone in my home country of Bangladesh is “racist/homophobic/sexist.” But why do they get to decide? You can bet that in your hypothetical, the cognitive elite will use their leverage over the government dole to impose their value system on everyone else.
Who is “needed” is not a “value judgment” it’s a structural fact about the economy. In a future where the machines make all the goods, you’ll need cognitive elites to operate and maintain them. But most people won’t be needed. And they’ll never be allowed to be full participants in a democracy—which necessarily includes development of social and moral norms.
This is what the elites often assert before the mobs with guillotines, torches, pitchforks, etc come for them.
Who gets to decide who is a participant? Ultimately it's the group that seizes power. You might think that a tiny group of despotic people can hold out against the overwhelming majority (South Africans sure tried, and some are still bitter that they failed at it) forever, but this type of thing never lasts, fortunately.
Just to review: the South African apartheid regime was famously overthrown, peacefully.
> Post-Apartheid, South Africa is basically two countries in one country
Not where it matters. South Africans, no matter their ethnicity, all have the same vote and the same elected leadership. The place isn't perfect but it's no longer operating as a wholly morally repugnant regime.
This is just one example, mind you. It's the whole "The arc of history is long, but it bends toward justice" pattern. Despotic rule by a tiny minority never lasts, no matter what temporary technological advantages they might have.
Agree, and that's kind of obvious.
> we may have dramatically changed the direction the cell phone industry went in the country
Not sure. Even less sure how instantaneous and very tariffs can help with that. Also it's not clear how that less of the financealisation.
https://history.stackexchange.com/questions/12297/how-many-p...
At the risk of getting downvoted let me posit a different narrative.
What if the past governments were just propping up growth by increasing government spending. The facts that are coming out now point in this direction.
Unemployment numbers that were fudged and recalled by nearly 1M on two occasions. 35% government hiring in the last 3 years.
What if this is the unwinding that was needed long ago but is happening now.
Yes tariffs are a net negative for the US economy, but there is no guarantee that tariffs will stay as we saw with the Canada and Mexico tariffs.
So may be, the government is not completely incompetent.
This data from Apollo management points to a not so bleak picture.
https://www.apolloacademy.com/wp-content/uploads/2025/03/DC_...
Keynsian economics 101. “The government should pay people to dig holes in the ground and then fill them up." except in this case it's government non jobs rather than asking people to do manual labour.
Nothing like that is seen now. You primary see markets reacting to tariffs and to boycotts. You see them reacting to large contracts that should be to Musk companies.
The government spending did not went down yet.
In the country where I live/lived programmers are usually 1) top 25% earners 2) dis-proportionally vote liberal leaning candidates
Of course that 25% is a part 100%, however that absolutely not a random selection and very different from the "median" citizen and their problems.
Being top earner definitely skews ones views - not a novel phenomenon.
I've been wondering how a labor market miracle seems to happen every quarter in the face of steep interest rate increases. The Fed has been trying to engineer a recession for years now.
It’s a recent shift. Historically, “technologists” were skeptical of the supposed knowledge of “experts.” When Linus built Linux, the “experts”—the guys with PhDs—said the future was microkernels: https://en.wikipedia.org/wiki/Tanenbaum%E2%80%93Torvalds_deb.... Linus was right. But I feel like today techies would’ve mocked him for being just a student arguing with a tenured professor on a subject in the professor’s field.
Opposition to free trade has been building for 25 years: https://www.britannica.com/event/Seattle-WTO-protests-of-199.... We used to make routers in California and sell them to China. Now we make them in China and Americans drive Uber. Economists tell us that this is efficient, but the public isn’t required to believe them. And it’s fine to try a different approach to see what happens.
Even more, if you truly believe what you are saying, and you want a more competitive trade environment, getting someone who will botch it will hurt your cause. I see no way these guys are going to leave your country in a good state.
It's also pretty clear that any economic benefits that there were, didn't benefit all of society equally,
So the competitive advantage for any country now boils down to the entire nation optimizing for cost. A country like China can do this, because the cost optimization for USA = lifting someone out of poverty in China. They are at the rock bottom of cost already.
Now that China has learned to optimize for cost, they will continue down that path - AI, robotics whatever tool they can amass to drive down cost, they will.
Meanwhile, other nations arbitrage about quality of life, politics, hatred of the rich so on and so forth and let the cost optimization slide. Ideally if every country optimized for cost, free trade would work like magic. Sadly, China is the only country doing that and rest of the world is now beholden to them, losing their once cherished competitive advantage.
Now China which once was derided for cheap quality has learned to build quality at scale and for cheap. Literally no one can compete with them on price:quality ratio. 3-4 decades of cost optimizations have paid off immensely for them.
China has to put up nets on its factories and subsidize entire swathes of its economy, for decades, to be competitive.
Currently - the value of labor is being eroded by the value of automation. This is why it’s no longer possible for India to succeed by turning into a manufacturing powerhouse. The global option now is in having effective service industries. Generative AI is already throwing a wrench in that plan.
This is leaving ZERO room for people with ordinary resources, knowledge and skills.
The idea that free trade is the problem, may have held for a specific window in time. That window was small and has closed. The larger issue is automation, and the displacement of neophyte workers.
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My personal take - the challenge today is helping people actualize themselves. This is a very fuzzy term, and frankly it embarrasses me to use it. But we have better tools, practice, and science behind human thinking. I’ve used this knowledge practically, and I’ve seen results in team performance and motivation.
The American military is a massive source of employment for Americans, and has been the case for decades. It is the source of multiple careers, education opportunities and investment into core sectors for the economy.
Without looking at the numbers, I am going to bet the 35% increased hiring is not military forces. Given the spread I saw of government employment, I suspect its going to largely be nurses, doctors and grunts to do work in many of the understaffed government agencies.
Tariffs are a net negative for the Global Economy, and in this case tariffs are political in nature.
This means there is no economic cut off or action target countries can take to remedy the situation - only ‘vibe’ and ‘appearance’ related actions.
Counter tariffs are going to target Trump and Republican dominated regions. The cut offs here are extreme - they are a form of communication through mutually inflicted pain.
Since it’s America vs the world; Canada, Mexico, the UK, China, India - will coordinate to make trade between each other more efficient, so as to offset the costs imposed on their goods.
Since America has jettisoned its soft power, they have no tools to bring to the negotiating table, meaning that the only options for America are - endure / capitulate / escalate.
This is the emperor’s new clothes territory. The New Emperor is naked, but people believe that they must simply be unable to see the greater plan.
I think the HN crowd (and technologists) are generally better informed on the economy and the nuances on economic growth, inflation, stock market etc. and that's probably the point OP is making. Dont get me wrong, a lot of technologists did vote for Trump.
This is why you can't have business people running a country. A country is not like a business or a household.
[1] https://www.canada.ca/en/department-finance/news/2024/08/can...
The United States on the other hand is planning a blanket tariff with certain carveouts, and the current administration seems to believe it will be foreign countries paying the United States as a result. When in reality, it will be American consumers and business owners paying 100% of the tariff costs. That is incompetence.
Canada's tariffs were to prop up their automotive industry. America's tariffs are to encourage nations to so more to stop importing illegal drugs into the US.
How does charging American consumers and businesses an additional 25-50% tax on purchases and imports accomplish that?
There aren't really domestic competitors for much of the imported materials used to create American products, so the foreign suppliers have the upper hand in the "deal" since Americans are reliant on them and do not have their own competitors in place.
To me this appears to be more about the federal government charging the majority of Americans more in taxes, to pay for the deficit being created by tax cuts for the few ultrawealthy Americans.
Musk is particularly dark—he was born in South Africa. He knows how this winds up. Yet he seems adamant to recapitulate the ANC’s corrupt playbook.
That's not a rationalist trade policy. At its most charitable, it's a failed attempted at brinksmanship. More likely it's just not understanding how markets work and in particular how that is reflected in the stock market (which, if not "rationalist" per se, is a lot more so than the administration). Incompetence either way.
That's a strange kind of ethics, refusing to buy from Democrats who want to sell. It's like you're boycotting Democrats.
These are distressed properties. They’re not for sale by the original owners, who probably would prefer to keep them. (Their creditors, on the other hand, want to get paid.)
-Hanlon's razor
The problem is that these people complaining about interest rates are stupid.
Sometimes I worry that, somehow, their reckless actions land onto a tangibly visible positive outcome, and they would brag about it until they die.