In short, it must get worse before it can get better irrespective of what happens next or when.
So when the tariffs can change every day and you don't know if they'll be around in 5 years, do you commit millions to building something that doesn't pay off until 5 years from now?
Nobody's even building them right now. CAPEX and industrial investment have declined in recent months. (!!) They may even drop further. So it seems that if the aim is to revitalize America's industrial base, the present strategy isn't working, but is having an opposite effect.
Talk to anyone in industry and they'll say "we on/near shored because Covid supply chain problems taught us a lesson" or something along those lines. Those investments were just starting to bear fruit in the past few years.
Edit: And before anyone tries to put words in my mouth, this is neither an endorsement of "Trumpenomics" nor a dispute of the prior commenter's statement about them.
Credit should go to all factors, but sorry it's foolish to think orchestration of a trillion dollars into exactly these sectors wouldn't play a huge role.
Of course. I don't think many saw coming that we wouldn't be on friendly trade terms with Mexico and Canada.
> and I'm going to bet the trillion dollars in incentives played a far, far bigger role than the delta in people's resilience estimations
Which have you seen companies respond more swiftly to, opportunities to make money, or disruptions in their existing ways of making money? Which gets the CEO on the phone faster, a potential business deal or a prod outage?
Just about everyone experienced the latter during Covid. "Yeah we'd love to do all the electrical for your covid construction boom fueled McMansion development but switchgear is back ordered 18mo, sorry", and so on and so on across many industries. And they're all real salty about it.
I'm sure the incentives added fuel to the fire, but the way the Chinese economy stayed disrupted for longer really pained a lot of people in the US who depend on stuff from there to make money here.
My point is that near-shoring is the obvious thing to do under the rationale you're talking about, but actually wouldn't show up in that chart.
Here's a comparison of the US vs Europe (which experienced similar China shocks):
https://www.atlanticcouncil.org/blogs/econographics/the-ira-...
Depends on if the outage impacts the entire industry/sector or just his company. If the former, it's relatively fine because stock performance is going to be similar to competitors and investors won't be asking too many questions. Might be some wailing and gnashing of teeth but not too much action in the form of spending money on the problem.
I don't think many companies in my estimation took too many lessons from the COVID supply chain crises. If they did, the lesson was to simply outwait things. Everyone was having similar problems and you didn't be the single one of your sector to have re-shored production at triple the expense while your competitors simply spun back up once the Chinese factories got back on-line.
If it was such a compelling thing that was already happening we'd be seeing a lot more 'low value base component' manufacturing coming back, such as electronic components like resistors. So far from my basic understanding of the subject it's all the stuff quite high up the value chain instead. At best some things got near-sourced or moved around, with the raw inputs seemingly still coming from China in the end either way.
It would certainly be interesting to find some actual data here though.
https://www.bloomberg.com/news/articles/2025-03-31/us-busine...
https://www.cnn.com/2025/02/04/business/china-us-trade-retal...
The issue is that the aim clearly isn’t to revitalize the industrial base. If it were, then the tariffs wouldn’t be removed after negotiating with other countries. Since other countries can make deals to reduce the tariffs on their products, then it’s clear that the aim isn’t to get Americans to build things at home. The tariffs are clearly some kind of brinkmanship game to pressure other countries into making concessions.
But "everyone" doesn't mean everyone because everything on this list is exempt from the global 10% tariff and recriprocal tariffs (https://www.whitehouse.gov/wp-content/uploads/2025/04/Annex-...). Categories have been added to the list after influential people called the President. So even the 10% for "everyone" tariff can be negotiated away if you give the President something he values.
So if CAPEX is declining, the downturn has already started. (I mean, I guess the article's headline already told us that...)
US has taken concrete steps in the last 100 days to reduce all three.
https://en.m.wikipedia.org/wiki/Pollution_haven_hypothesis
A political/diplomatic example is rebuilding the Japanese Steel industry after WWII so they could regain self sufficiency. Until we decide to shoot ourselves in the foot hard enough we’ve had a consistent trading partner in high quality steel ever since.
The current “strategy” is painful because it has the weight of the past 60-70 years working against it.
https://en.wikipedia.org/wiki/Marshall_Plan
https://en.wikipedia.org/wiki/Reverse_Course
This isn't some retroactive attempt to justify something. This was the actual policy at the time.
And double-digit increases are what they have been working toward the whole time, they know how to do it, that's how they have managed to get by, even though they know it will takes years. These are great business operators, they know they'll make it if they persevere, they just don't know how many years.
And these were the businesses that were shrewdly operating successfully in the USA in difficult markets with slim margins, even if they were leaning to any extent on cheap foreign materials, labor, or even weighted more toward robust domestic commerce in general.
Prevailing in situations that "average" businessmen aren't quite up to.
How do you think the less-skilled operators are going to feel? They know who they are. Lots of times their businesses are totally dependent on the majority of Americans overall being "richer" than most. And in less than 100 days really, that's been brought into question more times than in any other previous decade. With things like over-taxing and currency exchange taking their toll at the same time commerce itself as a source of prosperity is receding, this is going to make them some of them the most nervous of all.
Trump has always been foolish with money, after his first term the US can no longer afford lots of things that were affordable under all previous presidents, you can't make this up.
When a recognized business-bozo-in-chief can remotely do more percentage damage in one day than a business owner can make up for in one year, might as well give up now, or at least take a sabbatical. Trump can't last forever, and anybody who replaces him may not be any wiser or less misguided, but at least would be more stable & trustworthy.
However, doing something like declaring election fraud, having Vance not certify the vote, and then in chaos, remaining in power, its totally doable, granted he has legal immunity.
The things is, they are doing so much illegal shit that they know if Dems get in power, people will go to prison. So everyone around him has as large incentive to go along.
Too much is in flux to make an expensive decision that won't see value for years. There'd need to be grants to jump start construction.
Part of Trump's genius tarriff plan was closing trade deficits.
Except trade deficit is just mostly a measure of how much countries choose to park the returns on their goods/services in your own country as investment in capex, domestic investments, etc. It is the foreigner choosing not to take the dollar or exchanged goods back to their own country, but to invest it in your own country.
You literally kill capex by killing the trade deficit.
So, on practice, you won't find a correlation here.
I'm not sure this small price difference will continue since I assume a reduction in imports might result in greater demand domestically and those factories might not be able to easily scale to absorb the shift.
and unsurprisingly, the imported goods are the goods that are still heavily reliant on labor cost.
If automation was possible, it would be the preference of any business to use that over human labor, simply for the consistency of output and ability to control cost factors. I do believe this to be the case in most instances.
Thats why car companies have long advocated for tariffs on imported vehicles (and is one tariff we have consistently held for a long time).
If people will be happy to buy locally-made furniture for triple the price and having it last longer is a different question.
There is simply no way to speedrun that kind of development.
I am not against repatriating manufacturing, but it's something that needs to be done with thought and strategy. This trade war is worse than Biden's Afghanistan withdrawal.
"Biden's"? That's comparing an 100%-Trump fiasco with an 80%-Trump fiasco.
If we're gonna blame Biden for not breaking the US/Taliban ceasefire agreement and drawing things out... Then we need to talk about how it was Trump who made the agreement abandoning the Afghan government, Trump who negotiated that aggressive May 2021 deadline to land at the beginning of the next term [0], and Trump who had to be stopped by his staff from triggering a far-worse instant "fuck y'all, we bail" just days after he lost the election in Nov 2020. [1]
_____
[0] https://thehill.com/opinion/national-security/568154-trumps-...
[1] https://www.militarytimes.com/news/pentagon-congress/2022/10...
Not a lot of domestic coffee production. I'm pretty sure there would be riots in the streets if coffee was $65/lb.
Well at least it would be a slow moving riot with lots of yawning.
We're sleepy if we need coffee. We're angry when we can't have coffee.
What would it take anyway . . . ?
The most scary thing are medicines, medical equipment etc. Healthcare is going to become even more expensive, no?
Above everything else, why would other countries/allies/trading-partners trust the U.S govt again? I just can't comprehend how this is good for anyone, other than those with spare cash to buy up distressed assets
Is that the most likely resolution? No, I don’t think so, I’m still holding most of my money out of the stock market. But doing lots of business with countries whose current government isn’t trustworthy isn’t an unheard of scenario.
That might be the whole point. Look at Trump's "now is a great time to buy" post.
It's also good for America's enemies. Maybe the goal is just a weakened America overall.
Americans will learn too.
It is not black or white when there is not real [power of] law enforcement.
Personally I'd want one hell of an insurance policy to cover the risk of all that money being wasted when I finally open my doors and have to compete with overseas manufacturing that may no longer be burdened by these tariffs.
This is exactly the kind of short-termism that got us to where we are now. Why is it so hard to think on a 5-10 year timeline? This is country-level ADHD. Anything worth building requires long term investments. People in the past used to spend their life building cathedrals that they knew would never be finished in their lifetime, and now you're questioning whether it's worth investing in something that has an expected ROI in 5 years!
if you want people to think long term you need long term stable policies that won't change the next time someone else sits in the oval office or Congress changes hands. you need to commit to a strategy.
Because the tariff plans have changed every few days. If the tariffs were stable over 5-10 years, businesses would adapt.
> This is country-level ADHD.
Yes, these tariffs are.
It's Risk vs Reward. Anyone who built something great took huge risks, for a huge return.
There is no return here. At best, you've sunk a ton of capital into a low-profit business that is propped up only by government subsidy.
Oh, you meant other people's money.
Trump has control of all branches yet isn't passing any legislation. All he's doing is introducing uncertainty.
Tourist travel to the US has contracted, for instance. US service exports are suddenly extremely suspect and a lot of countries are finding alternatives. US goods exports are facing massive headwinds, and counter-tariffs in some other countries (China, where imports from the US have basically stopped, and Canada where $400B+ of US goods were sold last year, many of which now see a counter-tariff and boycotts/replacement).
The situation is going to get much, much worse, and there is a serious sense of denial among both the market and many participants who seem to think Trump can retreat from his economic folly and everything will be good again. It won't. There is a massive structural shift that is going to linger for decades.
I think more likely problems are small electronic PCBs used for semi-bespoke controls in whatever manufacturing that actually {happens in/moves to} the us, hvac controls etc.
The reason this line of thinking doesn't work is that these measures affect all the trade that the US does with anyone, but for any other country they affect only the trade with the US. The US relative dependence on the entire world is larger than any individual country's relative dependency on just the US.
To illustrate:
US imports seem to typically be about 15% of the US GDP. EU exports to the US are only 3% of the EU GDP. So we'd kind of expect the shock to the US to be 5x larger than the shock to the EU.
In the case of the US the result is isolation. That means loss of economic strength as well as loss of political influence. Those are more expensive than they sound because the second and third order consequences are security concerns and more powerful coalitions in opposition.
Could be. In the long term, the world needs to reckon with the fact that our implementation economic systems (capitalist, socialist, fascist) depend on population growth, and isolation could also mean removal from the chaos that ensues when the existing political systems can't cope. Assuming the US improves its situation, which believe it or not is oh so slightly better as a result of what's going on now.
How does losing a compensatory supply of labor across both low and high skill markets, cutting off ourselves from backup, discouraging fertility rates, and kneecapping any incentive to invest in manufacturing domestically AT ALL help the situation?
I'm on your side on the political issue, but the data do not agree with you: The states with the most restrictive reproductive laws have higher fertility rates. I'm not claiming there is a correlation -- but rather fertility is not at all governed by reproductive laws (or even motherhood support, because those states also have shit motherhood support systems).
To answer your question: Surviving into an non-population-driven-growth regime requires primarily two factors:
- reducing reliance on financialization
- reducing reliance on pure consumption
I'm not saying the US is good at either of those two (it's not) but it's better than it was, say, in 2019. I would even look at your retort -- it used the word invest. That suggests a heavily financialization-dependent mindset. If you are looking through those lenses, it is difficult to imagine what the future needs to look like.
Trump's economic and immigration and foreign labor policies do not encourage anything that mitigates the disaster of demographic collapse. We're making ourselves even more sensitive by taking away all the safety nets our economy could fall back on.
You're right, I don't believe it. :)
It won’t cause the economy to collapse with alarms going off everywhere.
It will instead be a quiet, slow and sustained shrinking of the economy.
The UK was the hardest hit by COVID, but it has recovered well.
Per-capita GDP has been rough in the UK post-brexit.
But compared to neighbours it's pretty close?
I was against Brexit, but I don't think the apocalyptic predictions have been borne out at all.
Agreed, this is the most likely outcome in the short term.
In the long term there are going to be unexpeted knock-on effects. Even a modest definancialization of the American economy makes it more robust to demographic changes and the end of the population-driven growth era. Lowered imports from abroad (especially china) and decreased consumption writ large means lower carbon footprint. Maintenance of airplanes getting more expensive means people fly less (already happening), again, lower carbon footprint.
Heard an interesting analysis by a Bloomberg Radio guest, running down the advantages/disadvantages between US and China. They came out mostly balanced, but the big imbalance is the population. The US population is a LOT less tolerant of disruption, and the Chinese population is more tolerant, and less informed, e.g., no one there even knows the rates are ~145%.
I'm inclined to agree. I see the US population as fully and multi-generationally accustomed to the luxury of comfortable living with a decent safety net. When things start to get really hard, the US population will get rapidly un-governable, while the Chinese will be both more ignorant, more controlled, and more willing to take some suffering for the country's good, while the US has been all about "ME" for quite a while.
THIS!
A nation of (predominantly) spoiled brats is not Sparta.
I would bet, of the US 48% who read above a 6th-grade level, at least 2/3 of them know the rate is well over 100%.
The analyst's point is that even the literate in China do NOT know the rates because they have been systematically suppressed by the govt., so the info is simply not available (except to those few who have a reliable hole in the Great Firewall), so the Chinese population is already more controlled.
What gives you this idea, at all?
Our safety net is non existent in this country. The fact is most people in the US feel squeezed, thats why Trump was able to win with his America First attitude to begin with.
I'm looking at it from a general historic perspective. Just look back 100 years.
Of course the safety net could be a lot better and the GINI coefficient is awful, but there still has never been more wealth floating about the general population. When the people complaining loudest about their situation are having boat parades, driving $75K pickup trucks with aftermarket mods, and getting their news on 75" TVs, and their biggest complaint driving their vote is the price of eggs due to an avian flu pandemic, they are definitely comfortable.
When that changes in a matter of weeks, we'll see what happens.
I just found the analyst's observations valuable and worth sharing.
This isn't reflective of the median reality for most people. Simply put, the strata divide is growing even though there is a lot of wealth in US society, it is spread incredibly unevenly.
The US isn't well prepared to handle a trade war, never mind that this trade war is really cover for a class war because big businesses felt labor made too many gains from late 2020 through early 2023
I won't dispute that the median reality for most people is far less than ideal. Yet from a historical perspective the overall life in the US is of historically unparalleled safety with overall peace and low crime rates, health with more ppl covered by insurance (but yes, less than 32 other developed nations, but higher top-quality care), and plenty of historically cheap goods imported from low-wage nations.
Yes, it can all be far better, the top 0.001% are stealing vast wealth that could literally transform lives, and there is a homeless problem from inadequate psych care. But we do not have massive poverty, unemployment is at record lows for decades, and so forth.
It appears we are about to find out what it is like to see breadlines and brutality.
And yes, I 100% agree the "trade war" is about cementing more gains for the top class because labor had it too good. They can only see a business model where they prosper only if everyone else suffers. They don't see the greater prosperity possible if everyone participates in building the prosperity.
Which in context of the conversation, means nothing. I'm not disputing the fact that relative to historical circumstances, entire swaths of the world have it better than ever, but that doesn't end poverty or meaningfully increase stability under the current regime, and whatever comes of this - and its not going to be good - will last far longer than the regime is likely to be in power[0]. Addressing current and future concerns is what counts here, regardless of how good anyone has it.
[0]: I hope the US can maintain free and fair elections. Remains to be seen if this administration, its cronies, and its followers running congress and SCOTUS won't dismantle elections
Umm, it's the central point —» Which population is more prepared and willing to endure deprivation to win a trade war? Those multi-generational experience of safety, stability, and MTV prosperity mean everything in terms of being unprepared to endure deprivation for a greater good. A nation of spoiled brats is not Sparta.
We certainly agree the outcome of this is inevitably bad, is already decades-long in terms of trust broken across the globe, and the regime is definitely trying to kill free&fair elections to remain in power.
The US being the centre of trade is basically the entire foundation of its GDP. It is the reason the US $ is the global reserve. It is the reason the world holds t-bills. It's the reason silicon valley is in San Francisco and the centre of the music and movie industry is in LA. It's the reason the financial capital of the world is in NY. It's why science revolves...revolved...around the US.
If you're living in the richest large country in the world, it's worth contemplating why that is. Is it US exceptionalism? No, it's that the US came out relative untouched from two world wars that seriously harmed most of the world, so it become basically the central hub. The geographically-safe, still wealthy friendly power.
That is all dissolving at an astonishing pace, and the reality will be a harsh one. Like the other post said, the US isn't going to suddenly be poor, but instead it's just going to be an endless drain as the world reorients.
And I mean you can say "oh well we'll do without!", and...okay? I guess it's just the new minimalist world!
As to the "the US will be harmed less than others", while I actually believe the US will be one of the hardest hit countries of all, because most of the US economy relies upon an illusion, it's a silly self-comfort anyways because the US is the cause of all of this. It's like salting the land and then gloating because your crops weren't grow well anyways.
That may have been the design case, but the reason it is now is just TINA. No other currency can absorb the volumes necessary. Let's go over the alternatives:
- Euro - has less than half the volume of the US. A possible contender, but remember each member state does get to dictate its own printing rules, so the
- Yen - one tenth the reserve volume, but pegged to a country that has been in several "lost" decades.
- Yuan - country has massive capital controls and you could get completely fucked if the government fears revolt and lets people move their money out of china. And yet, international reserves are LESS than the CAD.
> it's worth contemplating why that is. Is it US exceptionalism? No, it's that the US came out relative untouched from two world wars that seriously harmed most of the world, so it become basically the central hub.
I think you've got the causal arrow wrong on this. The US is geographically well situated. It touches both oceans, and has a huge gap between it and most of the rest of the world. It's ~energy independent, and has robust agricultural center. That's why it was untouched from both world wars and that's why it became the central hub of commerce in the postwar era. The US can afford to fuck up a lot of domestic and international policy and still generally speaking not worry about existential threats.
My point was precisely that the US benefitted by geographical happenstance. Not sure how I got this wrong.
Regarding existential threats, nuclear proliferation is going to go through its worst period in human history. We are going to end this decade with a number of new nuclear bomb participants, and it's a profoundly obvious, inevitable outcome of the current US administration's myopic policies. And with that the probability that some American cities become glassed keeps spiralling ever upwards.
Not really. At least in terms of oil, the majority of what’s extracted cannot be refined in the US because all of the refineries were built for non-shale oil. Basically all of the oil gets sent abroad to be refined and then sent back.
Why this isn’t talked about more, especially under the context of “drill baby drill”, I don’t understand. If anything the slogan should be “refine, baby, refine”
i would not be surprised if being ready for such a scenario + knowlege of shale reserve limitations is why those plants aren't kicked over so long as the trannsshipment for refining doesnt remain cost prohibitive.
How does one reconcile this with the fact that 2/3rds of the US economy is based on consumer goods? I agree with the general premise that we probably don’t need so much frivolous junk, but like it or lump it, that’s what our economy has been based on for decades. It would potentially take just as long to remake the economy into something else.
You will see panic in two weeks. I was talking to two truck drivers here in Lincoln, Nebraska I met at a Flying J. They are already talking about layoffs and job insecurity and they are wondering why no one cares. One of them asked where his bail out was.
The market, I think, is driven by AI and will be reactive, not predictive. All you need to do is be the quickest person out. All the under millionaire suckers will be wondering what happened to their 401k's.
"only about 12% of U.S. households have a net worth over $1 million."
https://finance.yahoo.com/news/guess-percent-people-1-millio...
Just curious why you would think this? Markets react fairly quickly to major events...
The GDP is the result of what markets (not the stock market, but actual markets for goods and services) do, if markets react quickly so does the GDP. And markets were reacting to tariff threats and other issues early in the term, Atlanta Fed GDPNow Q1 projection rapidly turned from strongly positive to negative in February, IIRC.
It feels like this was the natural progression of stuffing trillions of dollars into the economy, along with ZIRP, and the free ride has ended. Tariffs will magnify the problem.
The whole bullwhip effect never occurred, prices never returned to pre-covid levels, as everyone claimed they would. So now we have years of stacking inflation that happened because of bloating the money supply, then ZIRP goes away, throw the tariff fears/uncertainty on top, and here we are. I have very little to no faith this administration will help the situation. Playing a game of chicken with the other global superpower is a losing proposition.
This problem has been years in the making, big ships don't turn on a dime.
No one who knows anything about economics or inflation claimed that prices would return to their pre-covid levels. However, inflation has gone way down from its peak.
I don't care if we blame the current economic policy, I don't like the current economic policy at all. I think the problem is much bigger than that.
I still would like to know where all that money went. I can't figure that out.
https://www.forbes.com/sites/eriksherman/2025/04/25/why-corp...
I get Covid was a mess in real time and it was used as a political pawn, which really sucks. Trillions of dollars went into the US economy, and most of the country feels broke.
I don’t care how the market did, fuck the market, it’s a bubble that’s been waiting to pop for years.
That's how inflation works.
> I don't care if we blame the current economic policy
You mean the previous one until January, that stopped the inflation, or the current one that is making a lot of it for the next months?
> I still would like to know where all that money went.
The money is cycling around people and companies. That's what money almost always do, the US was an exception until recently, but exceptions to that never last.
It is? Why have wages been so stagnant for so long? Isn't that one of the leading theories/reasons Trump was elected, people are completely strapped for cash. I had read recently that loans are being increasingly being paid late, credit card debt has grown massively, home prices and through the roof, and the job market is a disaster.
Where is all that money again?
Obviously (real) wages did take a hit like everywhere but have been recovering, too.
My working theory is that noticeable inflations makes people go crazy and trumps anything else. Completely closes people off to rational thought and that’s what sunk Biden. Despite awesome economic recovery given the circumstances.
> US post pandemic economic recovery has been astonishingly great measured against other major economies.
Prices have basically only gone up on almost everything for the past 5 years. Going up slower does little good.
No, consumer prices trending downward is called deflation and the economy has been actively managed to try to prevent that for a very long time. Mild inflation has been the target and rule for a very long time, with the deviations being high inflation outside of a few major economic collapses. This is not a new trend of the last 5 years.
Prices on some things trend downward without inflation as the products become cheaper to manufacture and distribute due to process improvements and economy of scale.
Take, for instance, flat screen tvs. The first 42" flat screen TV, released in 1997, cost $18,750, or the equivalent of $37,201 in today's money.
https://www.wgal.com/article/evolution-of-tv-technology-pric...
The least expensive 42" (technically 43") tv available at Bestbuy today is on sale for $113.99, or the equivalent of $57.21 in 1997 money.
https://www.bestbuy.com/site/hisense-43-class-a6-series-led-...
Obviously this is not an apples to apple comparison, its a clarification that on some goods prices decrease regardless of inflation due to forces outside of the relative value of a dollar.
No, but Trump is trying to turn the US ship in a dime, and like this aircraft carrier, we are about to drop a ton of money into the ocean...
https://www.nbcnews.com/news/us-news/us-navy-lost-67-million...
Trump’s been unusually active, so you’d expect to see direct impact in Q1 numbers.
> tariff day was less than a month ago.
Even desiring the current economic policy doesn’t mean uncertainty is beneficial. My mother for example was confused about when the tariffs took effect and therefore delayed a major purchase. The economy is simply the aggregate of many such choices.
I really think this is a huge elephant in the room that seems to be ignored.
The velocity of money is informative here, basically a dollar can only be part of so many transactions over a year. If rent is 1000$ and you get paid 4 days before rent is due you need to set aside 1000$. Bump that by 30% and now you need to set aside 1300$ and for those 4 days + however long it takes for the transaction to finish that extra 300$ isn’t part of the economy. Bank lending is a multiplier, but that runs into similar issues.
Then what do you call it when nobody has much money left, but it's declining in purchasing power no differently than if more money was being created?
It doesn’t really make sense to say that “nobody has it left” overall because money gets transferred in a transaction. So most people “not having money” could mean it’s someone else’s not gone.
However, money is only a signifier. It you mean the overall economy is declining long term, which is hasn’t been, that’s economic collapse. In such cases the amount of money in people’s bank accounts could remain constant but the their income declines alongside their spending.
As to what you’re experiencing, in 2024 people where still a shock even if prices weren’t increasing people seem to expect them to fall. Falling prices would be deflation which is a negative outside commodities.
Prices going up when the money in peoples' pockets is not.
>money is only a signifier.
I agree, signifies how rich or poor you are, as an individual or a nation.
Not the numeric amount, but what it will buy instead.
>that’s economic collapse. In such cases the amount of money in people’s bank accounts could remain constant
That would be true sooner or later even for those who rapidly decline to zero, think about those to which it would not have happened otherwise. Not to mention so many citizens not having a viable bank account to begin with these days.
By that definition those unfortunates would be suffering much worse than an "economic collapse", and there is great likelihood they would be overlooked until it is too late because everyone else has it so much worse-than-before themselves. Trump is not even as honest as Nixon, there's going to be a lot more businesses and families ruined before this is over. In times of triage for survival, only so many can be saved, and it can be kind of a crap shoot.
>Falling prices would be deflation
Got it. So rising prices are inflation.
IOW whatever it is beyond your control that makes it more difficult or impossible to afford what you once could. Or what was once almost within reach but can no longer be sure it's even on the horizon any more.
Got it. Not really the amount of money in "circulation", but what people are actually able to buy with it. Especially compared to what it was "before inflation".
People generally always figured this anyway, lots of them are not easy to fool.
Regardless of any fancy equations.
For the US you are really describing income inequality. Most individuals got fucked over a few are doing wildly better than ever. On net the overall economic output has been going up overall and per person since the country was founded, it’s simply not ending up in regular people’s hands.
Don’t forget the inherent march of technology where indoor plumbing > radio > TV > AC > cable > internet > cellphones > smartphones have all slowly been assumed to be something most people can afford. Similarly the standards for education, healthcare, homes, etc are rising faster than inflation because the standards keep rising. People aren’t buying modest 1bathroom 2 bedroom homes like they used to so yes those mini mansions cost more.
> deflation
Inflation becomes the new nominal.
If everyone has 2x as much money and things cost 2x as much forever that’s not deflation that’s just the new normal. For prices to fall you’d either need more economic output or less money in the economy.
Of course the extra money wasn’t evenly distributed, but again that’s income inequality…
The chorus was slower growth in Q1, boosted by frontloading of purchases, with the real consequences only emerging in Q2 or Q3.
You may have expected this (and if so, I hope you bought some good PUT options), but most economists certainly did not expect this already for the first quarter. On the contrary, there was more the expectation that because of the looming tariffs, people planning to buy larger goods this year would rather expedite the purchase and do it now to avoid rising prices later, leading to a boost in orders. It is quite probable that this has actually happened, and that makes this number even worse.
Yes, they did, and the Atlanta Fed GDPNow estimate for Q1 has been negative since, IIRC, mid-February. That in Q1 we were likely in the first quarter of a significant recession that would get worse if some way out of the planned tariff apocalypse wasn't found was a widespread perception.
For me personally, I've largely stopped buying non-required stuff. Not because of price increases, but because I'd rather have the cash on hand to help me & my friends to survive the next few years. Two of my friends lost their jobs in the Trump job cuts, and many of my friends are in less secure financial positions than I am. I'd rather be able to give them some cash than buy stuff I don't need, so I'm hanging on to my savings for now. Dark times ahead, and cash will be more useful than another guitar or whatever.
But long term degradation of economy absolutely.
I suppose one silver lining is people ordering less crap? Might be good for the environment, just like during COVID. But a lot of businesses and people are going to be hurting :( As usual, people with cash will end up buying properties, businesses and other assets for pennies on the dollar.
Even if the situation was reversed tomorrow, ships cannot arrive until weeks later. I've seen "60 to 90 days" given, but I think this is time for the whole supply chain, not just port-to-port ship time.
And the situation won't reverse tomorrow. It's now at a place where neither US or Chinese leadership can change tactic without "losing face" badly.
This bad 2nd quarter is locked in. Likely much longer than that.
As for China, I mentioned that it's now that they feel disrespected, and it's about "face".
That's why I'm sceptical of the USA leadership's claims that China is calling up now to negotiate trade, which China denies (1). Why would they call? The ships not arriving is the negotiating statement. That message has to first sink in, in clear terms. Which it should in May and June
1) https://edition.cnn.com/2025/04/29/business/china-video-trum...
I also think China recognizes that Trump negotiations are largely about dominance and Trump’s ability to convey a narrative that he “out-negotiated” the other guy, rather than an attempt to get the optimal deal for the US. When you’re negotiating with someone like that, maintaining “face” (ie preserving your position of respect within the negotiation) isn’t some mysterious Chinese concept: it’s just addressing Trump on his own terms, ie understanding that he only respects strength.
It isn't logic, it's emotion.
"disrespectful" is a term that the Chinese officials have used to describe US officials statements (1). I'm not reasoning my way to that term, I'm noting that the Chinese are there.
That and "Bowing to a bully is like drinking poison to quench thirst" (2)
I agree with sibling comment that saving face is it's "addressing Trump on his own terms" but I wouldn't say it's "just" that. It's also universal human psychology to react defiantly, expressed in regional idioms.
I agree that it's bizarre that it ended up there, nevertheless this is the USA's "art of the deal" working out as well as it's going to. With China calling the bluff.
1) https://www.youtube.com/watch?v=xNUs9G0sCFc
2) https://www.mediaite.com/news/china-responds-to-trump-tariff...
By government decree. What other decisions should government make on our behalf?
Governments exist so that we can coordinate doing things that individually we couldn't do or wouldn't wish to do. It's us.
The problem with the tariffs is not that they're decreed by the government that your fellow citizens elected, it's that they're counterproductive to the extent that they're causing a recession.
Yes, there have been photos of empty ports. But there number of ships headed into the US hasn't fallen yet¹, and tax changes take a up to a few months to reflect on the arriving trans-continental traffic.
So, are those some ports specialized in short distance commerce? Maybe domestic commerce?
1 - They notoriously have recently started to leave half-full. What means they'll need less time at the ports by June. That shouldn't make a difference now.
Reddit is extremely biased toward being anti-Trump and anti-tariffs to a comical degree, so I would take anything written there with a grain of salt.
The economy would be doing better if the previous admin's relatively hands off policy was continued.
The mantra of some folks response to his more reckless statements has always been "it's just talk", but it seems to not be talk.
That would fit the "can't alter my business that much..." mindset you're referencing I think.
They just don't want to be left holding the bag.
(Though this version is dumber with the President trying to do it through EOs, which is probably illegal and Congress should probably be much more upset their powers to be stupid are being usurped before their eyes.)
[1] https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Ac...
People should have paid more attention
Asset prices adjust immediately as soon as knowledge is available. There is no 'yet'.