"The Dumbest Trade War in History"

Not a surprise to my long time readers as I'm going with the WSJ editorial page on this one titled, "The Dumbest Trade War in History." They said, "This reminds us of the old Bernard Lewis joke that it's risky to be America's enemy but it can be fatal to be its friend. Leaving China aside, Mr. Trump's justification for this economic assault on the neighbors makes no sense."

It went on, "Mr. Trump sometimes sounds as if the US shouldn't import anything at all, that America can be a perfectly closed economy making everything at home. This is called autarky, and it isn't the world we live in, or one that we should want to live in, as Mr. Trump may soon find out."

They quote the Cato Institute's Scott Lincicome who specifically says about the auto industry, "Thousands of good paying auto jobs in Texas, Ohio, Ilinois and Michigan owe their competitiveness to this ecosystem, relying heavily on suppliers in Mexico and Canada." By the way, I saw today that Nomura estimates the hit to the operating profit of the US auto industry at $33 billion with these tariffs.

And then lastly, "Then there's the prospect of retaliation, which Canada and Mexico have shown they know how to do for maximum potential impact."

I'm on board with the rest of the economic policies of Trump 2.0, particularly what is to come on the regulatory side but just not on this tariff approach as said here many times since 2018 under both Trump and Biden.

As for the defenders of the tariffs, all we hear is that it doesn't cause inflation as it's a one time price set and we didn't see it after the 2018 tariffs. Fine but what we did see after that tariff battle was a US manufacturing recession that resulted in Jay Powell and the Fed cutting interest rates in 2019. We don't seem to hear about that now when debating tariffs.

Here is a chart of the ISM manufacturing index and you can see it peaked in February 2018 just as the tariff battle was getting underway and that 2019 weakness saw Fed rate cuts as said. I've also included below the manufacturing component of US industrial production. It peaked in September 2018 and we've yet to surpass that level.