Cogito Ergo Non Serviam
Trump Delays Tariffs Again
The Trump-Always-Chickens-Out theme got another boost as the president send letters to some of the trading partners with whom he wants to cut trade deals. The letters threaten tariffs at punitive levels unless the others start doing as Mr. Trump wants. That sounds like a strong play, but by delaying the tariffs that were supposed to go into effect today, he has shown he is making a weak showing of things. What he has not paid any attention to, and what the markets have yet to price in, are the structural changes to global trade that his fixation on tariffs has created.
Now, the tariffs have not been a complete negative; not even Mr. Trump can come up with such a policy. In May, collected tariffs hit a record, $24.2 billion. In the last five months, that figure is $68.9 billion. That is a 78% increase over last year. At this rate, the Treasury will have $150 billion or so from tariffs. Intellectual honesty demands that these figures are acknowledged and accepted.
In the context of a $31 trillion economy, though, that princely sum becomes a rounding error. In truth, the amount brought does not cover the ICE budget that is included in the big, ugly bill. It is far from the amount Mr. Trump needs to balance the budget. Indeed, it never can. The tariff levels needed to fund the government would damage trade so badly that the revenue would fall almost immediately.
That $150 billion is the payoff, but the cost of getting it is massive. First and foremost, the dollar has declined by about 10% this year against other major currencies. That makes exporters happy, but America has trade deficits with so many nations that it actually harms the US. Imports are more expensive, so consumption of those goods will decline. And so will the tariff revenue derived from them. Secretary of the Treasury Scott Bessent has said the changes would boost the dollar and lower import prices. He was clearly wrong.
The BBC has reported
Trade numbers are starting to shift too. There was massive stockpiling before tariffs, there have been more recent significant falls.
Meanwhile, Chinese exports to the US have fallen by 9.7% so far this year.
But China's shipments to the rest of the world are up 6%. This includes a 7.4% rise in exports to the UK, a 12.2% increase to the 10 members of the ASEAN alliance and 18.9% rise to Africa.
China seems to be doing exactly what economic theory from Adam Smith on predicts; they will seek new markets. They are succeeding. This will have a significant impact on the future because, once a market is established, maintaining the relationship is much easier than creating it. The long and short of it is that the US is being replaced by Chinese firms, and money is money whether it comes from the US or elsewhere.
Another consideration is something Japan has raised. Japan is furious over the tariff situation having been earnest in negotiating a new deal with the Trump administration and hving been rebuffed. They have made known that they hold more US debt than almost anyone at $1.13 trillion. Unloading that would drive up US interest rates to crippling levels. It would also drive down the value of the dollar.
Ultimately, the value of the US dollar needs a certain stability if it is to continue to be the global reserve currency. If the dollar weakens sufficiently, it ceases to be a reliable store of wealth. Then, there will be a run on the currency, and fewer and fewer trade contracts will specify the US unit as the currency for payment. Should that happen, the Dollar Empire will fall.
© Copyright 2025 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.
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