John Maynard Keynes said: “Markets can remain irrational longer than you can stay solvent.” The point being that, even if you are right in the place where the stock market is forced to finish, the market does not have to follow your route or your calendar to get there.
Since the “Liberation Day” last week when the United States has announced to punish new prices on almost all countries of the world, many Americans learn a corollary in Keynes Maxime: Donald Trump can remain irrational longer than you can remain solvent.
The irrationality of the president on trade is the fundamental problem. During the weekend, he explained once again that he considered any trade deficit as a “loss” that we must be offset. He believes that trade deficits are “subsidies” paid by America to other countries. His invented mathematics ignore our excess negotiation In services, up to a quarter of a billion dollars a year. It is unconscious of the relations of trade deficits with foreign investments in America – when we send dollars abroad for goods and services, most of these dollars finally return to America. And he refuses to understand that prices are taxes paid by importersNo strangers.
As many have noted, Trump's mercantilism is one of the only political convictions he has owned for almost his whole adult life. Indeed, one of the favorite defenses of the administration of his policy is that “Trump was talking about it all his life”. Or, as the secretary of trade Howard Lutnick said it miscellaneous interviews During the weekend, “Donald Trump has been talking about it for 35 years.” The idea seems to be that Trump's consistency on the question makes it in a way correctly on the substance and that he has the mandate to follow his opinions. So, as Lutnick said it on CNN last week, everyone should relax and “Let Donald Trump direct the world economy. “”
The first statement is absurd. If a President Bernie Sanders tried to socialize medicine or to issue his own version of protectionist trade policies, the fact that he is still wrong all his life would not persuade opponents of deleting their opposition by deference to his coherence.
The second argument is also ridiculous but has a superficial political merit. Trump was honest and open to his love for prices – the “most beautiful word in the world” in his story – and he was elected. And unlike his first mandate, there is no one around him or the republican party who can say that he has the mandate to do what he wants.
Back in February, I famous The fact that the markets, unlike its human catalysts, do not support Trump's ill -designed and irrational love for protectionism. Effective capital markets are precious for all kinds of obvious reasons, but one of the most underestimated – and vexatious for politicians – is that they do not lie. They could be temporarily “erroneous” in a certain sense – hence the point of Keynes on occasional irrationality – but millions of investors do not put partisan desires before their financial interests. The markets have hated Trump's opinions on trade from the start, which is one of the main reasons why the markets have lost about 11 billions of dollars of value since its inauguration.
Like many people, I hoped that Trump would listen to the markets more carefully than for the rest of sycophants he surrounded. Tragically, this did not happen.
But there is an advantage. Markets do not simply say that Trump policies are bad for stock prices or business profits. They say to other politicians and decision -makers: “We are not going to save you from the irrationality of Trump.”
This awareness begins to be born on certain Republicans who bought the absurd idea that Trump has the mandate to fold unilaterally and irrationally the international economy to his will. The Constitution gives responsibility for taxation, including prices, in the congress, not to the president. The Congress has sold this authority over the decades to the president, for good reasons and bad. What could have been defensible is now indefensible because Trump abuses this large-scale authority, claiming emergency powers when the only urgency is the crisis he creates himself. And the Republicans begin to understand that their political solvency will not last longer than the irrationality of Trump.
Some republicans of the congress, led by Sens. Chuck Grassley of Iowa and Mitch McConnell of Kentucky, finally move towards claw Return this power (and the main conservatives are assembly Legal challenges to its commercial authority). Of course, Trump swore veto Legislation.
It should never have done it, but it is progress when the Republicans listen to markets instead of Donald Trump.
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Ideas expressed in the play
- The article argues that President Trump's prices are rooted in an erroneous understanding of trade deficits, which is wrongly equivalent to economic “losses” requiring compensation. This prospect ignores the American trade surplus of services ($ 250 billion per year) and the role of foreign investments in the recycling of dollars in the American economy(3)(5).
- The prices are characterized as taxes paid by national importers, and not foreign entities, the prices of 2025 providing for increasing federal tax revenues by $ 258.4 billion, a tax increase of GDP of 0.85% described as the most important since 1982(1)(2). Critics highlight the regressive impact of policies, revenues after tax falling from 1.9% for most income groups and low -income households faced with annual consumption losses of $ 1,700(2).
- The markets are described as rejecting Trump's protectionism, with 11 billions of dollars of lost value since its inauguration quoted as proof. The article stresses that the markets reflect the rationality of investors, contrary to what he calls the “irrational” commercial agenda of Trump(4)(5).
- Congress Republicans are increasingly challenging the use by Trump of emergency powers by Trump to impose prices, arguing that the commercial policy authority belongs constitutionally to the congress. Legal and legislative efforts to recover this power are designed in response to economic and political risks(5).
Different views on the subject
- The Trump administration defends the prices that necessary to process “large and persistent” trade deficits (1.2 dollars billion in 2024), which claims to be rear of American manufacturing, weaken supply chains and endanger national security. Reciprocal prices aim to counter non -reciprocal commercial practices such as foreign VAT systems and intellectual property theft(3)(5).
- Managers cite studies claiming that prices stimulate domestic production without significant price peaks, such as a report by the International Trade Commission 2023 linking prices to the reduction of Chinese imports and an increase in American production production(3). The administration projects long -term economic gains, including an increase in GDP of $ 728 billion and 2.8 million new jobs from a global rate of 10%(3).
- The White House affirms that the prices rectify the imbalances caused by “unfair” foreign policies, such as the manipulation of currencies and the abolition of wages, while encouraging reshoring. Exemptions for trade in accordance with USMCA aim to protect allies like Canada and Mexico from wider rates(1)(5).
- Supporters argue that prices protect strategic industries such as steel and automotive manufacturing, the average average tariff rate of the United States going to 22.5% – the highest since 1909 – to counter overproduction and foreign dumping(2)(3).
