Jun.04

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Today in Trumponomics

There were a couple of pieces of news yesterday that both relate to Donald Trump's economic program, so we're going to deal with them together.

The first of those involves the "most beautiful word in the dictionary," as Trump has called it, namely "tariffs." Yesterday, he signed an executive order increasing tariffs on imported steel and aluminum, from the already-high 25% he'd already decreed, to a sky-high 50%.

As everyone knows, at this point, Trumpy tariffs tend to be VERY temporary. However, this one might well stick, for a number of reasons:

• Chicken Dance: Trump is very well aware, at this point, of TACO—Trump Always Chickens Out—and he absolutely hates it. If ever he's going to resist chickening out with all his might, so as to show he is "strong," this is the time.
  
  
• Legal Basis: The legal basis for this particular tariff is not the International Emergency Economic Powers Act (IEEPA), which requires there to be a national emergency. The tariffs based on the IEEPA are the ones currently in abeyance. No, the steel and aluminum tariffs are based on Section 232 of the Trade Expansion Act of 1962, which gives presidents the authority to act if "an article is being imported into the United States in such quantities or under such circumstances as to threaten or impair the national security." It is not plausible to claim that Chinese Barbie dolls are a threat to national security, but steel and aluminum? Maybe. In fact, this is the statute Trump used in 2018 for the tariffs he imposed on steel and aluminum then. Since he made it work once, he might well be able to make it work again.
  
  
• Impact: Not only is this steel/aluminum tariff different in terms of the legal foundations, it's also different in terms of impact. Because it's narrower than the other tariffs, it's much less likely to rattle the whole economy and to roil the stock and bond markets.
  
  Perhaps more importantly, while it will eventually hit John Q. Public in the wallet, the cause-and-effect will be much less obvious. If the cost of shoes at Walmart, or television sets at Target, or ornaments from Hallmark jumps 20%-30% overnight, it's pretty obvious what happened, especially since those businesses are happy to tell you what happened. Steel and aluminum are raw materials; not only will it take a while for the increased costs to make it to the end of the purchase process, but those increased costs will be mixed in with a bunch of other costs. Will a person who buys a new home, built with post-tariff steel, in 9 months realize that they're paying extra because of the tariffs? Will a person who buys a new car, built with post-tariff aluminum, in 9 months realize they're paying extra because of the tariffs? Maybe, but probably not.
  
  
• Show Me the Money: Steel producers donated generously to Trump's campaign, his PACs and his inauguration. We will now remind readers of the famous observation from (wildly corrupt) Civil War-era politician and spoilsman Simon Cameron: "An honest politician is one who when he is bought will stay bought."

The one certainty here is that whatever Trump's tariffs are really about, they are not about creating jobs, despite his claims to the contrary. We have noted many times that the industrial economy of the late-nineteenth through mid-twentieth century is never coming back, and that all those middle-class-wage-paying jobs that one could do with a high school diploma (or less) are largely gone for good. There may be no industry where that is more true than steel.

Trump's grasp of history is shaky, but he is certainly familiar with steel magnate Andrew Carnegie (we know because Trump was one of the talking heads for the docudrama The Men Who Built America, and commented on Carnegie for that program). We further suspect that Trump is a big fan of Carnegie's business partner, Henry Clay Frick. And we think it's a pretty good guess that Trump's frame of reference is stuck back in that era, when the steel industry employed somewhere between 500,000 and 1 million people, which in that time was something like 1% of the population.

Do you know how many people work in the steel industry today? Around 85,000. That's about 0.025% of the population. And if all steel used in the U.S. were manufactured in the U.S., do you know how many jobs it would bring back to America? About 15,000 more. That would push steel employment to a robust 0.027% of the population. And those jobs largely aren't manual labor, high-school-diploma jobs, they are largely jobs for engineers and other STEM graduates. And all of this is before we consider that higher prices for auto manufacturers, construction firms, etc. will almost certainly lead to a loss of jobs in those industries. So, not only will the tariffs not have a positive impact on employment (particularly of blue-collar workers), they will almost certainly lead to a net LOSS of blue-collar jobs. Again, whatever the agenda is, it's not jobs for Trump's base.

There is also, as we note above, another bit of Trumponomics-related news from yesterday. Now that he's been cut loose, Elon Musk is on a bit of a verbal rampage. It was already no secret that he doesn't like the big, beautiful bill, but yesterday he got out the napalm and decreed that: "This massive, outrageous, pork-filled Congressional spending bill is a disgusting abomination. Shame on those who voted for it: you know you did wrong. You know it." He also declared that "In November next year, we fire all politicians who betrayed the American people." Republican members of Congress who share Musk's view, like Sen. Rand Paul (R-KY), cheered the billionaire's words. Republican members of Congress who disagree, like Speaker Mike Johnson (R-LA), lamented his apparent apostasy.

Who knows what will happen next. At this point, it feels like the end of an episode of the 1960s Batman: Will Elon remain butthurt about getting tossed out on his keister? Will he stay involved with politics or will he lose interest? Will he use his money to try to bring down leading Republicans in Congress, even if that means electing Democrats? Will he go to war with Donald Trump? Tune in tomorrow for the next exciting episode; same Musk time, same Musk channel. (Z)