Before investor Bill Ackman requested from President Trump a pause on his tariffs, he perhaps reasonably observed that Trump deserved the benefit of the doubt, that he’s often forged another path to right to the surprise of his critics, and that investors should support him. Pundits who follow Ackman, including New Criterion editor Roger Kimball, agreed with Ackman in subsequent posts about essentially a “wait-and-see” approach to Trump’s tariffs.
No doubt Ackman knows that the beauty of markets is that no waiting is required. This may explain his call for a pause. Markets are “wait-and-see” personified precisely because they provide hindsight ahead of time. And having looked ahead in response to Trump tariffs that well exceeded what anyone was predicting, the markets have been explicit that they’re a major economic negative.
What’s easily forgotten by people not Ackman is that markets just are. They’re not just buyers nor are they just sellers, they’re a collision of the opinions of both along with the opinions of those who are sidelined, but who for being sidelined are having an impact on prices. Market prices presently signal worse ahead for U.S. and global corporations most likely due to the tariffs.
Most important of all about markets is that they’re in no way ideological. While every commentator and investor of every ideological flavor invariably finds their actions informed by their views to varying degrees, markets are a dispassionate look into the future based on what’s presently known.
With tariffs, it’s easy to see why they’re harmful to everyone. That’s because there’s no such thing as an “economy” as there are individuals. And individuals work to get. They’re importers, from across the street and on the other side of the world. If they weren’t importers, they would live lives of unrelenting drudgery. If this is doubted, stop and imagine what your appearance would be if you had to cut your own hair, design and create your own clothes, raise the food you eat, build your shelter… We’re all workers, meaning we’re all price-conscious importers.
Tariffs make the getting more expensive. Worse than expensive, tariffs slow the expansion of labor division that allows us to do what we do best. And when individuals are doing what they do best, they’re much more productive.
It’s a reminder that tariffs are a political notion as opposed to an economic one. All individuals gain substantially from the free movement of goods, but since individual gains are never the same, politicians can demagogue the previous truth. Enter Trump and his tariffs.
That they’ll make things worse is vivified by markets that are once again a look ahead. What’s unknown is what Trump will do.
He judges himself based on stock-market returns, and stocks are telling him his tariff plan is wrongheaded. There’s also the Arthur Laffer angle. Laffer’s expressed belief is that Trump believes in free trade, his aim is to get to zero, but that he can’t negotiate with his aim. Hence the announcement of tariffs that have spooked investors.
So, while the ideal negotiation would be Trump announcing his plan to go to zero, and that other countries would be wise to follow lest they fall much further behind the U.S., he’s seemingly leading with draconian in order to hopefully convince other nations and blocs to go to zero so that he can. Vietnam has already said it will go to zero, so apparently has the EU.
Hope springs eternal that Ackman’s initial plea was right, that underneath the awful is a rational economic plan. That’s the hope because “wait-and-see” about Trump’s tariff plan is here, and it’s ugly.
