Real World Economics: Trump’s chaos hurts his own cause – and all the rest of us

Edward Lotterman Starting his first day in office Donald Trump initiated a blizzard of tariff announcements New tariffs would hit imports from Columbia Canada Mexico and China Americans would pay a tax on imports from any nation Additions revisions delays and special punitive actions have been added on a near daily basis For a comprehensive list through May see A timeline of Trump s tariff actions so far at pbs org April was Liberation Day with tariff rates communicated on imports from nearly nations following a formula that was nonsensical to economists But these were soon paused for days We were notified that hundreds of deals were in the making Other nations mentioned there were nearly none The deadline was moved to July No now the end of August Threats revisions new punitive measures and delays continue to fill the news Treasury and Commerce secretaries backpedal bob and weave to keep up At the end of April in an interview with the editor of the Atlantic our president eclipsed French King Louis XIV s L tat c est moi or I am the state with the flat declaration that I run the country and the world His actions bring that attitude to life They have continued in spades On news of the th summit of BRICS nations in Rio de Janeiro Trump threatened that U S importers would have to pay an additional on goods from any nations he s aligning with the largely symbolic and powerless group Days later he decreed that U S families or businesses would have to pay an additional tax on coffee orange juice steel architectural tile and stone or other products from Brazil Why Because Jair Bolsonaro an authoritarian-leaning former president of that country is charged with organizing a tropical version of the Jan assault on our capitol Friends this is madness economic as well as political To use Nixon adviser Daniel Moynihan s famous phase we have dumbed deviancy down in facing an increasingly out-of-control president The Big Beautiful Bill is supposed to revitalize our business activity but the president who required for it is destroying that economic activity with his erratic uninformed and ill-judged dictatorial outbursts Step back and review fundamentals in economics Information has economic value to households businesses and leadership Ample correct information boosts economic efficiency at all levels Scanty or false information decreases it Danger and uncertainty sap the usefulness of information even if correct when generated The greater the levels of uncertainty the harder it is for any decision-maker whether individual business or leadership to use information productively Chaos uncertainty raised to dominance destroys value Anything or anyone creating chaos reduces output of needed goods and services They make society poorer not richer British historian Lord Acton explained Power tends to corrupt and absolute power corrupts absolutely Well chaos cripples the creation of value Absolute chaos destroys it all Step back to the early days of our country The Declaration of Independence aimed to eliminate arbitrary actions by a king The Constitution separated and limited powers of each branch The provision that any changes in taxes must not only come from Congress but also must originate in the House protected families and businesses from hasty and unwise alterations of program The establishment of the civil arrangement system in reduced corruption and sudden zags in framework The Federal Reserve reduced economic instability Institutions created after the financial dilemma starting in fostered transparency and made investments in new business ventures less risky The Reciprocal Deal Agreements Act set us on a -year crusade to put international business under transparent and enforceable rules Benefits were huge The most-favored-nation principle slashed administrative costs for importers No longer did they have to employ platoons of clerks to comb tariff schedules to find what tax they would have to pay on coffee from Kenya versus Brazil or Costa Rica or on tin from Malaysia rather than Bolivia Different countries still had differing taxes on imports These could be changed but importers in any nation still could choose where to buy based on quality and cost rather than differing tariff rates charged by their own country Moreover the fact that a large number of nations bound their tariffs contracting to not change them without prior negotiations with other countries meant that an importer whether Target Corp or Angela s Exotic Teas could establish on-going business relationships with good suppliers with no danger that their costs suddenly be uprooted by selected whim in the Oval Office Exporters like U S farmers could plan purchases of seed and fertilizer to plant crops secure in the knowledge that a presidential whim would not suddenly torpedo either input or product prices Grain traders like Cargill or CHS could build loading and unloading terminals knowing that the rules of the battle would be constant long enough to recoup these tens of millions in long-term investments And a family-owned contractor bidding on five county road bridges in Cottonwood County would know the price of rebar would not suddenly jump between submission of a bid and having crews on site Yet that now is all being torn up and tossed aside The president declares his commerce offensives will bring manufacturing back to our nation But it can take five or seven years and hundreds of millions of dollars to build a new automobile plant If this president can impose tariffs the next one might abolish them If Trump could destroy years of integrating U S and Canadian auto industries what whim might his successor decree Thinking of investing millions to manufacture brass valves here rather than in China What if radio news driving home tells you of a new a tax on imported copper plus God knows what on zinc It is too late for retailers to change orders for holiday season merchandise But what if an additional U S tariff is imposed when their containers are being loaded on ships in Dalian China or Haiphong Vietnam And should your farm cooperative-owned soybean plant contract in the present day to buy beans at next July if sudden retaliation by an angry China drops the realm price to by then You know prices of your products soy oil and soybean meal will fall in tandem Every day chosen presidential impulse generates more uncertainty Every day Congress and the media stand by in complaisant silence that tells the rest of the world we U S citizens cannot be trusted to elect prudent leaders We are poisoning our own market system with a speed and severity not seen in any democracy in a century St Paul economist and writer Edward Lotterman can be reached at stpaul edlotterman com