I believe a reddit observation I have read is that Musk called for "zero tariffs with europe" and a response was "it was 1.4 to 1.5% on average between the US and EU before you blew this up"
Thats a silly example but there would presumably be jobs-creating outcomes for both of them in a negotiated outcome. You couldn't call this a BATNA
Trump hasn't stated that goal. It's unclear he has a particular goal in mind other than "trade deficits bad, tariffs can fix trade deficits therefore tariffs good".
The part of the equation where manufacturing jobs magically came back onshore and somehow all the other impacts were "not material" continues to escape me. Those manufacturing jobs won't come back even with a worldwide GST of 10% paid to the USA, and those other impacts are going to play out for decades.
I'm as critical of the US as the next person, but that is just a ridiculous statement. What the US does and doesn't do militarily with regards to the Houthis has nothing to do with what they can and cannot afford. Any limits on their actions against the Houthis is purely down to political will and strategic interests, and obviously not financial limitations. Push comes to shove and we all know that the US military could count on being backed up by more financial muscle than any military force on the planet (with the possible exception of the Chinese).
>U.S. Strikes in Yemen Burning Through Munitions With Limited Success
>In just three weeks, the Pentagon has used $200 million worth of munitions, in addition to the immense operational and personnel costs to deploy two aircraft carriers, additional B-2 bombers and fighter jets, as well as Patriot and THAAD air defenses to the Middle East, the officials said.
>The total cost could be well over $1 billion by next week, and the Pentagon might soon need to request supplemental funds from Congress, one U.S. official said.
>So many precision munitions are being used, especially advanced long-range ones, that some Pentagon contingency planners are growing concerned about overall Navy stocks and implications for any situation in which the United States would have to ward off an attempted invasion of Taiwan by China.
https://www.nytimes.com/2025/04/04/us/politics/us-strikes-ye...
https://en.wikipedia.org/wiki/Free_trade_agreements_of_the_U... https://en.wikipedia.org/wiki/Free_trade_agreements_of_the_E...
I might be wrong and biased, but maybe EU gains the most from this US vs world trade war?
One could suspect, and many have, that this is the reason.
In 2023, the total value of international U.S. imports of goods and services amounted to 3.83 trillion U.S. dollars
The lovely graph in this link suggests that foreign ownership of stocks was 40% in 2019 and growing rapidly: https://taxpolicycenter.org/taxvox/who-owns-us-stock-foreign...
The total market capitalization of the U.S. stock market stands at $62.2 Trillion (January 1, 2025)
Your idea is likely irrelevant since companies would retain ownership of foreign capital. Metaphor: owning JPY or USD makes little difference.
Disclaimer: not an economist. I'm extrapolating from my own experience as a New Zealander buying US stocks. I've sold 75% of my US holdings since January. Sold more since tariffs. Scaring away foreign investors might crash market but fix trade imbalance? Presumably the signal would be other stock markets going up as money shifts away from US.
Peter Navarro writes:
The US cumulative trade deficits in goods from 1976 — the year chronic deficits began — to 2024 have transferred over $20tn of American wealth into foreign hands. That’s more than 60 per cent of US GDP in 2024. Foreign interests have taken over vast swaths of US farmland, housing, tech companies..."
and:
[Foreigners] pump "so much money into the U.S. economy that it fuels economic vulnerabilities and crises." There is too much foreign demand to own our tech companies, so we have to reduce it, by making the tech companies’ stocks worth less.Maybe foreigners own 40% of US tech companies, but if 40% of US tech company income is coming from outside of the US then that is fair.
The US got a big slice of a bigger pie due to foreign investment. That investment surely supercharged the growth of tech companies (especially via IPOs) - just like good VC can do.
And meanwhile the US government is wanting to buy our businesses - and they use policy and agreements/accords to push that agenda to the benefit of the US. New Zealand sells good businesses cheaply to US and EU owners. Our government wants to give away equity and earnings. The right leaning minority party (ACT) are financial plonkers trying to sell New Zealand cheaply like a child loving a credit card. Sell NZ for some immediate income but cost us income over the years (that's the bargain you get with investors). Fine if the pie size is increased, but it isn't.
https://www.grumpy-economist.com/p/tariffs-saving-and-invest...
However - I do think it’s interesting how his over the top bravado is translated into stupidity by the media. Like he is all about shock and awe negotiating. He doesn’t mean everything he says or does in a direct way, much of it is for effect. When he drops massive tariffs on everyone at once, it’s intended to force people to the table to negotiate with an uncomfortable starting position for them.
Obviously there are side effects in the market, and it is kind of disrespectful in the current political culture, but I think it remains to be seen whether these will even be long term effects. If a few major countries capitulate in the next couple of weeks I think the market will probably catch its breath.
In this case trump probably feels that he has the leverage to achieve a net positive arrangement and not just a neutral one. If someone is treating you badly for a while, which is not objectively true about the EU necessarily but clearly trump thinks it, it’s normal human behavior to not settle for a draw unless you are the weaker party.
The media is almost doing him a favor in a way, like portraying him as being so crazy that he “just might do it”. They’re giving him a mad dog aura. Hmm.
Last year Norway bought[1] goods for 83B NOK from the US, while the US bought goods from us for 62B NOK.
We were slapped with a 16% blanket tariff, despite Norway having very few tariffs.
The majority of US imports were machinery and transportation equipment. Cars have taxes but they are not US-specific, and we have no local car production to protect.
We do have tariffs on clothing, 15%, and much higher on food we farm. However none on stuff we don't farm, for example we import a lot of corn from the US which has zero tariffs.
So why exactly should we be in an uncomfortable position when we already import significantly more than the US buys from us?
[1]: https://www.ssb.no/utenriksokonomi/utenrikshandel/statistikk...
Is it oversimplified in a way that causes unjust collateral damage? Yes.
Is oversimplifying a good political strategy, though? Maybe.
Imagine the counter factual where every little detail is accounted for, they use some model to differentiate protectionism from natural imbalances, etc. That takes way longer, possibly stretching into years, can still be very error prone, and assuming those factors are taken into account during negotiations (it clearly affects negotiating position if you have a legitimate grievance) the end result of the oversimplify+negotiate approach won’t be that different from the more details oriented academic style approach. Also starting negotiations with some super complicated white paper does not put you in a strong negotiating position against (other) politicians.
Basically check back in 3 months. If the deals aren’t renegotiated by then I will change my tune.
If trade imbalance is a proxy for protectionism, then it's the US that is protectionist in this instance.
He's punishing the people who are already doing what he says he wants done by the metric he claims to care about. Quite possibly with negative results as they react angrily to that.
Which makes a mockery of all the people in this thread finding 4D chess answers to this stupidity.
Are you saying the Norway rate violates the trade imbalance -> tariff formula that was published? I haven’t seen any reports on that. I clicked GP’s source but I can’t read it due to language difference.
This would be anti trump so I assume the media would be yelling about it, but maybe I missed it.
If that’s accurate though then I agree that it is confusing. Please contribute more details if you don’t mind.
Sorry, been spoiled by Firefox's local translation feature so I just assumed language wouldn't be an issue.
I rephrased it, but here's the opening remark translated:
The United States is one of Norway's most important trading partners. Over the past few years, Norway's export value to the United States has been around NOK 60 billion, or 3 percent of total goods exports. We imported US goods worth NOK 82.7 billion last year, which constitutes 8 percent of total imports to Norway.
The underlying statistics are available in English here[1], table 5.
[1]: https://www.ssb.no/en/utenriksokonomi/utenrikshandel/statist...
In case it’s not obvious, 100% tariffs on China means economic decoupling. Pick a side or strike out on your own but globalization as we know it just ended.
Generally, if you want other countries to do what you want, then you aim for that rather than pushing them towards China, or worse, making China seem like the best trading partner in the world.
But whatevs, you guys do you I suppose.
That might work in the short term, but it's not a good negotiating tactic. You need to build trust. If the EU had a deal on the table then engaging in that builds trust even if its not yet the deal you want. If you go in saying that you'll need to increase tariffs because the current system isn't working unless a deal is made - then fine. If you blow up the economy first and abandon the rules and order you put in place in order to try and strong arm an agreement then even if you get that agreement, you're the mob, the bully. Everyone will be working out how to get away from you, they'll have no trust in your agreements.
He's already done the crazy thing. The negotiations are already compromised.
Even if a country makes a deal, like USMCA - his deal - why won't he complain about it again in a month or a year and just reneg on the whole thing? This is the problem with untrustworthy liars.
If everyone were roughly equals in terms of power, then I would agree with you. If Poland treats France like this, it would not end well for Poland.
The trade imbalances are not a result of the US having been out negotiated by other countries in the past, though. That trade policy came from internal corruption, where American corporations influenced politicians to enrich themselves at the expense of national interests.
Now the government is ignoring those particular corporate interests (they are played out by now for the most part anyway), and USA is suddenly negotiating for real again.
USA doesn’t care about trust in this situation because there is a massive power imbalance in its favor.
So I would argue that the power imbalance is not as one sided as you think. It's not just about which economy is bigger, but who is more willing to bear pain to get the outcome they want. Polling in the US was already against tariffs prior to these new ones. Support for retaliation is high in Europe. The US has some critical imports, and because of the way this bizarre formula has been calculated tariffs are higher against the poorer countries providing those - so it will be a pure tax on Americans. And if costs and inflation start rising then we'll see if Trump really can persuade the US population its worth waiting on the nebulous results he's hoping for.
We understand that. That's why it sounds stupid. It's breaking trust and relationships in favour of showmanship. "Forcing" your allies to negotiate from "uncomfortable starting positions" is a terrible strategy longterm and will encourage them all to make plans to decentre you as much as possible.
It might be the intent, though there is no proof of it, just like there's no proof for any of the other 4D chess fanfic. But if it's the intent, the means are obviously a horrible way to achieve that goal.
If you want to force people to negotiate from an uncomfortable position while having all the leverage (rather than negotiating a mutually beneficial deal), you want to isolate them from support, you need a threat that hurts them worse than it'll hurt you, and you need them to believe that you won't back down such that their only option is to accept a bad deal.
None of this is the case. By issuing the tariffs against ~all countries at the same time, the outcome of failed negotiations is going to be far worse for the US than for any other country (affecting a larger slice of their economy). These measures are intensely unpopular in the US, and opposing them is as popular abroad, so the public opinion is working toward a return to the status quo on both sides.
Even if Trump himself doesn't care about public opinion, the Republican Senators and Representatives do, and they have the power to stop this. How long will it take for them to start fearing the general electorate more than the primary electorate? A couple of weeks?
> If a few major countries capitulate in the next couple of weeks I think the market will probably catch its breath.
How would they capitulate? The US itself has no idea of what its demands are. Again, something that you'd really want to line up in advance if this was all some galaxy brain negotiation play like you suggest.
I do think it's fair to translate it into stupidity. Alienating your allies for temporary gains is stupid, especially when it fails and does terrifying amounts of damage to the world economy.
As a Canadian, I'd say that Trump broke something that will take generations to repair.
Trump is emotional and with low self control. He flips flops and is insecure. He crashed his companies around 6 times and managed to crash a casino. We are getting to see how and why it happened.
He has certain charizma so some rich friend always helps him, including Putin. And plus the massive level of corruption he engages with helps him stay rich. But fundamentally, his businesses do badly.
Btw it’s much easier to just label someone stupid than to seek to understand them. It is definitely tempting.
> I feel like if you pretend it’s 1850 and there’s some great powers struggle afoot, trump makes a lot more sense.
I would say, he does not. When there are powers struggles afoot, it is actually better to be capable to be strategic about who/how you antagonize and attack.
> The game theory around international relations hasn’t really changed much since then, there’s just a veneer of ideology strapped on top of it.
I would argue that it did changed a lot in between. International relations are not the same at all.