From Scott Galloway
Jesus, this is Stupid
Countries have long used tariffs to protect strategic industries or counter unfair trade practices. In some cases, targeted tariffs are justified. In his first term, Donald Trump imposed levies on hundreds of billions of dollars of Chinese goods — tariffs that Joe Biden largely retained. But blanket tariffs of the scale we’re now seeing are what leeches are to medicine, an outdated strategy that doesn’t work.
With his “Liberation Day” tariffs, Trump has threatened to blow up the global economic order and spread pain around the world, from China to the Pacific island nation ofNauru. But when the shitstorm subsides, America will emerge from the wreckage with the most serious wounds. Erecting a protectionist trade wall around the U.S. is a brilliant idea … if your goal is to elegantly reduce American prosperity.
The markets ripped higher Wednesday when Trump postponed tariffs on dozens of nations (except China) — pulling the knife halfway out of the back of the U.S. economy — then tumbled again the next day. Treasury Secretary Scott Bessent told reporters: “I don’t see anything unusual.” Investors disagree. They realize these injuries will take years to heal. Brand America now stands for toxic uncertainty.
Extreme tariffs, if sustained, will immolate decades of economic integration, bringing an end to an era of globalization that’s created unprecedented wealth for the U.S. They’llraise pricesand decrease demand for American products abroad, curbing economic growth and destroying shareholder value. The revenue raised will be dwarfed by the losses. Like Britain’s vote to leave the European Union in 2016 — dubbed “Independence Day” by Nigel Farage and the other Brexit dullards — Trump’s tariffs will go down as one of the biggest own goals in history. But this is Farage on steroids, and the fallout will be much wider.
It’s impossible to foresee exactly how this will play out. Before I sign off, Trump’s sclerotic policies will undoubtedly have lurched again (see above: toxic uncertainty). But what’s clear is that Trump’s trade war will thrust America’s allies into the arms of its adversaries. To quote Winston Churchill: “There is only one thing worse than fighting with allies, and that is fighting without them.” We’ve moved to the “worse” part of the equation. One country is playing the long game, however, and positioning itself to exploit America’s self-harm: China.
Bob and Weave
When I first moved to New York, I started boxing with a trainer, who convinced me that I had a gift (I was paying him) and talked me into entering a tournament. I was dumb enough to do it. I remember the bell, and the bright lights as I lay flat on my back. More than two decades later, my nose still veers to the right. It turns out a 23-year-old, 5-foot-8 guy who knows how to box and weighs 190 pounds, is a reasonable facsimile of Mike Tyson when matched up against a 38-year-old professor. My rookie strategic mistake: assuming your adversary won’t hit back.
After Trump detonated his tariff bomb in that now infamous Rose Garden ceremony, China responded swiftly and aggressively, declaring it would match the president’s taxes with its own levies on imports from the U.S. Although Trump later said he’d pause “reciprocal” tariffs for most countries for 90 days, he raised tariffs on China’s exports to 145% in a desperate cry for some sort of big (i.e., small) dick relevance. China has vowed to “fight to the end.” The difference: Xi means what he says. Trump is the other guy.
While a trade war will likely hurt China more, that misses a key point: China is willing to endure more pain. Remember, we left Vietnam after losing 58,000 men compared withmore than 1 millionfor the North Vietnamese and Viet Cong. I love the U.S., but the notion that Americans are going to tolerate 50% fewer toys under the Christmas tree and $3,500 iPhones is laughable.
New Alliances
Amid the chaos, Europe is pitching itself as“reliable, predictable, and open for fair business.” The EU has signed trade deals withMexico, Chile, andMercosur— a South American bloc that includes Brazil and Argentina — andaims to finalizea pact with India by the end of the year. As the markets melted down, and the president’s acolytes took to CNBC to make excuses for giving the wheel of the world’s largest economy to a madman, European Commission President Ursula von der Leyen visited Central Asia toseal a new strategic partnership.
Among thecountermeasuresEurope is considering if talks with Trump fail are imposing tougher regulation on American Big Tech and taxing digital services. And there’s the insult to the injury. Europe loses revenue that trades at about0.3x price/sales (Mercedes), while we lose revenue that registers at about8x price/sales (Meta). This is not apples for apples, but apples to aircraft carriers … and we are on the wrong side of the trade.
Trump could also thrust Europe into the arms of China. The two sides agreed torestart negotiationsafter the EU hit Chinese-made EVs with greater tariffs last year, with Europe willing to take a “fresh look” at pricing. China, the world’s second-largest economy, isholding its firsteconomic dialogue with South Korea and Japan in five years and carrying out a broader “charm offensive” aimed at redirecting exports away from the U.S. China is touting itself as a global trade champion, minus the toxic uncertainty. In a meeting with Spain’s prime minister today,Xi Jinping called for closer collaborationwith the EU to defend economic globalization and resist Trump.
