by JayasankaranKK
Australian Prime Minister Anthony Albanese summed it up morosely: “Nowhere on earth is safe.”
It was an accurate assessment of the wall of tariffs the US erected on Thursday, its steepest in over a century.
But to claim it was targeted, as the administration did, was codswallop.
Example: the Heard and McDonald Islands, off the Antarctic were also slapped with a 10% tariff. But both are uninhabited with only ice and absent-minded penguins about.
The penguins were reportedly indifferent to the measures.
The Donald looked as pleased as a fox in a hen-house when he announced America’s “Day of Liberation” from the “pillage, plunder and looting” it had been subjected to. To the President’s mind, the rest of the world had taken advantage of US generosity. Now there was a new sheriff in town and it was payback time.
The immediate reaction, however, was a scramble for the exits: the dollar fell and the S&P 500 companies lost a combined US$2.4 trillion in one day.
The President claimed victory anyway. “Everything will come back, booming,” he said before jetting off to Florida to play golf.
“It’s going to be amazing.”
The President hopes that the sweeping tariffs will increase government revenues so significantly he can cut taxes. It seems unlikely: the flat 10% tariff is only expected to generate around 5% of annual revenue and to expect the other additions to generate a further 95% is outlandish, so much pie in the sky.
The White House hopes to collect US$700 billion from the tariffs. Economists disagree. Mark Zandi, chief economist at Moody’s, for example, was quoted as saying “we’d be lucky if we get US$100-200 billion a year”.
For context, the US federal government collected US$4.92 trillion in revenue in 2024.
The tariffs will also mean an immediate spike in consumer prices. It follows that the Federal Reserve is unlikely to cut interest rates any time soon. That will grate on The Donald who not only campaigned on a platform of lowering prices but believes that he knows more about interest rates than anyone on the planet.
Lest we forget, he’s also claimed the same for The Bible, the economy, women, politics, making money, etc, ad-nauseam.
But we digress. Going forward, expect a Trump showdown with the Federal Reserve sooner rather than later.
Incidentally, the Fed is supposedly independent and free of politics. Intriguingly, its current chairman, Jerome Powell, was appointed by Trump back in 2018.
Could history repeat itself?
The last time tariffs were hiked so steeply was almost over a century ago. In 1930, Congressmen Smoot and Hawley sponsored a Tariff Act that carried their names into infamy.
Old Smoot didn’t give a hoot for the rest of the world because his tariffs ultimately collapsed world trade and ushered in 12 years of global depression. Think The Grapes of Wrath, dust covered farmers and soup kitchens.
It was when the US went into full isolationist mode and other countries reacted to its tariffs with their own.
The tariffs may also give no satisfaction to some consumers. The US imports all of its Viagra from Ireland.
Pity the impotent American. By April 9, he’ll need to pay 30% more to stiffen his resolve as it were.
He’s going to feel pretty hard done by.
WE