I am an instinctual libertarian. And by that I mean my instinct is to always favor the individual over the group. I gave voice to this most clearly in my post about corporatism masquerading as liberty.
These days, I am not writing about these subjects. At some point I realized that my influence on political outcomes was minimal. And so, I have focused more on what is likely rather than what I want to be likely. It’s a subtle but significant difference because most people focus on what they want and not what they expect to occur.
On Trump
On Trump, that makes me conflicted. So let me make an exception here and talk about what I want in the context of Trump’s protectionist sentiments. I see the US President as having authoritarian instincts – the opposite of my libertarian ones. The way I see it, Trump ran for President thinking it would give him ‘control’. The authoritarian in him told him that President Obama was weak, because he failed to assert that control. But, now in office, Trump is realizing a President has less control than he thought.
And so, as President, Trump has been forced to compromise, if only to get a ‘W’, a win — a check mark for having kept his promises to voters. We saw that with the tax cuts. Now, one could argue Trump has no beliefs. And I have no quarrel with that line of argument. But irrespective of what Trump’s true positions were, his overriding concern was that ‘W’. And so, it makes sense that he outsourced tax reform policy planning to Congress. And we ended up with tax cuts tilted toward the wealthy and corporations. That’s where mainstream Republican positions are.
Now, however, things are different. Donald Trump is under assault. And the West Wing is in chaos. His own son-in-law is this close to peril. What does someone with controlling instincts do in that situation? They control. And in Donald Trump’s world, that control happens via taking bold moves via gut instinct. Look at how I described him before the inauguration back in January 2017. He fits this personality profile to a tee. And his actions are 100% in line with it.
On trade
The problem I have — not as an advocate of policy, but as a predictor of one — is that this is dangerous stuff. I started off the year talking about my unease despite 2018 being ‘a synchronized global economic boom‘. And while I tend to discount politics as a driver of short-run economic outcomes, I tend to think the two are much more intertwined over the medium- and long-term.
Look at Italy for a second. In the election yesterday, the ruling party got 20% of the vote and the outcome gives no one a ruling majority. Buzzfeed say the election was ‘a hot mess, even by Italy’s standards‘. Yet, there is mostly no market reaction.
My mental model for understanding policy errors says that’s what you expect. I mean how do you model the risk? How do you hedge against it for investment’s sake? You can’t until the risk basically has crystallized.
That’s where I am with Trump and his trade war. No one knows what’s going to happen. And that’s basically because the man is totally unpredictable. There’s no strategy. He might have told us he wants tariffs. And he did. But how do you know if, when and how he’ll act upon that? You don’t. It’s as simple as that.
So this trade war stuff might just be hyperbole by people trying to digest the surprise Trump has sprung on them.
Then again, maybe it’s not. We just don’t know.
Danger lurks
This isn’t a comfortable place to be, is it? And my mental model for policy errors says this is when those policy errors happen. So I don’t have a lot to say about Trump’s trade agenda. You can make all sorts of economic arguments until you’re blue in the face. They don’t matter. What matters is the politics. And this is going to play out over the weeks and months to come.
Donald Trump likes uncertainty. For him, unpredictability is a weapon. And so he is creating great uncertainty here. How will Trump carry out his plan? Who will the targets be? How will they respond? What will the economic and political ramifications be?
We simply don’t know. And that’s where the danger lurks.
Caveat Emptor.