In the roughly five hours since Donald Trump began tweeting about tariffs late this morning, the Dow Jones Industrial Average has plummeted by more than six hundred points. It’s still falling. Part of it is the expectation that Robert Mueller’s court filing on Michael Flynn will reveal some of Trump’s crimes with Russia before the day ends. But part of it is that Trump is just really, really bad at this whole tariff thing.
Donald Trump began ranting this morning about how he wants to cut a trade deal with China, while making idle economic threats that he didn’t seem to understand. He tweeted “President Xi and I want this deal to happen, and it probably will. But if not remember I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. The trouble: that’s not how tariffs work.
As numerous economists quickly pointed out, when you slap a tariff on another country, it doesn’t mean that country is paying some kind of tax to your country. Instead, it means your country is putting a tax on its own people, in order to discourage them from buying goods from that foreign country. If Trump puts tariffs on China, it may or may not cost China some business, but it won’t mean China will have to pay money to the United States.
When you have a “President” of the United States who reveals that he doesn’t even have a freshman year understanding of macroeconomics, it’s no wonder investors are running for the hills. If Donald Trump is hit with bad news in today’s Michael Flynn filing, it’ll just spook them even more.
Bill Palmer is the publisher of the political news outlet Palmer Report