The Empire strikes back

Written By: - Date published: 5:40 pm, April 13th, 2025 - 7 comments
Categories: Donald Trump, Economy, Free Trade, Globalisation, International, politicans, trade, us politics - Tags:

The past fortnight has seen another series of back flips and reverse somersault from the White House on Tariffs.

The story goes basically like this.

On April 2, 2025, dubbed Liberation Day by the US Administration, Donald Trump announced a global initial 10% tariff on almost all US imports with rates going even higher a few days later for many countries. Qualifying imports from Canada and Mexico were exempt as well as for some strange reason all imports from Russia and North Korea.

The baseline tariffs were to start on April 5 and the higher tariffs on April 9.

The tariffs affected almost everyone. Even remote islands home to only penguins and other native flora and fauna suddenly found that their exports, even though there were not any, were going to cost more in America.

China was hit with a 34% tariff.

Defacto Vice President Elon Musk did not take the decision well as clearly it would affect his business interests which are heavily dependant on China.

Musk apparently made personal appeals to Trump to reverse the tariffs.  He then criticized Peter Navarro, Trump’s trade advisor and one of the architects of the tariffs, questioning his educational qualifications and said “He ain’t built shit.” Navarro responded by saying Musk was not a “car manufacturer”. Musk retorted that Navarro was “a moron” and “dumber than a sack of bricks”.

This year’s White House Christmas Party should be an interesting event.

Then there was a wholesale rush of nations seeking access to the White House attempting to secure better terms of trade.

On April 9 Trump announced a 90 day hold on all proposed tariff increases over the 10% base line except for China where the rate would be increased to an eye watering 134% or 104% or 124%. Different figures seemed to get floated at different times. No one seemed to know exactly what was happening.

The decision was clearly rushed. From the Guardian:

Trump announced his decision to abruptly pause tariffs above 10% on dozens of countries during a congressional hearing featuring Jamieson Greer, his US trade representative.

“It looks like your boss just pulled the rug out from under you,” the Democratic representative Steven Horsford of Nevada told Greer. “This is amateur hour, and it needs to stop.”

And Trump’s justification for his about face is somewhat underwhelming. Again from the Guardian:

When asked later about the reason for his decision, Trump told reporters, “Well, I thought that people were jumping a little bit out of line.”

“They were getting yippy, you know, they were getting a little bit yippy, a little bit afraid,” Trump said at the White House.

Treasury Secretary Scott Bessett claimed to reporters that Trump had always intended to put the brakes on the wide-ranging tariffs the president announced last week.

“This was his strategy all along,” Bessent said at the White House, where officials, including him, had denied for days that the tariffs would be suspended.

Then in between games of golf Trump announced that smartphones and computers from China would be exempted from the 125% levies imposed. And this would be retrospective and credits would be paid out.

A threatened near doubling of the cost of an Iphone was obviously not tolerable. But spare a thought for Apple which had arranged for the air shipping of 600 Tonnes of Iphones from India.

And the Chinese cleverly targeted US manufactured chips by exempting computer chips from US manufacturers if the country of manufacturing was not the United States. Taiwan and South Korea were obviously relieved.

What caused the United States to engage in such dramatic and chaotic policy reversals?

There is this intriguing theory posed by Dean Blundell that Canadian Prime Minister and former Merchant Banker Mark Carney organised with other world leaders a sell off of US bonds and caused a spike in the cost of bond’s thereby threatening significant interest rates increases as well as the inflationary effects of tariffs.

From his post:

Let’s talk about the moment Donald Trump blinked. It wasn’t loud. It wasn’t a tweetstorm or a rally rant. When the tariff threats that had the world on edge—125% on China, 25% on Canada’s autos, a global trade war in the making—suddenly softened. A “pause,” he called it. A complete turnaround from the chest-thumping of the past week. And the reason? Mark Carney and a slow, deliberate financial maneuver that most people didn’t even notice: the coordinated Treasury bond slow bleed.

This wasn’t about bravado. It was about leverage. Cold, calculated, and devastatingly effective.

Trump’s pause wasn’t because people were getting yippy…

There would appear to be some supporting evidence of Blundell’s claim.

US Bond prices have recently been crashing. And you would think that during times of intense economic turmoil US Government bonds would represent a safe haven for investors.

Of course the alternative is that Trump is that scary to rational investors they are avoiding US investments. With everything he has done you can understand why investors would be concerned.

I expect that we will see an unusual coalition forming in the United States comprising of big business, the wealthy, unions, environmentalists human rights organisations, and people dedicated to dealing with poverty and showing tolerance to everyone no matter where they are from. They all realise they are being ruled by a clown and to stop their country being ruined.

And pretty well the rest of the world will be cheering them on.

7 comments on “The Empire strikes back ”

  1. Binders full of women 1
    13 April 2025 at 6:22 pm

    CANZUK should add Mex asap. IPhone should relocate to Vancouver.

    Reply
  2. Anne 2
    13 April 2025 at 6:23 pm

    I think you will find it was a mix of the two… a deliberate sell off of US bonds and panic stricken investors fleeing the US stock market.

    After weeks of discombobulation (had to get that word in) I'm sure you are right about the formation of weird coalitions. But it won't be confined to the US. It will happen here and elsewhere as well.

    Did you watch Judith Collins on Q&A this morning Mickey? She was oozing charm and reason and… so many sweet smiles. I even started to like her. 😯

    Reply
  3. Ad 3
    13 April 2025 at 7:17 pm

    We're at the point in the Trump administration where any and every action including no action is a further destabilizing shift for business investors or traders.

    Trump can no longer stop the tide out to US recession.

    Reply
  4. Res Publica 4
    13 April 2025 at 7:51 pm

    I expect that we will see an unusual coalition forming in the United States comprising of big business, the wealthy, unions, environmentalists human rights organisations, and people dedicated to dealing with poverty and showing tolerance to everyone no matter where they are from. They all realise they are being ruled by a clown and to stop their country being ruined.

    I want to believe this. I really do.

    That America could once again turn toward sanity and real reform after years of darkness and decay. That some broad, improbable coalition might finally say: enough. Just like it did at the end of the Gilded Age.

    But even from here, it’s hard not to see how much harder the road is this time.

    The corruption isn’t as cartoonish as Tammany Hall, but the system feels more deeply captured — more polarised, more paralysed. The civic infrastructure that once made Roosevelt-style progressivism possible has eroded. Now it’s monopolists in hoodies, media outrage cycles, and political machinery that barely pretends to represent the common good.

    Trump isn’t a strategist. He’s a wrecking ball with a crowd — and that makes him dangerous, not brilliant. Treating him like a master tactician flatters him. Treating him like a joke underestimates him.

    I’d love a Roosevelt moment. But we don’t get one just by waiting. History doesn’t necessarily repeat: and the cavalry isn’t coming. If the arc of the moral universe bends at all, it will only be because people bend it, together, under pressure.

    Reply
  5. Nic the NZer 5
    13 April 2025 at 8:07 pm

    This effect is just the smart money doing risk avoidance. With a large tax on imports, it's at least likely for a lot of US import purchases to go away (note this is different from tariffs succeeding which would also involve actual US import substitution, the more likely result would still be falls in real US consumption). The implication of this however is less external trade surplus funds being used to buy US bonds for external to US clients. This will devalue US bonds (in the secondary market), obviously running into an asset class you anticipate devaluing is not running to safety.

    The other coupled thing to understand is the Fed is unlikely to go into the US bond market during high inflation (which the tariffs are likely to create for US consumers), so the usual backstop to US bond markets is anticipated not to intervene.

    I would only anticipate solidarity against elements of the Trump agenda which steer towards real valued US recession.

    Reply
  6. SPC 6
    13 April 2025 at 11:22 pm

    Who dunnit it, and what can be done.

    Chaos theory meet quantum, chaos entanglement dawns. Will they put AI in charge of market management? Will Luxon ask Key to explain why Trump's win is good for the global economy?

    A global reserve currency nation with a large and growing debt, wants to sustain unfunded tax cuts for the haves. It wants the domestic consumer to pay more taxes (tariffs) and believe it is for the good of them to build a better American economy.

    The impost on the global economy (and village from withheld US funding) and the stagflation in the US of A, makes for a poorer and less stable world (geo-political and economic).

    An idiocracy is fatal to empire.

    Thus team technocracy, the broliagarchy and its Christian dominionism (personified in JD Vance) has a problem. Because they want to build one in their own image – their T cloud empire inheritance.

    This is bigger than the Fed.

    Trump's instinct is pre 1913, he might end the Fed, if they do not go down the path that leads to stagflation. Thus the return of the age of Volcker – the savagery of his time. But when the institutions of the USA – SCOTUS, Congress (one sycophant led order) and MSM (end of the fair reporting rules in the 1980's) have fallen.

    Chaos entanglement.

    https://fortune.com/2025/04/11/inside-bond-market-800-billion-murder-mystery-basis-trade-time-bomb-fed/

    Reply

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