Recession?
I noticed a lot of discussion in the Open Thread comments about whether or not we’re headed for a recession.
That’s the sort of thing on which my knowledge base is small, so I won’t make a prediction. I’ll just link to this post on the subject at Legal Insurrection.
Here’s a thread for you to talk about the topic to your hearts’ and brains’ delight.
A couple of things worth mentioning. We shouldn’t get too far ahead of ourselves. Bauxite was right that DOGE hasn’t saved enough money yet to make much of a dent – lord willing, it will. And Trump’s use of tariffs is still enigmatic.
My best guess is that Trump realizes that access to U.S. markets is a nuclear weapon that only we posses. No other individual country can begin to compete, including China – maybe more on that later. Step one for him is to establish that he is willing to use that weapon to get what he wants.
The entire thesis of the Greg Jensen WSJ article I linked to revolves around the U.S. meaningfully reducing its trade deficit. Trump Administration 1.0 didn’t at all.
Why should we not?
My theory of tariffs is that those who support them are on to something real. We were told that free trade is a win-win, but that’s not true. It is definitely a trade off. I think there’s a strong case that the upside is greater than the downside, but there is a downside and there are definitely losers from free trade. (And many of the losers are Trump’s working class base in the rust belt.)
The problem is that if you begin to unwind free trade with tariffs, you can’t just unwind the losses, you unwind the whole enchilada. It’s a trade off. You create new losers. And because free trade is a net win, you create more tariff losers than winners. And that’s what Trump will do with his “beautiful tariffs.” It’s great for Trump’s base, but probably, ultimately, a losing political issue, perhaps catastrophically so.
I actually think that Trump handled the matter well during his first term. He gave limited, targeted tariffs to his supporters in a way that maximized the benefit to his base and minimized the losses overall.
I fear he’s lost the plot this time around.
Bauxite:
This is the difference as I see it –
During his first term he used them for economic reasons. During his second he’s sometimes using them for that reason, but he’s also using them as threats to gain other concessions, such as foreign policy goals and action on the fentanyl trade. So he’s expanded their use. He hasn’t lost the plot; he’s trying to broaden the plot, and may not find much success on that score. The jury’s still out.
neo – I can’t figure out what Trump is up to this time around, but if his objective was to win specific concessions, especially from Canada, the fact that tariffs are actually going into effect is a damning indictment of his skills as a negotiator. That is, unless he intended to impose the tariffs all along and was using the concessions as a pretext. As between tariffs for their own sake and tariffs as a threat in negotiations, I suspect that he actually falls somewhere in the middle, which is why his decisions look so chaotic from the outside.
I think Trump sees increased tariffs as a necessary tool to return more industry to the US, but also sees *very* increased tariffs as deal-making leverage. He’s trying to do too much of the latter in too many directions at the same time and it looks chaotic.
Bauxite is of course correct that free trade and tariffs both involve winners and losers, not usually the same people. There’s no policy that is going to harm no one, or benefit no one.
From my perspective free trade is a fundamentally moral position, and there needs to be a more pressing moral concern to deviate from it (like not allowing our citizens to buy the results of slave labor) but I am aware this is not how most people look at it. I do also think that protective tariffs do more economic harm than good, and that this is fundamentally math, you can’t add up minuses and get a plus, and I am aware that not everyone accepts that argument.
Where I think Bauxite is not right is in saying Trump’s second term efforts here are “probably, ultimately, a losing political issue, perhaps catastrophically so.” There is no possible way there’s been enough time to see that, and I’m pretty sure that’s Bauxite’s bias against Trump talking there. We all have our biases, which is why I outlined some of mine before to pointing his.
Niketas Choniates – If Trump’s tariffs create more losers than winners, they will be a political loser. If they create significant losses for the more numerous losers, then they will be catastrophic. That’s really all it is.
I suspect there will be more losers than winners, and that the losers are going to lose things dear to them (jobs, retirement savings, affordability). I don’t think that the benefits are going to be that widespread. Now I could certainly be wrong. I guess we’ll see.
I agree with David Foster. We need more economic growth in the US to support the increasing entitlements. We can get that with 1. tariffs that incentivize companies opening operations in the US or we can get that with 2. reciprocal tariffs that incentivize other countries to remove their barriers (tariffs) to our goods which will increase production here for export markets.
With 1. our balance of trade deficit is reduced because we are importing more goods and with 2. our increased exports reduces the trade deficit.
I think President Trump would settle for either, but both would be ideal. And he might vary the strategy based on the sector. In the interim it could bet messy.
To the original question, here’s some data:
Here’s what the pro’s think:
Since Congress has no interest in cutting spending this year, we will likely have a deficit of $1.9 trillion-$2.2 trillion in fiscal year 2025. That’s 6.8% of GDP.
Since consumer spending is the lion’s share of GDP, it would really signify something seriously to go into a recession.
Lost the plot?
Trump’s ALWAYS losing the plot.
(Just ask Doug Ford. Just ask Zelenskyy. Just ask Starmer. Just ask the EU).
The “plot” being to destroy DJT, hog-tie the US and weaken the West, while using taxes to fund their pet projects (and enrich themselves) ALL under the rubric of “human rights”, “morality”, “progress”, “diversity”, “justice” and “saving the planet”, etc.
IOW, grand larceny on an astronomical scale, wall-to-wall mendacity, degradation and demoralization of the citizenry accompanied by all the requisite elaborate coverups…along with the—TOTALLY ETHICAL—persecution of perceived political opponents…all for the good of humankind (as indicated above).
At the very least, one might give Trump a bit of time (just a bit) and/or the benefit of the doubt.
Oh, right. Can’t do that…
(Since not only do we know better…but our elites and betters in the Democratic Party et al. AND the Global Media tell us so…)
Such that a sane observer just might be inclined to hope—FERVENTLY—that Trump keeps on “losing the plot”….
File under: The Audacity of Hope….
Losing the plot, continued….
CR passed the house.
Greenland has voted…
https://blazingcatfur.ca/2025/03/12/red-white-greenland/
USAID to engage in massive shredding and burning of confidential documentation (no doubt in the interest of transparency and reducing global warming…).
Oops.
Here’s the link to that last item:
https://www.zerohedge.com/political/shred-and-burn-all-documents-usaid-staff-ordered-destroy-evidence-tuesday
+ Bonus:
Gosh, seems like shredding records has become the latest fad of the “Resistance”…
(Shouldn’t be too, too surprising…since they have absolutely nothing to hide…)
“Shapiro’s office deleted emails relevant to sexual misconduct complaint: ‘stunning’ admission’”—
https://justthenews.com/nation/states/center-square/shapiros-office-deleted-emails-relevant-sexual-misconduct-complaint
File under: “Trust us. (No NEED to verify…)
US GDP is reported to represent 26% of global total GDP. US consumption is reported to be about 33% of the global total. This is why Trump is using tariffs to achieve both economic and non-economic foreign policy objectives. So far his approach is working.
There are some theoretical benefits from removal of restrictions on trade in merchandise and non-factor services and in the removal of restrictions on trade in factors of production (immigration among them). The quantitative value of such benefits for a large economy is quite modest in context.
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See Jagdish Baghwati on this point: an actual free trade treaty would be about ten pages in length. We have 1,000 page phone book treaties (that Glitch McConnell has fast-tracked for ratification) because these treaties are compendia of carve-outs, just the sort of thing Glitch McConnell loves. JB notes that people who lobbied for the carve-outs understand their own special deal, but no one understands the whole. (And JB says he does not understand these treaties). Trump isn’t attacking a pristine system.
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I would worry that Trump is getting sidetracked. We should be working on the immigration mess (controlling the border, deportation of illegal aliens, radically lowering the number of settler’s visas issued each year, restricting the dimensions of the permissible temporary resident population, amending the screening criteria for who gets a spot in the queue for a settler’s visa or a temporary residency visa, elongating the period of residency necessary for naturalization, ending birthright citizenship, and ending dual citizenship). We should be working on reconstituting the federal penal code, the code of criminal procedure, and the array of federal investigatory services. We should be working on ballot security. We should be working on reconstituting methods of recruitment and promotion in federal employment. We should be working on streamlining the federal tax code. We should be working on containment of federal spending and balancing the budget.
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By the way, Congress stinks. Always.
Thanks for LI link and key info on trade I haven’t seen: US exports generating $370 to foreign govt vs import tariffs of $70 (billions USD). Most free market critics fail to discuss this. The free market is better for the consumers, the consumers of other countries are paying too much / more than with free trade.
Until tariffs are generating $370 billion for the USA they are not, generally, too high.
The Canada and Mexico governments are both using protective tariffs to reduce US exports, equalizing the tariffs has been an effective way in the past to get both sides to reduce tariffs. Tit for Tat works, that’s how real cooperation evolves.
Imagine 100k workers getting paid to dig holes, and then to fill them. No value is created, but that still adds $6 billion to GNP, as now calculated. The USA is better off not borrowing money to pay such folk to do useless work. But stopping that work increases, temporarily, the unemployment and decreases, temporarily, the GNP. DOGE is doing that. It’s good. All DEI jobs are more negative than digging & filling holes.
Brian E – I know of no understanding of economics in which tariffs increase economic growth, especially in a developed economy like ours. The reason that other countries can undercut the prices of US made goods is that their costs of production are lower due to lower labor costs, better proximity to resources, or whatever. The bad consequence of free trade is that our laborers who were previously making goods and services at higher costs than foreign competitors are out of work. Tariffs subsidize inefficient domestic industry, i.e., they artificially raise the price of foreign goods so as to allow high-cost domestic goods to compete in the domestic market on price. But the downside is higher prices, which actually reduce overall economic growth. Economic growth is further reduced when other countries retaliate with tariffs of their own to block exports in the industries where the US is more efficient to protect their own domestic industries.
Tariffs are a net loss and a net drag on economic growth. I’m open to the idea that the cost of working class folks losing their jobs and way of life is too high to justify the economic benefits of free trade, but the whole thing is a trade. Pretending that tariffs are going to increase economic growth is bordering on crazy. Telling the public that tariffs are going to increase economic growth is bordering on political suicide.
(Of course, there are so many variables in economics that this could be the one special case where tariffs actually increase economic growth. Could be, but I doubt it.)
Gotta LUV Doug Ford.
(Kinda cute…and SUCH a kiddah…)
“Ontario Premier Doug Ford apologizes to Americans amid tariff war: ‘I love the American people’”—
https://nypost.com/2025/03/12/us-news/ontario-premier-doug-ford-apologizes-to-americans-amidst-tariff-war-i-love-the-american-people/
File under: All Ye Need is Love…but it would also be nice if you beefed up the porous borders (or at least pretended to make the effort…)
Tom Grey – I fail to see how net revenue is a meaningful way to think about tariffs. If another country is taking advantage of the US by using tariffs to protect their own domestic market from US goods, while exploiting our free trade policies to sell into our domestic market, they yes, that’s a problem and yes, it should be addressed.
But if you think of it in terms of overall revenue generated, you cancel out the actual problem. Using tariffs against Country A would cancel out tariffs charged against US goods in Country B, but would do nothing to affect Country B’s behavior, and is actually likely to provoke a retaliation from Country A, prompting a downward spiral.
That’s the problem with Trump. You can come up with all kinds of ad hoc justifications for what he’s doing. You can say that he’s just using tariffs as a negotiating tool. You can say that he’s just trying get other countries to lift their own tariffs. Yeah, all of those things could (potentially) be justifiable. The problem is that Trump’s own words and actions are not consistent with any of these justifications. He just looks like a chaos agent. Sometimes you need chaos. In economics, however, chaos is bad.
Trump won in large part because people were willing to put up with his BS because the economy was pretty good between 2016 and COVID. Take that away, and disaster awaits.
They were never serious
https://x.com/rachelbovard/status/1899651352080335139
Is that why india china and germany to cite three examples keep high tariff walls
In order to rebalance an economy that has been overly consumer and has discouraged manufacturing for instance
https://x.com/PoleDancingPooh/status/1899567910109970644
Who New York has made itself so vulnerable
Recession?
To whom might THAT be attributed?
Open sesame!
“Trump lawyer claims she has uncovered Biden’s ‘fake Oval Office’ after White House’s health cover-up”—
https://www.dailymail.co.uk/news/article-14489029/Trump-lawyer-Alina-Habba-claims-uncovered-Biden-fake-Oval-Office.html
Barry Meislin – If you believe that, after Trump’s tariff circus and the rest of his strum and drang, the GOP is going to successfully convince the electorate that a recession later this year would be Biden’s fault, I have a bridge in Brooklyn to sell you.
We wanted action? We’re getting action. But we’re also going to get accountability.
Indeed, let’s hope we get it.
(Assuming we can even recognize it when it’s right there in front of our lying eyes…)
I meant that Trump is going to be accountable for the results of his actions. The left isn’t going to get accountability. Trump’s nonsense is just going hand power right back to them.