Trump applies the 'Madman Theory' to the economy: the world trembles before a ceremony of permanent confusion

One of the most important philosophies of former US President Richard Nixon was the so-called "Madman Theory." Its definition was simple: if he acted irrationally, the countries he negotiated with (especially the communists) would not know what to expect and would fear that he could drop an atomic bomb on them, which would force them to be much more careful when making decisions so as not to anger Nixon and risk such a response. Donald Trump seems to have resurrected this theory, but applied to the markets: Wall Street has been shaking for weeks, not knowing what to expect from the president, and the concern continues to grow every time Trump opens his mouth to threaten more and more tariffs on more people, changing dates and rates without order or concert.

The main weapon that everyone fears he might use is tariffs. And the chaos has only grown. Earlier this month, Trump threatened to impose 25% tariffs on Mexico and Canada , a move that would severely hit the economies of all three countries and destroy the US automobile industry , as well as drive up the price of gasoline for American consumers. Those tariffs were set to go into effect on February 4, but on the last day, already in the last minute, Trump came up with an excuse to postpone them for a month.

But the 30-day delay - actually 28 - decreed by Trump is about to end again, and the American president has promised that this time he is serious . Or so he said on Tuesday, when he announced to the press that "they were on schedule." But on Wednesday, in his first meeting with his Cabinet, Trump said no, that they would come into effect in April.

So, are we sticking with that date? The reality is that the order that is in effect right now, the one he issued at the beginning of the month, maintains all the conditions defined then, with a simple paragraph added to change the effective date from February 4 to March 4. In other words, Trump doesn’t need to do anything for the already scheduled economic “bomb” to go off at that time. If anything, he would have to approve a new order to defuse it or extend the timetable again . Commerce Secretary Howard Lutnick has suggested that they could postpone them again if they again demonstrate progress on border control, opening the door to another last-minute extension.

But if there is one thing that the markets do not like, it is precisely not being able to make plans even in the short term. What happens if Trump proves that he is 'crazy' and orders the tariffs to be imposed on Canada and Mexico? The economies of three countries would suddenly explode overnight , with enormous damage to numerous companies, massive layoffs and first-rate social chaos.

And if it were just the constant threats of economic warfare against its neighbors and major trading partners, that would be enough. But Trump insists on setting off time bombs almost every week . Two weeks ago, Trump threatened to put tariffs on practically the entire planet , claiming that VAT is a tariff (which is incorrect). Last week, he threatened cars, drugs, and semiconductors from around the world . And today, he threatened the EU in particular . To all of them, by the way, he promises tariffs of 25%, which seems to have become his lucky number.

Investors so far seem to assume that Trump's bark is not a joke, and that all these threats are just bluffs that will come to nothing when push comes to shove. But the problem is that this cannot be assumed to be the case: the promised 10% tariffs against China did go ahead , provoking a counterattack from the Asian country.

And the biggest problem is that Trump seems convinced that tariffs are good : he has been claiming for decades that tariffs bring "prosperity and wealth" and arguing that imposing tariffs will allow him to lower taxes, almost believing that these fees would be paid by foreign countries and not by American consumers. Statements that would make any economist faint and that are not at all funny on Wall Street.

For the moment, media outlets such as the Wall Street Journal , which openly supported Trump during the election campaign, have been calling for weeks on him to go back on his campaign promises and not impose tariffs, warning of the damage this would do to the economy. Citizens, for their part, seem to have taken note of the message and consumer confidence has fallen sharply this month : expectations of recession and fear of a surge in inflation have grown. Even the big businessmen and bankers on Wall Street who supported Trump hoping that he would bring a new era of economic prosperity are beginning to tell the media that they are increasingly worried: What if it is not an act? What if Trump is really crazy?

Trump won a second term in the White House by reminding Americans how good the economy was between 2017 and 2020, when Covid turned everything upside down. But that magnificent economy of 2017 came after another excellent 7 years before , after the recovery from the global financial crisis. Trump simply kept his foot on the accelerator and surrounded himself with orthodox people willing to say no to him or even to withdraw from his table an order to impose tariffs, as Gary Cohn did in 2018. This time, however, the economy drags more doubts, inflation lurks, and Trump has done everything possible to get rid of anyone who might contradict him. Today he has assured that his Cabinet must obey his orders, "all of them", without complaint. And Wall Street is not doing it at all happy.