The Trade Derangement Syndrome

Politicians’ incoherence is on the rise. The current war of the American government against international trade offers many examples.

President Donald Trump has stated that the high tariffs he imposed on imported goods were both temporary and permanent (“Are Trump’s Tariffs Negotiable or Here to Stay? Amid Confusion, He Says It Can Be Both,” ABC News, April 7, 2025):

Amid mixed messaging from top White House officials, President Donald Trump was asked directly on Monday whether his sweeping tariffs are negotiable or here to stay.

“They can both be true,” Trump responded. “There can be permanent tariffs and there can also be negotiations because there are things that we need beyond tariffs.”

He also said (“Calling Trump’s Bluff on ‘Reciprocal’ Tariffs,’” Wall Street Journal, April 6, 2025):

To the many investors coming into the United States and investing massive amounts of money, my policies will never change

He seemed to affirm both that he was waiting for a phone call from “China” to mollify him and pay homage and that his administration was already negotiating with them (“Dow Jones Jumps 1,300 Points On Trump Tariff News; Apple, Nvidia, Tesla Rally,” Investor’s Business Daily, April 8, 2025). This week, on Monday morning at 9:08, he wrote on his social media:

China also wants to make a deal, badly, but they don’t know how to get it started. We are waiting for their call.

But the same Monday morning at 11:14, he also wrote:

If China does not withdraw its 34% [retaliatory tariff] increase … all talks with China concerning their requested meetings with us will be terminated!

Slips of tongue, slips of mind, or innocent baby talk? Perhaps. But these are just examples of continuous incoherence.

A is non-A, freedom is unfreedom, liberation is subjection, war is peace, and temporary is permanent. We know this is false or, more precisely, that we cannot rationally think and debate ideas without accepting the law of contradiction of classical logic. Other ways exist to approach reality such as poetry, music, and perhaps religion, but they cannot serve as the foundations of political philosophy and government policy.

What we are now seeing in America, is a protectionist policy that is totally incoherent, economically illiterate, and properly clownish. “Trade wars are good, and easy to win,” Trump tweeted on March 2, 2018. On January 31 of this year, he declared that “the tariffs are going to make us very rich and very strong.”

On April 2, “Liberation Day,” Trump announced so-called “reciprocal” tariffs, calculated with a formula that has no foundation in economic analysis and simply assumes that the “tariffs” applied by foreign states are proportional to the trade deficit of America. Fraudulent advertising went as far as the president brandishing a thick report, the National Trade Estimate Report on Foreign Trade Barriers, published every year by the USTR and whose 2025 version had been submitted to Congress a few days before. The president’s theatrics suggested that the 400-page report was the basis of the “reciprocal tariffs” formula, while it merely provides a qualitative list of the tariffs and (presumed) non-tariff barriers of about 50 countries. The April 2 declaration named nearly 180 countries whose exports were subjected to “reciprocal tariffs.” (The EU counts for one country.) An explanation sheet of the “reciprocal tariffs” calculation was provided by the White House as the two-page “Executive Summary” of a document that is unfindable and probably does not exist. The few academic citations in the “Executive Summary” don’t provide a justification for the formula, and many of the papers’ authors took exception to how their work was used. And so forth.

The arbitrary if not absurd determination of “reciprocal tariffs” is illustrated by St. Pierre and Miquelon, a small North-Atlantic archipelago that is not a country but a French territory where less than 6,000 people live. It is part of neither the French or European customs zone, and exports nothing to the United States. Yet, it was put in the category of the highest “reciprocal tariff,” that is, 50%. Another non-country supposed to have been abusing the United States is the Heard Island and McDonald Islands, an Australian territory occupied only by animals, mainly Penguins. “Don’t know what they did to Mr. Trump,” quipped the Australian trade minister speaking of the animals. (“A Tariff Whodunit: How a Tiny French Archipelago Became Trump’s Top Target,” Wall Street Journal, April 4, 2025; for the whole list of “reciprocal tariffs,” see “Where Trump’s Tariffs Stand Now,” Wall Street Journal, April 9, 2025.)

No wonder why so many professional economists (and EconLog bloggers, including Jon Murphy) and economic journalists found the whole exercise absurd.

A few days after these events, Trump intensified the trade war against China—which mainly means against Americans, who pay the tariffs—while announcing, for the countries that behave, a 90-day pause on the tariffs over 10%. In other words, he partially backed off under the likelihood of a serious economic crash, a drop in the dollar, and high interest rates (“America’s Financial System Came Close to the Brink,” The Economist, April 10, 2025). But this pause can itself be paused or canceled at the pleasure of one man. And if tariffs and personal power are so good, why doesn’t Mr. Trump impose a universal tariff of, say, 254% (some meaningless formula could be adumbrated to produce that figure), and then pause it for 90 days on what’s imported from countries whose producers sell to Americans something politically sensitive for him?

One headline in The Economist of April 10 reads along with its subtitle:

Trump’s incoherent trade policy will do lasting damage

Even after his backtracking, the president has done profound harm to the world economy

A government significantly restricting the freedom to trade of its own citizens and residents and running a propaganda machine to push related lies on the populace must represent an advanced case of the Trade Derangement Syndrome. Perhaps we can view that as the prefiguration of an utopian mix of Orwellian vicious rulers and an addicted and smiling populace à la Huxley. The observation that previous governments have brought their own stones to the building of Leviathan’s palace is correct as well as useful for a project in constitutional political economy: chaining the occupant or occupants of the palace. But it also risks becoming a partisan diversion that understates the present danger.

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