Watching the wild lines of the S&P 500, U.S. Treasury bond yields, and various foreign markets is how I’ve spent most of the past week. This felt familiar; I’d spent much of 2017 doing the same, following the vagaries of the first Trump administration and tracking the markets’ reactions like a nurse checking a patient’s heart rate.
But despite that familiarity, this isn’t the same as last time. I actually wish it were. This time, there’s no coming back from this quickly. Whoever is elected the 48th president won’t be able to easily rebuild what Donald Trump is busy destroying. Countries can and will move on without the United States. Their firms will establish new supply chains and pursue other markets. Even if the U.S. were the ultra-dominant trading partner it used to be, the credibility of the nation’s promises, its treaties, its agreements, and even its basic rationality has evaporated in just weeks.
The first Trump administration flirted with protectionism, but nothing like what the second Trump administration is trying now. Those earlier efforts seem quaint in hindsight. Not only were tariffs imposed selectively on specific goods such as solar panels and aluminum, but they were much smaller in size and escalated gradually over the course of 2018 and 2019. This was trivial compared with the plans launched and unlaunched over the past 10 days that have sent bond markets reeling. Usually, investors in search of a haven from a plummeting stock market will flee to buy safe, reliable U.S. Treasury bonds, but the opposite seems to be happening, indicating that investors no longer view the U.S. government as the safest bet in town.
America sports a half-earned cockiness that has mostly served the country well. But as the Financial Times’ Tej Parikh pointed out earlier this week, the United States “isn’t the main driver of global trade growth,” and despite being the world’s largest economy, just over 13 percent of world imports flowed into its borders (as of November 2024). Instead of reshaping trade partnerships to further benefit the U.S., it could be left behind. One analysis Parikh cites—as something of a thought experiment, hopefully—tries to model what would happen to America’s trading partners if the country were to be fully closed to trade in 2025. That analysis predicts that, within the year, nearly 41 percent of U.S. trading partners would have fully recovered from the lost U.S. exports, and by 2029, 100 out of 144 trading partners would have recovered the entirety of their loss of U.S. sales because of the expected growth in other economies.
America’s economic dominance has long been supported by alliances, faith in U.S. debt, and the independence of the Fed. Those three things “were all built on trust that took decades to build,” the economist Ernie Tedeschi told me. Over the course of the rest of Trump’s new term in office, “they could be decimated, taking decades more to rebuild, assuming our politics even has the energy to do it.”
This will be a painful process. Firms will go out of business, workers will lose their jobs, and the world will be poorer for it. But it can move on without us. As the economist Scott Lincicome pointed out earlier this year, countries have not stalled on signing free-trade agreements. In just the past few days, the European Union and the United Arab Emirates have launched free-trade talks, as have the EU and Australia, the United Kingdom and India; and senior officials from China, Japan, and South Korea have already held their first trade talks in five years.
The problem facing future administrations—and this one, in the unlikely event that it gains a modicum of rationality—is that the country has killed its reliability. “Trump has unilaterally decided that I’m going to wreck the credibility of international agreements,” Skanda Amarnath, the executive director of the research and advocacy organization Employ America, explained to me. “If you’re a manufacturer, industrial firm,” he said, “what is the confidence you have that the rules are not going to change for arbitrary and capricious reasons?”
Trump himself is certainly to blame. Yet many of the people I have spoken with lay blame at the feet not of the president, but of the legislature, which refuses to assert itself as a co-equal branch of government.
The right to levy taxes is reserved for Congress, not the president. To enact these tariffs, Trump is using emergency powers that he has invoked because of what he views as a “national emergency posed by the large and persistent trade deficit” between the U.S. and other countries. This is a breathtaking use of these powers; the International Emergency Economic Powers Act of 1977 was meant for an “unusual and extraordinary threat,” which, of course, trade deficits are not. According to the Brennan Center for Justice, no president has ever invoked tariff authority through this law. As a result, Congress or the courts could constrain him. “Somebody in the federal government is going to need to demonstrate that these laws on the books are not blank checks for a single individual to destroy trillions of dollars of wealth with the stroke of a pen,” Lincicome argued to me.
It was once possible to believe that Trump’s first reign was a fluke, a glitch, a deviation from the slow, unyielding march of liberal democracy. After all, he lost the popular vote in 2016, carried into the presidency on an Electoral College bias that discounted the votes and voices of millions. Moreover, he was deeply unprepared for the actual job of being president, his campaign having been shunned by most of the Republican establishment that had experience running White Houses past.
When former President Joe Biden ran for election in 2020, he did so to restore normalcy. In his announcement video, he proclaimed, “I believe history will look back on four years of this president and all he embraces as an aberrant moment in time.” No such luck.
A principled ideologue can be more dangerous than a craven politician. Trump may have paused some of the tariffs enacted earlier this week, but he’s still plowing ahead with the largest trade war America has seen since the 1930 Smoot-Hawley Tariff Act. The bond markets are in serious trouble, and Trump’s polling on his handling of the economy is plummeting. But the president seems remarkably stalwart. He is, it turns out, a true believer. Wrong as he may be, Trump is behaving like a man seeking an age-defining legacy.
I’ll bet he gets one.
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