This is all pretty embarrassing.
It’s been two weeks since President Donald Trump’s “Liberation Day” tariff speech launched a global trade war, premised on absurd math, and erased trillions of dollars in market value. Every day since has been a stream of contradictory statements and brinkmanship with no way of knowing which declarations will stick. (Not helping: The looming threat of a constitutional crisis as the White House picks fights with American courts, higher education, the entire legal profession and most of the media.)
It’s no wonder then that the rest of the world is taking a look at the United States — as a trading partner, a travel destination, a steward of the global financial market — and shaking their heads.
Even before the tariffs were announced, multiple European countries, Canada and China issued travel updates warning their citizens about potentially being detained at the US border. Canadians have been especially vocal about canceling their trips to the US in protest of Trump’s policies, including tariffs. But they’re not alone: All foreign arrivals into major US airports tumbled 20% late last month compared with the same period a year ago, according to an Axios analysis — a fact that should alarm the more than $2 trillion US travel and tourism industry.
The world’s appetite for American-made stuff is also taking a hit, especially in China, which is retaliating against Washington’s 145% tariff.
On Tuesday, Bloomberg reported that Beijing has halted all deliveries of aircraft and parts made by Boeing, that quintessentially American manufacturer that directly or indirectly supports 1.6 million US jobs.
Whether Beijing’s move is a negotiating tactic or a lasting boycott of the plane maker, it is decidedly bad news for Boeing, which hasn’t turned a profit in more than five years. But it’s great news for Boeing’s European rival, Airbus.
It’s not just planes. The tariffs are hitting China at a moment when US brands like Apple, Nike, Tesla and Starbucks are losing market share to homemade rivals, as the Wall Street Journal reports.
That consumer rejection is an especially thorny issue for businesses.
“You see a lot of danger for US brands and US manufacturers in the current environment, both directly from retaliation by other governments, and indirectly from a very negative consumer response to American products in general,” John Gilbert, an economics professor at Utah State University, told me. “People have memories — I’m not sure how much that dissipates, even if the governments of those countries can come up with some kind of agreement.”
And of course, there’s the turmoil in the US Treasury market — the clearest, and frankly scariest, rebuke of Trump’s tariff policies to date.
ICYMI: When stocks fell in response to tariffs, the market for US government bonds — the boring-est, safest, most vanilla of assets — should have been the go-to place for investors. That didn’t happen.
Sleepy Treasuries started behaving like risk assets, a sign that investors are losing confidence in America’s ability to pay its debt and manage its economy. That’s the financial equivalent of a five-alarm fire.
Meanwhile, the value of the US dollar has been falling — another sign investors are shying away from what has historically been the market’s safe haven.
“I think this is one of the biggest ‘own goals’ to US credibility in financial markets that I’ve ever seen in my lifetime,” said Heidi Crebo-Rediker, a senior fellow at the Council on Foreign Relations, in an interview. “You can look at the global financial crisis as being a hit to US credibility in terms of financial markets, but this is different… Covid was an external shock. This comes straight out of the White House.”
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