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Tariff Mania: Acceleration Toward The Abyss
Roger Boyd
Apr 11, 2025
It’s April 12th and already Trump is rapidly back-tracking the tariffs against China by driving a truck load of exemptions through them, which include all computers, smart phones, micro-processors, memory chips, telecoms equipment, CD/DVDs, LEDs. Basically, all the high value added stuff that China exports to the US, while the low value added is still tariffed (i.e. what the poorest of society buy in Walmart). Which will be fine with a China that is moving up the value chain. At the same time, China’s 125% tariff on all US imports remains in place. Pretty much a Trump surrender! All the other nations of the world will take note of this abject surrender.
In my previous piece I detailed how China has come a long way from its position relative to the US during Trump’s first term. It has accelerated up the technology value curve to greatly reduce any technology dependence upon the US, and we have seen the great success of China brand companies both in the domestic market and abroad. These include the Huawei which the US state and technology companies conspired together in an attempt to destroy, Xioami, BYD, Geely, Chery, Luckin Coffee, Anta, Li-Ning and many others. I also covered the astonishing reorientation of the Chinese economy in the past decade from one heavily driven by real estate development to one that is now focused on rapid industrial and technological upgrading;
overtaking the West.
I have also covered the lunge into monetary and fiscal absurdity by the US since the 2000 “dot com” crash, accelerated by the 2008 GFC, and further accelerated by the 2019 Repo Crisis state rescue covered up under the auspices of the COVID pandemic. And also the late 2022 fiscal spigot reloosening as the US economy looked set to plunge in response to the Federal Reserve’s interest rate rises. Then the games played by the US Treasury Secretary and the Federal Reserve in 2024 during their failed attempt to win that year’s elections for the Democratic Party. Since the balancing of the US federal budget during the late Clinton years, the US has spent twenty five years on a debt-fuelled war spending spree while delivering one tax cut after another to the US oligarchy that controls it. At the same time, the leaders of US corporations have happily off-shored as much of US manufacturing capability as possible to take advantage of lower costs (especially in China), while at the same time gutting the corporations that they lead in order to pay outsized dividends and share buybacks to shareholders; while they became rich on their stock options or private equity payouts.
What was called for was a fundamental retrenchment by the US, as taxes were raised on the rich and on higher income consumption, the colossal war making budget was scaled significantly back, stock options and share buybacks banned, private equity severely restricted, and the great monopolies and corporate connivances that have so raised the cost of doing anything in the US broken up. In conjunction with a long-term industrial policy which may have included targeted actions to push domestic and foreign companies to build industrial capacity in the US. Such policies are of course anathema to the US oligarchy, and may have also risked a meltdown of the highly indebted and leveraged US financial system. Instead, Trump who is a tool of the US oligarchy decided to double down on more benefits for the rich through not just an extension of his “temporary” 2017 tax cuts, but even more tax cuts. In addition, he has announced the first US$1 trillion+ war budget. This new spending was supposed to be balanced by the “huge” savings that DOGE would make from the
government spending that benefits the majority of the US population, including the members of his MAGA base. These have been shown to be as mythical as Elon Musk’s predictions with respect to the companies that he runs. Instead of carefully removing some of the fiscal and monetary gasoline that his administration resides within, Trump has decided to pour more of his own. At the same time, he pushed the Federal Reserve to reduce interest rates. He, and the oligarchy, will simply not accept the financial straight-jacket that the US state is limited by.
The Trump administration thought it was clever in hiding a large tax rise on the many, to fund yet more giveaways for the rich, as tariffs. Seeming to be economically illiterate, they totally ignored the fact that such tariffs are paid for by Americans (reducing demand in the economy) and that those same tariffs will raise prices (inflation); reproducing the stagflation of the late 1970s and the more recent COVID era. This was akin to lighting a match when standing in a sea of gasoline.
Since my first piece on the tariffs, only a month ago, things have accelerated rapidly. Facing utter chaos within the integrated North American supply chains built over many decades, Trump did step back somewhat from his tariff attacks upon Canada and Mexico. The USMCA North American free trade agreement (the one Trump himself signed) will be generally honoured, but there are still the 25% tariffs on steel and aluminum together with a new global 25% tariff on vehicles (with great chaos about how the latter and the USMCA would be reconciled). The sheer speed of changes with respect to these tariffs, and the obvious lack of detailed thought about how these would be implemented with the USMCA, foretold the later lunacy.
The out of left field scale of the tariffs announced by Trump at the beginning of April, covered here, were so absurd as to constitute outright mafia bullying tactics to beat other nations into submission. What Trump did not understand though is that this is 2025, not the peak of US power in the early 1990s, and that the financial markets would go into meltdown when faced with the obvious recessionary and inflationary consequences.
As in the previous month’s North American tariff lunacy, Trump backed off within days claiming his own bargaining “genius”. But not fully though, keeping a 10% tariff rate on all countries and escalating the tariff rate on a China who had dared to retaliate. Then China retaliated to the escalation, and then Trump escalated again, and then China retaliated again. That is how we got to the US having 145% tariffs on China and China having 125% tariffs on the US.
The problem is that the US relies extensively on Chinese imports both to keep the cost of living affordable to large segments of the US population and as critical inputs to industrial processes that may take many years to replace at most probably significantly higher prices. The nosebleed high tariffs are utterly toxic to the standard of living for a vast swathe of the US population, and to many, many US corporations. In addition, exports from China to the US are predominantly managed by US corporations who will take large financial hits. With US imports to China being predominantly raw materials, food and relatively easily replaceable manufactures, the Chinese economy will be just fine without US imports. Also, with net Chinese exports to the US being less than 2% of GDP, the loss of them can be offset through fiscal and monetary policy and a re-orientation of exports to other countries.
In reality, the new structure of 10% tariffs on the world, specific 25% tariffs on steel, aluminum and vehicles, and 145% tariffs on China is worse than Trump’s walked-back beginning of April position due to the colossal impact the China tariffs will have on the economy. And the other tariffs were only stalled for 90 days while negotiations/attempted US thuggery took place. Seeing the combination of continued fiscal largesse, tariff-driven recession (which will increase federal spending and reduce the tax take), and tariffdriven inflation, while Trump attempts to jawbone the Federal Reserve into cutting interest rates, investors have started to flee the massive US Treasury bond market and the US currency. Trump has lit the financial gasoline surrounding his administration and he may not be able to put the resultant fire out. At the same time, gold has exploded higher reflecting its traditional safe haven status. To have any chance of putting out the fire, Trump would
have to carry out a humiliating climb down and very quickly cut a deal with China. As that nation is seen as the main enemy by the US oligarchy, such a move will be very hard to stomach for them. And instead, Trump is now talking about tariffs on pharmaceutical inputs and products, which will both greatly escalate the cost of medicines in the US and crush the profits of many US pharmaceutical companies that make outsized profits by importing cheap and selling expensive in the US market. And even if Trump did come to a compromise with China, he would reinforce the utter volatility and unpredictability of his administration, which has significantly frozen corporate investment decisions. How can a company decide to make a new major fixed investment when it has no clue about what the tariff position will be even weeks from now? Such an investment strike will already deepen the recession, as consumers hunker down in the face of such uncertainty and the supply chain impacts ripple through the economy. Any such massive climb down would also signal to the world how truly weak the US Empire is, while the actions previously taken will have greatly reduced foreign positive attitudes toward the US and its corporate brands.
As of the mid-afternoon of Friday April 11th, the US Treasury 10-year bond yield is about 4.5%, and the US Treasury 30-year bond yield is 4.9% (US mortgages are set at the 30-year bond rate). Both not far from their highs in late 2023 of 5% and 5.2% respectively, with the dollar having fallen precipitously since Trump’s early April tariff announcement; the combination of a falling currency and rising interest rates is what currency crises are made of. The stock market seems to have stabilized for now, after the bear-market style rally on Wednesday, but that can easily be the calm before the storm. This weekend will see a huge amount of lobbying of the Trump administration and much work to calm the financial markets, but without significant actions the stock market will start reflecting the dire economic and financial future, and the foreign exchange and bond markets will continue escalating the crisis until the administration is forced to act. The UK Liz Truss disaster of late 2022, and the UK currency crisis of the early 1990s come to mind.
Whatever the Trump administration does, it has already severely damaged long-term investor confidence in the US, damaged US relations with the whole world, damaged US corporate brands across the world, while also displaying the true weak economic and financial hand that it holds. Building on the displayed weakness of the US military and its equipment and training in Afghanistan, Ukraine and Yemen. All the while allowing China to burnish its image as a reliable, stable, and equitable partner for the world to trade and ally with. All the while destabilizing its relationships with the vassals that constitute the US Empire. In years to come, Trump may be seen as the Gorbachev of the US; turning a condition of slow relative decline into one of accelerated collapse. He will be just a symptom though, of the voracious greed of the US oligarchy and its utter resistance to taking any responsibility for the long-term health of the US national power that underlies their own wealth and power. While over-extending the position of the US again, and again, and again.
The above will of course be taken into account by both Russia and Iran in their dealings with the US, given that the US position has been significantly weakened by the tariff mania. It is becoming more and more obvious that Russia is building toward a full-blown Spring offensive as its attacks escalate daily across the front line. Until its basic security needs are met by the US, which would require a colossal climb down and very public defeat (and cause utter chaos with the Western European vassals), Russia will continue with jaw-jaw and war-war simultaneously. Iran will certainly not be ready to compromise much either, especially with the backing that it has from both Russia and China. The US cannot afford an escalation in Ukraine or with Iran given the incredibly shaky position of the US economic and financial position. And of course, China will drive a hard bargain to allow Trump to get out of the mess that he himself created. It is in their interests to not create a financial crash in the US, but they will be just fine with speeding up the US decline somewhat. It is noticeable that China has reached out to the EU as the US increases the level of vassal abuse, and the Spanish PM is pushing for an EU-China policy pivot.