by Kyle Johnson

 

We’ve passed the point of no return; this is President Trump’s economy now.

Liberal media tell us that Trump inherited “the best economy ever.” But I’m not convinced Biden’s biggest supporters actually believe that.

Frankly, it doesn’t matter much now… at least not to investors and speculators. The markets have moved on.

Let the economists fight over the state of the economy during the transition between the Biden and Trump presidencies. They’ll have strong opinions, no doubt, but relatively little to show for their “expertise.”

We have more important things to discuss.

As I write this, the White House says that over 130 countries have reached out to seek tariff agreements. The specifics will roll out in the days and weeks to come. There will be plenty of details to comb through.

I understand that there’s a 90-day pause on most tariffs. But it would be a mistake to assume this issue will be buttoned up in a few short months. Trump himself has said that this would not be physically possible.

Don’t be fooled if tariffs momentarily drop out of the spotlight. Beware of curiously soft comments from Trump. His previous statements and those from Treasury Secretary Bessent indicate that some level of tariffs is intended to be permanent.

 

Bigger Than Tariffs

A quick trip down memory lane reveals that many commentators seriously misunderstand Trump’s take on tariffs.

Traditional discussions are about Country A vs. Country B, each of them being separate entities and each responsible for their own successes and failures. But this is not how Trump views tariffs, at least not when America is involved.

On September 2, 1987, Trump wrote an open letter to America. He paid to run it in the New York Times and the Boston Globe. It laid out his position on international trade and geopolitics.

He wrote of countries not only taking advantage of America but laughing at us, particularly with respect to the Persian Gulf. Trump said the world laughs at America as we “protect ships we don’t own, carrying oil we don’t need, destined for allies who won’t help.”

Trump criticized Japan for manipulating its way to having a weak yen against a strong dollar.

He concluded his letter with a bold position:

Make Japan, Saudi Arabia, and others pay for the protection we extend as allies. Let’s help our farmers, our sick, our homeless by taking from some of the greatest profit machines ever created—machines created and nurtured by us. “Tax” these wealthy nations, not America. End our huge deficits, reduce our taxes, and let America’s economy grow unencumbered by the cost of defending those who can easily afford to pay us for the defense of their freedom. Let’s not let our great country be laughed at anymore.

Did you catch that?

He called other countries “profit machines” that were “created” and “nurtured” by America.

Trump wants more than tariffs—he wants economic tribute.

Don’t believe me.

Trump said so himself.

 

Trump on The Oprah Winfrey Show

In the spring of 1998, Trump went on The Oprah Winfrey Show to discuss his open letter.

As you probably suspect, he didn’t back down. When asked what he would do differently regarding America’s foreign affairs, Trump replied:

I’d make our allies, forget about our enemies …. Our enemies you can’t talk to so easy … I’d make our allies pay their fair share. We’re a debtor nation. Something is going to happen over the next number of years with this country. Because you can’t keep on losing $200 billion [per year in a trade deficit].

After talking about Japan, Trump moved on to Kuwait:

Kuwait? They live like kings. The poorest person in Kuwait live like kings [sic]. And yet, they’re not paying. We make it possible for them to sell their oil. Why are they not paying 25% of what they’re making? It’s a joke.

It seems to me that Trump was not talking about a 25% tariff on the oil Kuwait was selling to the US. He was talking about “taxing” Kuwait 25% on all oil sales.

 

Tax Your Friend, War with Foe

If Trump is willing to call for a tax—something beyond a tariff—on American allies, it should be no surprise that he would call for worse on its enemies.

His focus shifted to China after its economy was liberated and manufacturing was allowed to boom. A clip from C-SPAN in January of 2000 shows Trump complaining, “We lose $100 billion a year on China.”

But how far is he willing to go?

During an appearance on Fox News’ Hannity program in December 2011, Trump complained of China “making” $350 billion on America that year. The show’s host asked how Trump could get what he wants regarding China without starting a trade war. Trump replied that a trade war is “okay,” even “wonderful.”

And here we are.

 

Trump Tariff Recap

So let’s do a quick recap on how Trump views trade.

• Trade deficit = loss.
• Trade surplus = win.
• Trade deficits cannot go on indefinitely. In fact, trade deficits threaten national security.
• Trade wars are “okay” to “wonderful.”
• America is not being adequately compensated for the role it plays internationally.
• For a multitude of reasons, both enemies and allies owe the US.
• Artificially weakening currency against the US dollar (à la Japan in the 1980s) is bad.
• Other countries owe their economic success to the US and as a result, must pay.

My question is this: how many of Trump’s preferences get satisfied with the current round of trade deals being negotiated?

My guess: relatively few.

Buckle up.

 

Bessent Wants to Play Ball

Understanding Trump’s opinion on international trade and geopolitics helps make sense of his pick for Treasury Secretary, Scott Bessent.

Bessent has spent the better part of 40 years on Wall Street and in the financial markets. But there are dozens (if not hundreds) of people with comparable CVs.

Trump most likely had his pick of the litter. I suspect Trump picked Bessent because he identifies the same threats to America. Trump likes the sound of his proposed solutions.

On June 14, 2024, the Manhattan Institute published a video on YouTube featuring Bessent. At the time, it might have seemed like more breathless pontificating from another big wig on Wall Street. But now that Bessent is the treasury secretary, his comments deserve attention.

On stage, Bessent was given an open-ended prompt to discuss his top concerns.

He first denounced all things Bidenomics, starting with serious concern over 6–7% peacetime deficits. He went on to claim that we’re at the “last chance bar and grill” to grow our way out of the Biden-era deficits, calling them a potential national security threat:

As an economic historian, and as someone who has been in markets for 40 years … I think we’re at a unique moment geopolitically, and I could see that in the next few years that we are going to have to have some type of grand … global economic re-ordering. Something on the equivalent of a new Bretton Woods … or if you want to go back … something back to the [International] Steel Agreement [1926] or the Treaty of Versailles. There’s a very good chance that we’re going to have to have that over the next four years and I’d like to be a part of that.

When asked if tariffs as a revenue source were a credible strategy for fiscal consolidation, Bessent firmly answered “yes.”

Recall that Bessent was at Soros Fund Management when it bested the Bank of England in 1992. Black Wednesday, as it is known, is likely one of the biggest shakeups in central banking since Bretton Woods.

 

Yawn if You Want, Ignore if You Dare

I get it. Another newsletter writer with a scary story.

I’m not making any promises or predictions. But I did catch a little blurb that many missed. In the days leading up to Liberation Day, the Washington Post asked the administration about Trump’s thinking behind the tariffs.

“He’s at the peak of just not giving a f*** anymore,” replied a White House official.

The perceived lack of respect and insufficient remuneration for America’s international diplomacy has perturbed Trump for nearly 40 years. He’s in his second term after managing to avoid prison and survive multiple assassination attempts.

He’s called making deals his “art form.”

In my humble opinion, Trump wants to be remembered as the best president in American history. And that won’t happen by sitting on his hands: it’s time to wheel and deal. As Lobo says, Trump is an agent of change (if not chaos).

If you put yourself in Trump’s shoes, Bessent looks an awful lot like a hired gun.

I’m not saying the sky is falling. I’m not saying we’re returning to the gold standard. But I’d encourage you to consider that Trump is trying to make an indelible impact on the global economy and international monetary system.

Maybe he succeeds.

Maybe he doesn’t.

So ignore me at your own risk when I say, buckle up.

KJ

 

PS: Tariff news will continue at a feverish pace. Special privileges will likely be granted. There will be exceptions to the exceptions. Lobo is tracking how the deals will help or hurt resource plays. There’s only one place to get his latest thoughts: Speculator’s Digest—our free, no-hype, no-spam newsletter.