As I related in a previous post, I am encouraged that Mr. Trump understands what he is doing, he is not merely ignorant and pridefully so. That doesn’t mean he isn’t taking incredible risk, at what I see is for a very small reward. I (and most economists and informed observers) have told you for years about the destructiveness of tariffs, and that almost everything those arguing in favor of tariffs is a complete lie (e.g., we don’t make anything in America anymore, when industrial production is double what it was in 1980–we are a manufacturing powerhouse globally). But the populist nostrums that “they’re ripping us off” by running trade surpluses with us, or “they’re tariffing us more than we tariff them” (forgetting that simply means they’re taxing their citizens more than we’re taxing our citizens, and the way they are proposing to get even is to tax our citizens more!) is one that scratches the MAGA movement’s itch. We are reminded of H.L. Meachan’s famous quote that “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.” The last few days are giving it to us good and hard. And don’t think I’m suggesting that we should be listening only to elite economists–the view that tariffs are bad is broadly shared across the U.S. population.

Those that were hoping for the prosperity that Mr. Trump wanted, along with the lower prices he promised, are instead given a new line: “Yes it may be hard in the short run. You may have higher prices in the short run. But we’ve got to do it, and in the long run you’ll see how great it is.” This is not what voters wanted, as we’ve said before. Mr. Trump’s solid but not overwhelming win was primarily about getting prices down, securing the border and ending progressives’ cultural jihad. His victory was certainly not a mandate to restructure the global economy, as if he could even do that (absent tanking it, which is possible). And it was not a mandate to declare economic war against the entire world, including our closest allies. The major indices were down close to 6% on Friday after ~5% the day before, and the NASDAQ is now in bear market territory. Trumpians are excusing this as foolish panic selling, saying it’s not justified. Just two days ago, Mr. Trump’s Treasury Secretary Scott Bessent argued that the initial market moves down were more due to the high valuations than tariffs. But there was a reason that Mr. Trump waited until markets were closed to unveil his plan on Wednesday (as if we couldn’t see subsequent market moves as primarily tariff-induced). The question I have is are Trumpian supporters doubling down on their own investments in the market? If they believed the Trump Administration’s public statements, they should borrow as much money as they can and go all in, since fortune favors the brave. But I suspect they are not, and indeed I hope they are not. Markets are not always right, that’s for sure. But they reflect not the political opinions of the day, or the spun narratives of either the Biden/Harris team or the Trump team. Rather, they are a reflection of millions of peoples’ best judgments about the future value of the earnings of those companies. In one sense, stock market valuations for publicly traded stocks are a populist answer to elite statists who believe they have better knowledge of what the true value of the economy is, and where capital should be allocated. Utter hubris. But pride goeth before the fall. And the initial results of Mr. Trump’s tariffs are much more closely aligned with what the economists have said would happen, than what the Trumpians have argued.

When those arguing against free market economics are unable to convince the public of the soundness of their arguments, they will often resort to calling those defending free markets as “ivory tower academics” or “it works in theory but not in practice.” The latest is a variant of both, with Mr. Trump being the first real businessman who really understands tariffs, as contrasted with economists who have never had to make payroll. I’m seeing a lot of these type arguments, and we’ll have to see if Mr. Trump is ultimately successful. Yes, we’ve had liberation day. But now we’re in Adam Smith’s day (and David Ricardo’s). The claims of the economists versus the Trumpians can now be compared–do tariffs lead to a great national renewal or will they Make America Poorer Again? The initial data clearly favors the economists. And I will unequivocally say that if the tariffs Mr. Trump announced stay in place during his presidency, we will be poorer, and very much so. And the Republicans will lose the house in 2026 and everything in 2028. Of course no one expects our dealmaker in chief not to make a deal. I will for the sake of argument believe that Mr. Trump wants lower tariffs globally, not higher–I’ve been hopeful in the past that this was so, and now I’m increasingly believing it to be true, despite all the other nonsense that the administration says about tariffs. But I think the history shows that trade wars don’t lead to lower tariffs, but peaceful multilateral and bilateral negotiation can. Further, if Mr. Trump somehow were able to restructure the global economy and “bring back the jobs,” we will be poorer and not richer. The manufacturing jobs that have left are not only poorer paying than the service jobs that have replaced them, they are poorer paying than the manufacturing jobs that we have now. Mr. Trump, please don’t bring back the textile factories. Don’t make us poorer. We are a far, far richer country than China and the reason is precisely because of our free markets. We have outperformed Europe for decades, precisely because of our relatively free markets and their embracement of the kind of controls and restrictions that J.D. Vance espouses. Mr. Vance’s declinist views that many Trumpians share is just not consistent with any view of the data for the U.S. as a whole. Yes, certain rust-belt areas that were union dominated manufacturing centers have been hurt by global competition, but other parts of America have been greatly helped, including in manufacturing.

So where do we go from here? No one really knows; we can’t even have any confidence as to what Mr. Trump wants. We certainly can’t know how other countries are going to react. The Secretary of the Treasury’s admonition of other countries not to retaliate is fanciful, as the initial reaction of China shows. And even if Mr. Trump is successful, do we really not expect a cost from attacking every one of our allies, and showing that we have no respect for our previous agreements, even ones that Mr. Trump himself arranged? It’s certainly questionable as to whether Mr. Trump is Making America Great Again. But it is not questionable that he is making America a stench to the rest of the world. Political capital is scarce and fleeting, and exceedingly hard to regain. I fear that even his successes, whatever they may be, will be at the cost of other more important agenda items.

May God bless Donald Trump, and may God bless America.