On the menu today: Happy Financial Literacy Month. During this month, President Trump urges “families, communities, schools, and institutions to commit to bolstering their financial knowledge.” The world is still reeling from the de facto declaration of an American trade war against the world; as of this writing, the S&P 500 futures are down another 3 percent. There were a lot of problems with the tariff announcement this week, but one angle is getting overlooked: The whole thing was hastily assembled, sloppy, and riddled with errors.
There Is No Plan
If you criticize the Trump administration, there are several responses that Trump fans will throw back at you:
- It’s multi-level chess, and you, the critic, are just too simple-minded to grasp the sophisticated strategies at work.
- It’s a negotiating tactic.
- You like the president’s judgment on other issues (the border, hitting the Houthis, etc.) and therefore you must trust the president’s judgment on this issue.
Most often, the defense of any particular Trump decision or action is that even if it seems counterproductive, self-destructive, or contrary to other efforts, there is some sort of plan at work that you, the ordinary citizen, cannot see. And that no matter how erratic, odd, or foolhardy a particular decision appears on the surface, you should have faith that this is all part of the plan for the president and his team.
I regret to inform you that there is no plan.
The tariff rollout is the biggest, most consequential, and sweeping economic decision of the president’s second term. The stakes could not be higher — for the country’s economy, for the markets, for the U.S. relationships with every other nation on the globe, and for the GOP in the midterms and beyond. You want the announcement to be marked by clarity, precision, and attention to detail, with every “i” dotted and every “t” crossed.
Yesterday’s newsletter noted that the White House announced tariffs on two uninhabited islands, a volcanic island with no permanent residents and just 18 people at a meteorological station, and an island chain with a grand total of $186,000 in exports to the United States.
I didn’t mention it yesterday, but the administration also announced a 10 percent tariff on “British Indian Ocean Territory.” This is seven atolls, less than 24 square miles in area. The largest one is Diego Garcia, which consists almost entirely of a joint U.S.-United Kingdom military base. Apparently, the seven atolls collectively sent the U.S. an entire $330,000 worth of exports in 2023.
The Trump administration announced a 29 percent tariff on all goods from Norfolk Island, a 13-square-mile remote island territory of Australia with about 2,000 people. According to the island administrator, they don’t have any trade with the United States.
So how did the administration reach that 29 percent figure? The Guardian thinks this all comes from errors in shipping records and government data.
According to an analysis of US import data and shipping records, multiple shipments of goods were classified as having originated from Norfolk Island or Heard and McDonald islands when neither the company address, nor the port of departure for the shipment, nor the destination port were located in those territories.
In some cases involving Norfolk Island, which is 1,600km north-east of Sydney and has a population of 2,188, the confusion appears to have resulted from the fact that the company’s address or port of departure is Norfolk, UK, or the destination is Norfolk, Virginia in the US, or a company’s registered address in New Hampshire (NH) has been listed instead as Norfolk Island (NI).
Got that? Official U.S. policy is being set by typos.
The White House team assembling the tariffs and putting together the chart were apparently oblivious to the realities of the Heard and McDonald Islands, British Indian Ocean Territory, Jan Mayen and Tokelau, or Norfolk Island. This is a disturbing sign that the entire tariff regime was hastily thrown together without any attention to detail.
(In the staff’s defense, according to the Wall Street Journal, President Trump wanted the tariffs to be across-the-board and universal, and the president also simultaneously wanted “individualized tariff rates for nations that could be calibrated according to their tariffs and other economic policies.” Everything had to be the same, and everything had to be different, at the same time. According to the Journal, this debate continued until Tuesday afternoon; Trump unveiled the plan Wednesday afternoon.)
What’s more, Politico counted 14 countries whose tariff percentage is different on the White House website and an official White House post on X. You would think that when the White House is announcing what the new tariff rates are, the one thing everybody involved in the announcement would pay close attention to is what the new tariff rates are.
The post-announcement messaging is similarly contradictory.
White House senior counselor on trade Peter Navarro, appearing on CNBC this Thursday: “This is not a negotiation.”
Navarro made similar comments on Jesse Watters’s program the previous day. “This is not a negotiation, Jesse. This is a national emergency.” (Read Rich on why the claim of an “emergency” is “an abuse of language and logic in the service of bad policy that hardly interacts with the alleged threat to national security.”)
After Navarro’s CNBC appearance, President Trump addressed reporters on Air Force One:
“Every country is calling us. That’s the beauty of what we do,” Trump said. “We put ourselves in the driver’s seat. If we would have asked these countries to do us a favor, they would have said no. Now they will do anything for us.”
Trump added: “The tariffs give us great power to negotiate. They always have.”
I don’t think either man is lying. I think Navarro has always wanted tariffs as high and sweeping as these, and wants them to be here to stay, while Trump has always enjoyed playing the dealmaker. The problem is that the man who is the architect of the policy and the man who is signing the policy into law do not agree on the objective or approach.
Navarro insists that the rates are based on “all of the cheating that takes place in the non-tariff barriers. . . you’ve got currency manipulation, you’ve got VAT tax distortions, you’ve got export subsidies, you’ve got dumping, you’ve got counterfeiting, you’ve got intellectual-property theft, you’ve got these phony technical standards, you’ve got these phony agricultural standards.”
In that comment, Navarro mentioned eight different factors that vary widely from country to country. (For example, it’s very hard to see how the U.S. can accuse Ecuador, El Salvador, Timor-Leste, Micronesia, Palau, or a handful of others of being currency manipulators, as those countries use the U.S. dollar.)
Apparently entirely coincidentally, that calculation of all those different factors on a case-by-case basis with every country in the world just happened to result in a figure that exactly matches the U.S. trade deficit in goods with each country, divided by the amount of imported goods the U.S. buys from that country, and then cutting that figure in half. Every single time. Go figure! (Read Dominic Pino for more on the administration’s unpersuasive math.)
We should also pause and review Navarro’s claim of “VAT tax distortions.” VAT is short for “value-added tax.” I mentioned this in my rundown of U.S. Department of Commerce claims of unfair tariffs on Tuesday.
The problem is that a VAT is essentially a sales tax. The U.S. does not have a national sales tax, but other countries do. These countries apply the VAT to both imported and domestically produced goods. For example, last year Florida welcomed about $9 billion worth of imported goods per month. Some of those goods are sold to customers in the state; Florida charges a sales tax of 6 percent. No one in their right mind would argue that Florida is putting tariffs on imported goods because of that, because you pay the same 6 percent sales tax on the good, whether it comes from overseas or in-state or from somewhere else in the state.
We hear a lot about how congressional Republicans are in lockstep with the president. Eh, maybe not on this one. Senator Ron Johnson of Wisconsin, yesterday: “I’m concerned, the stock market is very concerned, I’m concerned. . . I don’t have the president’s strongly held belief this is absolutely what has to be done. But he’s president. I’m not. He ran on this.”
ADDENDUM: The editors on the tariffs, yesterday:
The last thing that worked to substantially reduce the U.S. trade deficit was the Great Recession, because a bunch of people lost their jobs and couldn’t afford to buy as much stuff as normal. You probably remember that as a bad time, but if trade deficits are truly national-emergency-level terrible, then the 2009 reduction in the trade deficit should have been great news.
Trump likes to frame his trade policy as “commonsense.” To treat allies worse than enemies and raise taxes on consumers and businesses at a time when the cost of living is a major concern is anything but commonsense. Trump’s mistaken beliefs about trade have been a constant since the 1980s, but now they have been combined with an enormous grant of power, and Americans will pay the price.