Trade War With China

Plus: Theories to explain Trump's behavior, the radium girls, university investigations, and more...

We're doing a trade war: It's just not quite as extensive as previously feared.

President Donald Trump announced yesterday, after more market bloodbath, that he would pause the implementation of his reciprocal tariffs (the higher-level ones) for 90 days, but that the 10 percent universal tariffs would remain in place and that tariffs on Chinese products would be raised to 125 percent. Stocks rallied. Goldman Sachs rescinded its recession prediction, which had put "the probability of a downturn at 65% in the next 12 months" per Bloomberg. (Now it's been adjusted to 45 percent.)

"I thought that people were jumping a little bit out of line," Trump said Wednesday. "They were getting yippy—you know, they were getting a little bit yippy, a little bit afraid."

Just to recap following Bessent's briefing to reporters here at the White House:
- Tariffs on China increased to 125%
- 90 day pause on reciprocal tariffs amid negotiations
- Tariff level brought down to a universal 10%
- Canada and Mexico are part of the 10%
- Pause won't impact…

— Shelby Talcott (@ShelbyTalcott) April 9, 2025

In other words, we've been anchored. It's a classic negotiation tactic. Now, 10 percent universal tariffs—and massive tariffs that cripple trade with China—don't feel so bad, do they? We've been primed to believe the worse alternative would become reality.

This reality is still a bad one, though. And nobody really knows what changed his mind: The Wall Street Journal reports that Trump watched an interview with JPMorganChase CEO Jamie Dimon on Fox Business, in which Dimon said a recession would be a "likely outcome" of the tariffs. "I'm taking a calm view, but it could get worse," added Dimon. There's some thought, given the timing here, that this influenced the president, who later said of Dimon: "He's very smart, and very genius financially, did a fantastic job at the bank. And he knows that everybody knows that."

Nobody really knows for sure. Elon Musk had been privately sounding the alarm. Bill Ackman had taken his concerns public. Treasury Secretary Scott Bessent surely played a big role (and publicly turned around and claimed "This was [Trump's] strategy all along").

There are a few takes you could conceivably have, maybe even multiple at once. One is that there's far too much power vested in the executive; that the power to tax has been delegated to Congress, that tariffs are taxes, and that the president attempting to unilaterally impose such taxes—and transform our economy overnight—is a constitutional breach.

Related is the idea that Republicans will at some point be punished for this:

History says the GOP should be terrified of the electorate now:

McKinley tariff 1890: The House flipped midterms from R +7 to D +147. In 1892, D secured unified control of gov for first time in 34 years.

Smoot-Hawley 1930: In midterms, D gain of 52. In 1932, D unified control. pic.twitter.com/bYKF7vVAIM

— Johan Norberg (@johanknorberg) April 8, 2025

Another is that China is our adversary, and that we're far too dependent on China for everything from appliances to machinery to penicillin. These tariffs will provide a clear incentive for domestic manufacturers to ramp up their production of goods we previously relied on China to supply; a transition that was both inevitable and sorely needed.

Another is that, since China is our adversary, a trade war (or a cold war) is more likely to lead to a hot one; our economic interdependence lowered the likelihood of actual conflict on both sides. We extricate ourselves at our own peril.

Yet another is that the economic whiplash hurts American businesses and consumers the most. People caught in the crosshairs of Trump's schizophrenic trade policy—who don't know whether the 90-day pause is a real one or whether they should make business decisions predicated on it—stand to lose the most. The budgets of normal middle-class and poor Americans who've grown reliant on cheap Chinese goods will still suffer. Markets have reacted positively to the initial pull-back, sure, but they don't tend to love this type of volatility. Trump hasn't gone about this in a way that's measured, calculated, strategic; he's shooting from the hip.

Still another is that Trump won. He got what he wanted. He imposed universal (and, frankly, ridiculous) tariffs and China was the one that escalated and he hit back while other countries mostly capitulated (with the European Union notably going for 20 percent retaliatory tariffs, which may now change), coming to the negotiating table. Now, China will be severely hurt by this; Trump imposed the pain that he desired.

It's not clear what happens now, other than a lot of things getting much more expensive. Bessent has not ruled out delisting Chinese stocks from U.S. exchanges and has started publicly saying that any U.S. allies choosing to align with China on trade would be "cutting your own throat." Even if you think decoupling is the right move, it will be short-term painful: Companies seeking to restore their manufacturing have already started asking the administration for tariff exemptions in order to be able to import machinery needed for them to build out manufacturing capacity domestically. (It's unclear whether the administration will grant them such waivers.) "The two economies with a combined GDP of $46 trillion [are] locked in a game of chicken," notes Bloomberg. "At stake is almost $700 billion in two-way annual goods trade, China's estimated $1.4 trillion of portfolio investments in the US, and less obvious but no less significant variables such as people-to-people links forged over decades at businesses and universities and public opinion that's souring on both sides."

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Scenes from New York: 

all i'm saying is that if i were on the trading floor of the nyse i'd definitely be pulling the most dramatic "it's over" poses i could in the hopes of making it into the papers pic.twitter.com/PUVWOwnui4

— corvid friend (@ahabstanaccount) April 7, 2025

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QUICK HITS

• Sen. Rand Paul (R–Ky.) joined us to talk about why he's trying to put a stop to Trump's tariffs:

• The takes have been predictably bad in the wake of all this turmoil:

They did everything they could to create a panic. They predicted a Black Monday that never came. They became jubilant over an intraday correction on Tuesday. They were rooting for Trump to fail even if it meant the market and economy crashed. Fortunately their hopes have been… https://t.co/7V6uLHWoMz

— David Sacks (@DavidSacks) April 9, 2025

(Who is the they that wanted the market crashed?)

• "House Republican leaders canceled a vote on the Senate's budget resolution Wednesday night, as Speaker Mike Johnson came to terms with what had been clear for many hours: Too many Republicans would vote in opposition and the measure was bound to fail," reports Politico. "The outcome is a brutal blow for House GOP leaders and President Donald Trump, who have spent days trying to wrangle the votes for the fiscal blueprint."
• "President Donald Trump on Wednesday paused for 90 days many tariffs but is not halting 25% tariffs on automotive imports and looming tariffs on auto parts, drawing criticism from Michigan business and auto groups," reports Reuters.
• "The guests at White Lotus resorts arrive and leave by boat, a fact I've come to believe has some kind of mythological significance," writes Sophie Gilbert at The Atlantic. "These guests are never simply going on vacation. Rather, they're entering some kind of magical-realist hinterland where they're tormented by different iterations of fate, pride, vanity, and greed, a ritualistic evisceration accompanied by pool drinks and a spectacular breakfast buffet."
• A teacher in Florida lost her job over calling a student by a preferred name, in violation of new laws that at aim to restore parental rights after schools have become a front in the gender culture wars. Reporting from Florida Today notes that this does look like a case where the child was gender-questioning, and the teacher chose to affirm that in the classroom. I'm sorry if this makes me a bad libertarian, but I have no problem with the firing or the law. It seems important for parental rights to trump everything else at play here, and the parent is the one who gets to make decisions for their child, not the teacher/ideologue.
• "Tuesday, the Trump administration froze over $1 billion of Cornell's federal funding and $790 million of Northwestern's, citing civil rights investigations. The campaign against elite universities continues, fueled by accusations of antisemitism, contempt for the DEI [diversity, equity, and inclusion] industrial complex, and a broader cultural vendetta. Directionally, this is good—universities are bloated credential mills, non-STEM research is largely farcical, and the ballooning student debt crisis is untenable. But if you're going to kneecap research institutions, throwing the baby out with the bathwater, you can't just walk away," writes G.B. Rango for Pirate Wires. "Sure, burn down the universities, but build something better in their ashes."
• Do you know about the radium girls?

The most famous example of the radiation-craze gone wrong was the radium girls.

From 1917 to 1926 clock factories hired around 4,000 people to paint the dials of watches with radium paint, so they would glow in the dark.

A lot of them were women. pic.twitter.com/UZwhH3rTNn

— isabelle ???? (@isabelleboemeke) April 8, 2025