Memorial Day Tribute for Trump II, Part II | Australian Markets

‘I had been imagining what war was like – everything on fire, children crying, cats running about, and when we got to Stalingrad it turned out to be really like that, only more terrible.’

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—A feminine Soviet soldier

Here we go again. Reuters:

Gold falls almost 1% after Trump extends tariff deadline on EU items

Trump threatens tariffs… and gold goes up. He backs off… and gold goes down. (Is somebody close to the White House frontrunning POTUS?)

Yesterday, we watched the previous newsreels. Hundreds of hundreds of troopers, vans, tanks, weapons, and tons of provides… all sloshed by way of the mud to the gates of Leningrad. Then, they may go no additional.

By August 1941 the assault had stalled.

Meanwhile, one other prong struck to the South. It was designed to faucet into the wealthy oil fields of the Southern Caucasus. If he didn’t get that oil, Hitler remarked, he’d should call off the warfare. As it turned out, he by no means received the oil… and by no means referred to as off the warfare.

Every formidable authorities program appears to have three main components — the ‘Relief, Recovery and Reform’ of the New Deal… Japan’s ‘Three Arrows’… and Donald Trump had three prongs to his MAGA assault too.

“Reciprocal” tariffs have been meant to be the second thrust of Donald Trump’s marketing campaign. “Cooler heads” had prevailed during Trump’s first time period within the White House, stopping him from making use of the steep tariffs he needed.

But in his second time period, Trump II, the cool heads have been changed with sizzling heads…and a few plain numbskulls. Thus was launched the ‘Trade War’ that was imagined to be ‘easy to win.’

On Friday, Donald Trump appeared to neglect that he had already misplaced that warfare. He advised Apple CEO that if he didn’t make his telephones within the US his clients must pay a 25% tax.

“I don’t want you building plants in India,” wrote America’s chief of state.

Then, he despatched a message to Europe, threatening a 50% tariff:

“Our discussions with them are going nowhere,” he lamented.

But what else did he anticipate? Everybody now is aware of that a actual trade warfare would carry down the stock market. Trump can nonetheless make threats. But no one believes that he can observe by way of on them.

From the very starting, few economists thought raising tariffs could be useful. The actual issues have been financial and structural. The US had a ‘credit-based dollar’ that it might ‘print’ at will. Americans might spend {dollars}…sending them abroad in exchange for items and providers…however by no means should carry them home in exchange for items and providers of their own.

Instead, the {dollars} sat in overseas bank vaults for a long time, as ‘reserves,’ at the same time as inflation eroded their worth. This was the ‘exorbitant privilege’ that French finance minister, Valery Giscard d’Estaing, had famously recognized. But it was a ‘privilege’ that got here at a high price. It undermined US manufacturing.

Normally, money printing causes inflation. But with the foreigners slicing costs… and the new money resting comfortably in overseas vaults…inflation remained subdued. But it was relentless. Over time, it made American labor a lot more costly than labor in Mexico, Vietnam or China, for instance. Chinese wages rose in actual phrases, however American wages solely went up in pretend, inflationary phrases.

The end result was that US employees tread water as US merchandise turned much less aggressive on world markets. And together with environmental guidelines, youngster labor and different restrictions, these ‘non-tariff’ boundaries couldn’t be simply addressed by raising costs on imported merchandise.

Nor would US exporters reap a clear benefit from greater tariffs on imports. By this stage, hardly any complicated product is 100% American. The Wall Street Journal:

Almost half of new passenger automobiles offered within the U.S. in 2024 have been assembled outdoors the nation, in line with information from S&P Global Mobility. And almost all of the smartphones offered within the U.S. are made abroad. Companies typically attempt to tout their American-made bona fides, even when they make solely a small share of their items within the U.S.

Nevertheless, Donald Trump went forward along with his trade warfare, introduced to great media fanfare as ‘Liberation Day,’ on April 2, 2025. But ‘reciprocal’ tariff charges have been set at ranges that appeared to have little to do with the precise trade state of affairs. Some nations have been subjected to export tariffs, despite the fact that they’d no exports. And with Great Britain, for instance, the US loved a trade surplus, not a deficit. Yet it was subject to a tariff anyway.

China didn’t take the tariffs sitting down. Within two days it got here out swinging. And quickly, US-China tariffs have been over 100%, each coming and going. Now, we had a actual trade warfare on our arms, one that might simply set off a worldwide despair. The stock market (the Dow) fell almost 5,000 factors over the subsequent 5 days. Secretary of the Treasury Bessent needed to admit that Trump’s high tariffs have been ‘unsustainable’ and the administration backed off…suspending its tariffs and proposing ‘negotiations.’

In simply a matter of days, the Trade War was over. Like a burnt-out tank, ‘reciprocal’ tariffs have been deserted. The new tariffs could be negotiated in conventional give-and-take discussions. They could be low enough to nonetheless impose a large tax burden on US customers, however not trigger a catastrophic financial collapse nor a main ‘reset’ in international trade. By late May, negotiations have been settling round an average tariff of 18% — very similar to Europe’s high VAT taxes on client purchases.

And yesterday, as anticipated, got here one other ‘pause.’ Forbes:

Trump Delays European Union Tariffs To July—Latest Big Tariff Flip-Flop Since ‘Liberation Day’

Returning to the Soviet steppes within the early ‘40s, the Germans poured more and more men and resources into the battle for Stalingrad. But by this time in the war — late 1942 — the Soviets were gaining strength while the Germans were having a hard time replacing their losses.

A surprise Soviet advance encircled most of the exhausted German, Hungarian, Romanian and Italian axis troops in the ‘cauldron.’ At first, the Luftwaffe promised to keep the bottled-up military provided from the air. But this proved largely fanciful…and shortly, Friedrich Paulus, the German commander, needed to defy Hitler’s orders and give up.

By the time the battle was over, in February 1943, more than three million people had died.

Of course, there may be no comparability within the struggling brought on by the Battle for Stalingrad…and Trump’s marketing campaign to re-organize world trade. The ‘Trade War’ was more farce than tragedy. But a president — like a common — solely has a lot time and sources. If he concentrates his forces on the appropriate goals… he would possibly be capable of make actual progress.

Trump’s marketing campaign to recast international trade, nevertheless — set amidst mass deportations and on-going battles with Harvard, the press, Jerome Powell, conservative Republicans, and lots of others — was a strategic mistake. It was the unsuitable goal… which he couldn’t hit anyway. After expending an monumental quantity of political and diplomatic capital, he was pressured to retreat.

Peace negotiations will proceed…

And tomorrow, we’ll take a look at the third and final main initiative…the one actually important one. That battle is enjoying out, day after day, on nationwide media.

Tune in tomorrow for an replace.

Regards,

Bill Bonner,
For The Daily Reckoning Australia