Trump's Tariffs Wipe Out over $6T on Wall Street in Epic Two-Day Rout

The entire new tariff scheme is napkin math. Although it could also be napkin math done by some LLM.

If it was real math, it wouldn’t assume that there is some magical trade elasticity that is completely linear in the tariff rate. And real math might notice that the prices of goods that are subject to tariffs are an utterly absurd measure of value, cost, movement of money, or anything else.

Consider:

A US company does a bunch of R&D and designs a widget. They pay $10 each to a Chinese factory to manufacture it. They warehouse the widgets in Hong Kong. Each widget purchased by a US customer results in a “$100” item being imported. $90 stays in the US. $10 goes to China.

The same company does exactly the same thing except they ship in bulk to a US warehouse. The imported item is now “$10”. The tariff is 1/10 as much, the napkin math sees 1/10 as much trade imbalance, but the economic effect of the import is identical.

Or maybe they ship from Hong Kong to a French customer. This should be seen as an export from the US to France with $90 and an export from China to France worth $10. But I think it’s invisible to the napkin math.

Now consider that the US is home to some wildly successful companies with names like AMD and Nvidia. They sell chips for thousands of dollars each, worldwide. They pay TSMC quite a lot less to make them. If they warehouse in the US, they may be screwed now! If they ship from Taiwan to a buyer somewhere else, the US has, in effect, exported quite close to the full sale price of that chip, but no trade goods ever touched US soil. Can the napkin math sees that?

You can bet that several other countries use brains instead of napkins and will have no difficulty thinking that they could retaliate by restricting or taxing of these US-designed goods even if they’re imported from elsewhere. And China is working very hard to make their own alternatives, and they will surely be willing to export them.

(Don’t forget: The UK and Israel have CPU design expertise. ASML is dependent on tin zapping tech from San Diego, but they’re an EU company. And it looks like the successor to that tin zapping tech might be free electron lasers, and that technology come from US national labs and universities, but other countries also have FELs, and the nerdy physicists who fiddle with them are not happy with the US government right now.)

> that led to interest rate rises

Interest rates didn't rise because of industrial revival acts; they rose because they had been artificially low for a decade and someone had to throw water on the economy to cool it lest hyperinflation hit.

> and a TON of tech layoffs!

The nature of tech layoffs and what has happened in the Midwest over the last 50 years are completely different. When a guy is let go from Meta, he's let go from a job that earned him well over the median salary for Americans. Provided he hasn't blown it out his ass on courses at microdosing at Esalen, he should have something in savings. He has resources. He has connections. He has opportunities. When you work in an area with that much money in it - remember, Larry Ellison, Elon Musk, and Mark Zuckerberg each have a net worth that puts them on par with the yearly gross economic product of small American metropolitan areas - you can recover.

When a guy was let go from an automotive parts supplier in Michigan in 1988, he's making near that median salary. He has far less cushion. The nature of his work does not allow him to simply open his laptop and toy around with new business ideas, or open a startup; his former employer was the employer in town. When it went under, the town went under, and he had no way to get out.

And that's before accounting for what the rusting hulks of machinery did to the town. Chemicals dumped before regulation poison the water and soil. Major swathes of real estate needing millions of dollars in cleanup before any real redevelopment can occur. Maybe the Feds will get around to it with the Superfund in a generation or two; the developer from back east sure as hell isn't going to pay for it. By the way, can the town - which is already short on funds - give them tax increment financing for that redevelopment? They'll never come out ahead otherwise. You can't just convert a former brake pad manufacturing plant to lofts like you can with a former tech headquarters in San Francisco.

> And are you saying that the US media doesn't pillory Californa as a liberal hellhole? I actually don't even know what distribution of media you consume that doesn't handwring over the morality of liberals.

... where are you getting that from OC's comment?

In reality, Canadians have bravely fought and died for American interests in the Middle East. Don’t take any of this as my personal view, or as a repudiation of the interpersonal camaraderie that Americans, by and large, still feel with Canadians (although I understand it’s no longer universally reciprocated).

However, as a matter of industrial economic reality, NAFTA likely benefited Canada more than it did the US, and the US does subsidize NATO and Canadian defense by extension. What barriers are there to an independent Canadian defense industry?

(Although I would argue that NAFTA benefited both countries, and we should continue our free trade agreements!)

Yeah, that's the uncertainty we all have to face. I hope they find some local jobs at least.

I don't even know what I can do if I can't find an IT job. I don't have any other skills.

Oh, high quality will recover. Biotech will recover. It’s possible Walmart stock doesn’t recover. Auto makers will be interesting.