Trump’s Follies

It is galling to watch Trump's vain posturing as he parades around the world. It is easy to push his buttons; he seems to offer an entire keyboard of them. We may have sympathy with Gary Cohn's rumoured assessment of the man as being 'dumb as shit' but he is the one in power and we are obliged to objectively consider the consequences of his actions.

The tax cuts have been a good thing for the stockmarket, though these are now wholly reflected in prices. The improbable device of soaking the rich with even more wealth will almost certainly spur economic growth, perhaps by as much as 0.7% this year and a further 1.5% in the following one according to the Economist. However, this comes at a monstrous cost to the government deficit which will hit nearly 6% by 2020. Through modern history, the deficit has never been greater outside a time of crisis. This leaves the economy in a vulnerable position and the government's finances risk spiralling out of control if something untoward occurs.

Trump has now begun to hike tariffs. His initial salvo targeted washing machines (no, really) and moved on to slapping 25% on imports of steel and 10% on aluminium. The pace has accelerated as tariffs are threatened on a range of imports from China. The Chinese have responded with tariff proposals of their own matching the new US tariffs, dollar for dollar. Playing a game of chicken with autocratic nations who only have a passing interest in the well-being of their people is a dangerous approach for a democratically elected President. However, in the short term this has played well with Trump's core blue collar supporters despite the economics profession showing a rare show of unity in decrying the move.

Turnover amongst White House staffers is now at unprecedented levels. Worryingly the widely admired chief economic adviser, Gary Cohn, has resigned in protest over these tariffs and joins the growing diaspora of ex-staffers. The arrival of a retread neoconservative like John Bolton adds to our concerns. Markets took comfort from Trump's election promise to fill his staff with the ablest lieutenants. Presumably this means that the replacements are second best, having been overlooked in the first round. Given Trump's record on hanging on to staff, the third rankers should be readying their résumés.

I was tempted to read Trump's 'Art of the Deal' to get a more informed view of his approach. However, a little research revealed that he only seems to have had a limited role in authoring the book. His ghost writer apparently wants nothing further to do with the man according to this Wikipedia entry. The Head of Random House, the publisher, is quoted as saying "Trump didn't write a postcard for us". Trump has responded to criticism from his ghost writer with threats of legal action.

Separating fact from fiction in a such politically charged Washington/NY individual is difficult. His bullying nature, rumours of sharp business practice combined with a vain charismatic public persona reminds me of the bouncing Czech, Robert Maxwell. Trump has never been convicted of any crime but he keeps his lawyers dizzyingly busy in the civil courts.

Trump entered the White House as a maverick promising to 'drain the swamp'. He appears to relish chaos around him and has no qualms in creating conflict. Markets have benefited from his tax cuts but his unorthodox trade policies risk much. It seems difficult to believe that Chinese tariffs can be reduced by ratcheting up US tariffs but Trump considers himself a genius and perhaps such is the man's elevated intelligence that it defies traditional logical analysis. We must be ready to bet against it in the expectation that US economy may be heading for the rocks.