Trump playing Holi in the dark with trade

Expectations were that Trumpism would take a while to come up against the cold economic reality of a manufactured recession, or a return to inflation. Well, the way Donald Trump has been going about his on-again, off-again tariff policy, he seems to have a pretty good handle on the initial pushback. Tariffs against Mexico and Canada have been delayed by a blood bath on Wall Street. But Trump has pressed on with duties on steel and aluminium from the rest of the world, which do not have as much of an inflationary impact on US manufacturing. Tariffs are the tool of choice - his, at any rate. But the response is graded to improve the US trade balance and revive domestic manufacturing.

This provides trading partners with a sense of Trump's threshold for domestic economic pain. Internally, too, business and consumer reaction to inflation are setting limits on Trump's agenda. Within the administration, there is resistance to Elon Musk's shock'n'awe-meets-slash 'n'burn spending cuts that have made Trump see reason on how far such 'economisation' can be pushed. Tax giveaways down the line will have to run past bond-holders. The response from POTUS to all this is that his policy is meant to be fluid. The way it works is to start from an extreme position and recalibrate in accordance with friction. To be fair, this is every politician's approach to problem-solving. It's just that Trump adds a patina of unpredictability with public announcements followed by hard-headed negotiation.

Where does that leave the stated objective of rebalancing US trade with the rest of the world? It can't be accomplished through protection without stalling the US economy, or allowing inflation to spike. Since neither is even remotely acceptable, the ambition will eventually be tempered. Yet, there are gains to be made through threatened tariff action to bring surplus economies to the negotiating table. Once they get talking, bilateral trade negotiations can move much faster than multilateral reform measures.