Bulwark: A Clear and Plain Explainer of What Just Happened with Trump's Tariffs
While the reality TV show president and his MAGA mediaverse stooges proclaim a 4-dimensional chess victory, the truth is that he had badly damaged the economy's underpinnings
By Jonathan V. Last The Bulwark
We’re going to take a journey today to understand what just happened. We’ll range from the ludicrous attempts to sane-wash Trump’s tariffs to the dishonesty of the “art of the deal” bs.
But the real meat comes in #3 where we’ll talk about the bond market. Because at the heart of everything is the idea of risk.
The United States economy has been the center of global finance for 80 years for one simple reason: Year in and year out, we have been the safest place to do business. The ground rules remained constant and when they changed around the margins, they did so slowly and transparently.
Investing money is always risky—but America had the lowest level of risk on the planet. Our government, legal system, and business community worked hard to make that happen and the rewards we reaped for it were tremendous.
Donald Trump destroyed 80 years of that work over the last week. America is now a risky place to do business. A place where the rules change from day to day. Where no business can trust in the sturdiness of its long-term plans or count on its revenue projections even for the next quarter.
This abstract problem is going to create real-world economic hardship. Let’s dive in.
That ain’t it. In the last week some anti-anti-Trump types have squinted as hard as they could to see a sane version of Trump’s tariff regime.
Ross Douthat and Ben Thompson (and even Democrats such as Gov. Gretchen Whitmer¹ and Rep. Chris Deluzio) talked about how the old free-trade regime needed reform, and tariffs are an important tool, and the problem is just that Donald Trump has gone too far, too indiscriminately, and—blah blah blah.
STOP IT.
Stop sane-washing this insanity. Right now.
Here are three true things:
(1) Trade policy can always be reformed. There has never been a moment in American history when trade policy was perfectly optimal. Such a state does not exist, because all of the factors (domestic political concerns, economic reality, foreign affairs challenges) are constantly in flux.
Policy is like fashion. It’s never finished. Saying that our trade policy needs reform is meaningless. Everything needs reform, always, because life is a cycle of reformation and counterreformation.
(2) Tariffs can be a useful tool. I’ll let you in on a secret: All tools can be useful in the right situation. For example: If you have to either write a dissertation or perform an emergency tracheotomy, then the BIC Soft Feel Jumbo pen is a useful tool. But if you are in a lifeboat in open water and I hand you a BIC, it’s useless.
(3) We are currently in an economic meltdown caused by a president’s singlehanded desire to wreck the global financial system by imposing blanket tariffs across the world.² These tariffs were not “reciprocal.” They were not designed to protect strategic industries. They were based on the illiterate idea that trade deficits are economic losses.
For the love of all that’s holy: Stop pretending that this is a rational, nuanced discussion where it’s important to acknowledge the fair points being raised by Donald Trump.
This is not that.
Imagine a wildfire raging out of control in a city. The fire was started by the mayor, intentionally. He campaigned for office on a platform of arson. His fire destroys half of a city. As it burns, eating up businesses and properties, is it relevant to spend time talking about how important fire is to human civilization?
Or how controlled burns can be a useful tool in managing fuel levels and preventing wildfires?
No. These observations are not “nuance.” They’re non sequiturs.³
And someone who, in the midst of a crisis, insists on proclaiming non sequiturs is either deeply stupid or playing an angle.
Declaring victory. So Trump’s tariffs are off.
Or rather, “off.” Sort of. Mostly. For now. Subject to revision.
Yesterday the president put a 90-day pause on tariffs. Except for tariffs on China, which he increased to 125 percent. And tariffs on Canada and Mexico, which are at 10 percent. Or 25 percent. Or 30 percent. No one really seemed to know, for sure. And the baseline global tariffs seem to still be at 10 percent. And 15 other countries did not get a 90-day reprieve, though the president did not immediately identify which countries those were.⁴
The president made this announcement while his U.S. trade representative, Jamieson Greer, was testifying before Congress. Greer was literally in the middle of explaining how beneficial the tariffs were for the American economy when word got out that the tariffs were off. You can see it happen live at the 3:32:50 mark in the hearing:
Rep. Steven Horsford is the one to ask Greer about the tariff “pause.” It’s amazing theater. Greer tries to pretend that he isn’t surprised and knew the pause was coming all along. Horsford asks him why, then, he spent the previous three hours extolling the virtues of tariffs. Greer says he just didn’t want to divulge sensitive information.
At which point Horsford says, Oh yeah? Then tell me the details of this pause that you knew all about?
And Greer freezes up like a third-grader caught doing a book report without having done the reading.⁵
The decision to levy tariffs was not rational.
The administration’s mixed messages about the tariffs—they are forever; they are subject to negotiation—were not rational.
The decision to pause (some of) the tariffs is not rational.
The decision to increase (some of) the tariffs is not rational.
There is no 5D chess. There is no hidden masterstroke. There is no “art of the deal” on display here.
Whenever Trump declares victory, his explanation is always “art of the deal.”
Certainly all of these things Trump said or did might look foolish, but they were just part of a negotiation.
This is an unfalsifiable proposition. If everything a person says is merely part of a negotiation and cannot be evaluated as true/false, smart/stupid, or helpful/unhelpful, then nothing means anything.⁶
The critical importance of bonds. One last true thing: You cannot negotiate with a market. You can manipulate it in the short run, but in the long run markets do what they do.
This truism holds for the stock market, but it really holds for the bond market. And the bond market is not having any of Trump’s nonsense.
William Cohan had an excellent explanation last night of where the bond market is after Trump’s tariff pause. I’m going to simplify it, but you should read the whole thing.
The bond market can be broadly understood as a device that measures risk. The riskier an economic environment is, the higher the yield on bonds goes.
Over the course of Trump’s brief tariff regime the 10-year yield on T-bills went from 3.86 percent to 4.54 percent—a 17.6 percent climb in less than a week. That’s a screaming klaxon alarm.
Yesterday, after Trump announced his 90-day pause, the yield only dropped back to 4.4 percent. Which suggests that the bond market was not especially reassured.
Cohan notes that the high-yield bond market (junk bonds) is where “risk goes to hide.” When you want to see the bleeding edge of bond-market sentiment, look at the yields on junk bonds.
Two weeks ago, the average junk bond yield was 7.2 percent. On Monday, it was 8.2 percent. After Trump’s tariff pause it moved to 8.5 percent. People are still seeing lots of risk.
One of the big risks is China. China holds $760b in U.S. Treasuries. Should the Chinese decide to lower their purchasing of T-bills at the next auction, that will drive up the yield as the Treasury Department has to make them more attractive in the face of slackening demand.
Which would in turn ratchet the entire bond market up another level of fear.
Why do bonds matter? Because bonds are how people finance debt—they are a rough approximation of the belief that it is safe to extend credit. And without credit, financial markets can’t function.
Here’s Cohan:
A credit crunch or credit freeze, where sources of debt capital disappear as fear ratchets up, is to be avoided at all costs. Way back in the fall of 1989, when Citibank could not syndicate a loan in support of the large management buyout of United Airlines, a pall was cast across the vast credit markets. It was virtually impossible to get banks to lend or bond investors to pony up capital to support corporate financings or financings related to deals. Bankruptcies exploded. The credit freeze lasted for years, until 1994 or so. That’s why the focus of many on Wall Street is turning to the effect that Trump’s shenanigans are starting to have on the debt markets.
Risk. It’s all about risk.
Donald Trump’s erratic and foolish actions have turned the most desirable financial haven in the world into a whirlpool of risk.
The safest way to conduct business now is to avoid the United States to the greatest extent possible.
This is not the art of the deal. It’s the destruction of stability and the start of a long, slow slide into a vortex.
1.The more I see of her, the less impressive she looks.
2.Excepting Russia!
3.If you absolutely must have a discussion about the usefulness of tariffs, we’ll limit it to a footnote:
Certain sectors are so vital to national security that they must be incubated, even if doing so is not economically self-sustaining. For instance: A first-world power must have a homegrown aerospace industry and the ability to manufacture weapons systems. It is helpful to be able to manufacture microchips.
If these industries cannot survive global competition on their own, then it is appropriate to use available policy tools—subsidies, tariffs, etc.—to sustain them.
But always the nation is balancing sacrifices in efficiency with national security needs. Because every dollar being spent to prop up a vital, but uncompetitive, sector incurs opportunity cost for the broader economy.
4. Maybe the econ professors at Trump University taught that the way to encourage investment was to create an environment of maximum chaos and uncertainty because business owners get bored easily and like surprises?
5. The Republican party is like the 1930s Comintern. For years it was Communist dogma that the Soviet Union was the glorious people’s republic and that the fascist Germans were the enemy. On the day the Molotov-Ribbentrop Pact was announced, the party line shifted and—effective immediately—Nazi Germany became a great friend to the workers of the world.
6. As a rhetorical strategy, saying “it’s all part of the negotiation” is a trick used to arbitrarily set the moment of judgment for an action at the most advantageous point for the person deploying it.
For instance: Trump imposes tariffs. The stock market loses $5t in value the first day. The “art of the deal” argument says that you can’t judge Trump’s tariffs by what happened on day one. Or two. Or three. And you can’t judge them by what happens a month from now, or five years from now. You have to judge them by what happened on April 9, 2025.
Because when he reversed them on April 9, stocks went up. So the decision to do the tariffs in the first place was a good idea because it was the art of the deal!
Bulwark Editor Jonathan V. Last writes “The Triad” newsletter for the publication. You can subscribe here.
Image: Brendan Loper cartoon for The New Yorker.