In 2016, voters in the UK opted to leave the European Union hoping that the day after would deliver something better. Nearly nine years later, Britain’s growth remains anemic, its economy continues to underperform. A parade of prime ministers came and went. Along the way, a head of lettuce outlasted a hapless and clueless Liz Truss.
Blood and soil economics exacts high a price. Fittingly, Nigel Farage, the godfather of Brexit, was on hand for Donald Trump’s inauguration in January. On account of the cold, he was not seated. Still, Farage left his mark. America now endures a Brexit moment of its own.
Just weeks in office, Trump has managed to blight the markets. A shadow grows over the US economy. The word “stagflation” re-enters the lexicon. His tariffs ignite trade wars and have sent the stock market reeling.
On Monday, the Dow had retreated to a level last seen in September, dropping nearly 900 points. The tech-rich Nasdaq endured a “correction”, that is a retreat of more than 10% from its high, with no apparent end in sight. Also, Elon Musk’s Tesla fell by 15% if anyone cares.
In response to the mayhem, Trump deflects blame and points fingers at so-called globalists. Irony abounds. His treasury secretary, Scott Bessent, once worked for George Soros, a bete noire of the right. Bessent now forecasts a “detox” period for the US economy.
He also declares that “cheap goods” are not the essence of the American dream. This is how you tell Americans “let them eat cake”. Bessent is an ex-hedge fund manager with an estimated net worth of at least a half-billion dollars, according to public filings.
At the same time, Trump refuses to rule out the possibility of a recession and directs the public to avert its eyes from the market’s swoon. “What I have to do is build a strong country,” Trump said on Sunday. “You can’t really watch the stock market.”
Really? A year ago in January, Trump took credit for the market’s advances despite the fact that Joe Biden occupied the White House.
“THIS IS THE TRUMP STOCK MARKET BECAUSE MY POLLS AGAINST BIDEN ARE SO GOOD THAT INVESTORS ARE PROJECTING THAT I WILL WIN, AND THAT WILL DRIVE THE MARKET UP,” Trump posted to social media.
“EVERYTHING ELSE IS TERRIBLE … RECORD SETTING INFLATION HAS ALREADY TAKEN ITS TOLL.” The capital letters are all his.
On his watch, egg prices continue their climb. In hindsight, “Only I can fix it,” another infamous Trump brag, turns out to be a case of false advertising. Then again, his companies filed for bankruptcy a half-dozen times. Whether he possesses a Midas touch is debatable.
“There is a period of transition, because what we’re doing is very big,” Trump recently announced. “We’re bringing wealth back to America. That’s a big thing,” Trump added. “It takes a little time, but I think it should be great for us.”
And what if it doesn’t? In February, unemployment ticked upwards and job growth was underwhelming. If there is one thing Trump has experience with, it is endeavoring to keep his creditors at bay and spinning a yarn. There’s always a story.
Markets move quickly but the camera never blinks. In early February, Trump conceded that tariffs might be disruptive. “We may have short term, some, a little pain,” he admitted. “And people understand that.”
But three weeks ago the S&P 500 closed at 6,144.15, a record high. At that point, “tariffs” was still the “most beautiful” word, to quote Trump.
Beauty, however, rests in the eyes of the beholder. Tariffs now loom like a dagger thrust at the swing voters who powered his re-election. His supposed fealty to working Americans grows questionable.
Michiganders stand to bear the worst of it. By the numbers, only Illinois imports more from Canada than Michigan and only Texas imports more from Mexico than the Wolverine state. Beyond that, the domestic auto industry is integrally tied to production north and south of the US border, with more than 165,000 workers in Michigan alone.
For the moment, Trump has hit the pause button on auto tariffs. But only for a moment. The respite continues until April.
Promoting tariffs, Trump claimed they would spur direct foreign investment. Perhaps over the longer term. But right now, much like Brexit, Trump’s economic package sows chaos.
And like Brexit, things don’t have to work just because you say they will. Farage confessed that his brainchild had failed to live up to the hype. “Brexit has failed,” he said in May 2023. “We’ve not delivered on Brexit and the Tories have let us down very, very badly.”
Soon enough, we will learn whether Trump’s experiment succeeds. Once again, the American economy is under the gun and under a microscope. How much lower the markets go remains to be seen.
