Trump: "These countries are calling us up, kissing my a--...dying to make a deal."

S E E D E D   C O N T E N T

Here's the banner headline in today's NY Times:

And here's the president last night at the National Republican Congressional Committee dinner:

"I know what the hell I'm doing. ... These countries are calling us up, kissing my ass. They are dying to make a deal. ... 'I'll do anything, sir.'"

There may be some on Trump's team who believe that we need to restructure global trade. I think they're misguided, and their sledgehammer approach, bad algebra, abuse of facts (Navarro: "Tariffs are a tax cut!"), and utter disregard for the benefits of trade flows are widely recognized as terrible policy that's already having hugely negative repercussions.

But I firmly believe that for Trump, it's all about getting other leaders to call him up and grovel. It's true that he's long supported tariffs and has railed about being ripped off. But he doesn't know anything about trade. As that headline above reveals, he and his team appear to have no interest in trying to distinguish between the majority of trade which is legitimate commerce between willing trading partners, and unfair trade, where other countries manage currencies or dump overcapacity to capture market share. Ergo, the sledgehammer versus the scalpel.

He knows nothing about trade, but he knows everything about pressing his advantage to get other leaders to kiss his ass, "dying to make a deal." That not economics. It's not governance. It's not sustainable foreign policy. It's his twisted psychology, which, he—and here's his genius—masterfully conveys to MAGA voters who, like him, feel similarly dismissed by "elites."

It's all just retribution, and it just made $6 trillion of wealth go poof, it is breaking a global trading system decades in the making, and it is shouting to the rest of the world that the US is an unworthy and unreliable trading partner.

With that, let me turn to a bit of analysis. We've talked about the stock market, but there's also the bond market.

Steve Goldstein, above at Marketwatch, writes:

Treasury yields spiked on Wednesday as investors bailed out of what has been perceived as the world's safest instrument on expectations of crumbling foreign demand as tariffs take effect.

Yields came in a bit, as you see at the end of the figure, at the time I'm writing this, apparently on the back of a hint of forthcoming negotiation with the Chinese about the 104% tariff you see in the NYT table above. But this is occurring right before the US Treasury auctions off $61 billion of 10- and 30-year bonds today and tomorrow.

You typically can't glean much from an auction or two. And there's a lot of tariffed-induced stress in the bond market. Some analysts are reporting that the spike in the figure above is not due to China or any other sovereigns dumping U.S. debt. It's hedge funds unwinding the "basis trade," an arbitrage play based on mispricing between bond futures and current bonds that becomes too risky in an unstable bond market. Others say it's a dash-for-cash by "leveraged investors [needing] to raise cash to meet margin calls on equity positions."

But I'll be watching these auctions, as well as tomorrow's CPI report, which I'll write up post-8:30 release. Researchers at Goldman-Sachs think there may be some tariff price pressures in the March CPI report, followed by more such pressures in coming months, though note their distinction between tariffs and the ongoing disinflationary trend:

…we have penciled in modest upward pressure from tariffs imposed in February on categories that are disproportionately imported from China, such as the apparel, recreation, and communication categories. Going forward, we expect a boost to monthly inflation from the escalation in tariff policy. Aside from tariff effects, we expect underlying trend inflation to fall further this year, reflecting shrinking contributions from the auto, housing rental, and labor markets that is partially offset by catch-up inflation in healthcare. We expect year-over-year core CPI inflation of +3.7% and core PCE inflation of +3.5% in December 2025.

Those are, of course, elevated rates relative to what was expected pre-trade-war. They are why, as I wrote a few days ago, tariff-induced stagflation is tough for the central bank, especially one legitimately worried about the inflation-expectations anchor. Slower growth and market disruptions signal Fed rate cuts; higher inflationary pressures, especially if they're threatening the anchor, signal rate hikes.

All because one man, who happens to be president, is both vindictive and far, far too convinced of his brilliance ("I know what the hell I'm doing!"). And he's completely unleashed at the hands of a Republican party that defines fecklessness.

It's hard to think of a more dangerous combination actively in play in American political economy.