Trumped Up Tariffs, Pt. 2

Well, with TradFi in shambles, the DeFi market teetering on its own downturn, and Aaron Brogan reporting that tariffs may have put the kibosh on any sort of public offering from Coinbase’s stablecoin project Circle, it feels like the ideal time to reprise our take on the Trump tax.

Up front, I don’t stan for Trump, Musk, or anyone, really. I believe every individual is a mix of good and bad. Their actions may tend to cumulate on one side or the other, but many contested things are neither universally good nor bad — they are circumstances opposed. Many of our political differences come from focusing on this division in and identifying the problem, rather than a resolution.

All to say, just because the consensus among economists opposes tariffs, particularly at the scale about to be enacted, I don’t think it’s productive to merely argue, “Tariffs bad.” In fact, I can personally get behind the concept of substituting import taxes for income taxes and import taxes, as they did prior to the latter’s genesis in 1913. By the same token, I’m also for meeting the friction on the road, where the implementation of this policy meets reality.

The long and short of it is, it’s going to be bad for the relatively small percentage of the U.S. population that owns the majority of the U.S. stock market. We know this, because they’re the same wealthy, influential cohort whose discontent has been most loudly voiced — the Jamie Dimons and Bill Ackmans of the world. On a Main Street level, it will also suck for small businesses depending on cheap exports to operate their business — online, D2C, dropshipper types; white-collar pros jumping on an arbitrage trend. And on an individual level, it could considerably harm those with invested retirement savings, particularly older Americans without a time horizon to recover their losses.

On the flip side, younger generations of high school grads have been trending toward the trades and other practical professions to avoid of crippling debt — the immediate pay that outsizes and outpaces most white-collar salaries, and the demand from an older generation of these professionals moving into retirement. These Americans stand to benefit most from the potential reshoring of job opportunities — and also happen to have a perspective unlikely to be amplified by most media channels.

As for my perspective, I believe there are opportunities ahead in both the equities and crypto markets, for those with an adaptable perspective of their own. The Trump tariffs may well be an apocalyptic event for the current financial order. Another way of looking at it is as a transition to retaining hard asset values in the U.S. and not trading at a fiscal deficit for goods of degrading quality and depreciating value. And IMO, consumer goods are not a reflection of strength, but a sign of dependency and a lack of fiscal discipline that prioritizes short-term luxuries for long-term security.

It just also just so happens that blockchain use cases are well-aligned with the needs of an increased investment in the domestic supply chain. Artists, craftsmen, and others who work with their hands to produce goods for the marketplace could leverage new reputation-based systems to maximize the earnings for goods of higher quality, and cheap charlatans would be highly visible for those who wish to avoid being defrauded. 

It’s easy to turn to FUD when it feels like everything around you is burning. But while the Trump tariffs have indeed taken a Molotov bread basket to Bretton Woods, it’s not inconceivable that they could also lead to a sustainable economy supporting a thriving middle class. It undoubtedly sucks to see a world leader take a blowtorch to his citizen’s hard-earned savings for reasons it’s unclear if he really understands. Yet there’s an undeniable schadenfreude to seeing the PE firms and hedge funds that have been screwing those same citizens over for decades go up in the same flames.

Contradictions are life’s constant. Navigating the challenges and the opportunities in every moment means finding the neutral space in between.

— El Prof