Trump’s Liberation Day has delivered what he loves most: Phone calls
Like all businessmen, Trump loves being on the phone. Liberation Day was a grab for attention, and boy did it deliver, writes Helen Thomas
Liberation Day certainly delivered the kind of audience its director was looking for. The US President has the world’s attention, having slapped tariffs on everyone, even the islands with penguins for inhabitants. Whilst economists ridicule the formula for calculating the tariffs and the establishment consensus reels from an attack on the previously settled question of the benefits of free trade, Trump sits in the director’s chair, happily setting the narrative of this particular high-stakes thriller motion picture. In the face of the biggest one day drop in US stock markets in five years, he simply noted with pleasure: “The tariffs give us great power to negotiate, every country has called us.”
Getting on the phone with world leaders is just an extension of the typical day he outlined in his 1987 book The Art of the Deal, which begins with his proudly mundane explanation that “I usually arrive at my office by nine, and I get on the phone. There’s rarely a day with fewer than 50 calls”. He loves calls. This is how he gets deals done. Attention is power in the mind of The Donald.
But he is now more than just a New York real estate broker or reality TV star. We now have a CEO in charge of a country, running a business where he can make the laws. This is unsettling.
Trump’s long obsession with tariffs
It should not, however, be surprising. Trump has been consistently clear for 40 years about his desire to put America first. He took out a newspaper advert, also in 1987, to make the argument:
“Why are these nations not paying the United States for the human lives and billions of dollars we are losing to protect their interests?… ‘Tax’ these wealthy nations, not America. End our huge deficits, reduce our taxes, and let America’s economy grow unencumbered by the cost of defending those who can easily afford to pay us for the defense of their freedom”.
Every action he has taken so far in his presidency is consistent with this view. His address on tariffs concluded with a section exhorting the house speaker to get permanent tax cuts in place. This is the next step for the Trumponomics package. And he can take swift action to enact his programme because he was elected with a clear mandate to do so, winning the popular vote, the Presidency and his party taking both houses of Congress.
How have the markets reacted to Liberation Day?
Yet five months after election day, financial markets have reacted with shock. Indexes of policy uncertainty have rocketed higher. Mentions of the word “uncertainty” in the US Beige Book have reached record levels, even above the spikes generated by the financial crisis, both Iraq Wars and the oil price shock of the 1970s. Are we really at the most uncertain moment for the economy in almost 60 years?
Financial market volatility would suggest otherwise. The VIX, often known as the Fear Index, currently hovering around 35, is far from its record highs of 80, reached twice in its 30 year history: the aftermath of the collapse of Lehman Brothers in 2008 and the onset of the pandemic in March 2020.
That is a level synonymous with a systemic crisis. Trump’s tariffs might be widely disliked and increase the risk of a US recession but they are not indicative of a financial market crash. At least not yet. Liberation Day was just the beginning. Trump is not the only player in the game. The big question now is whether other countries will retaliate. A tit-for-tat trade war would increase the risk of a global recession and introduce destabilising capital outflows. We could then enter a game of chicken where President Trump and China’s Xi Jinping decide they can each take the pain more than the other, leaving everyone in the backseat of a car accelerating towards the cliff edge.
Trump is ultimately a pragmatist
We are not there yet. China’s response so far has been measured. Trump anticipates a response, saying in his Rose Garden address “they’re going to fight”. He has already suggested he could dial down tariffs if China approves a deal on Tiktok. Trump might be a man on a 40 year mission to get a better deal for America but he is, like all business people, ultimately a pragmatist.
Trump came into office with the benchmark US stock indexes at record highs. He has calculated that he can take a short-term hit in pursuit of goals that will, he believes, secure his legacy as one of The Great Presidents. His agenda of cutting taxes, securing the border, cutting government spending and using tariffs to bring capital back to America will, in his view, deliver a long-term gain. He has the most political capital right now, having won an historic second non-consecutive term. He is facing global leaders running low on the same commodity. Canada, Portugal and Australia are in election campaigns; Japan and India’s Prime Ministers both lost their majorities; Germany has yet to form a government and France is struggling through with a caretaker Prime Minister until it can constitutionally hold another election. The UK has a government with a majority but no mandate for tax rises and spending cuts, beholden as it is to an edgy gilt market. Even authoritarian regimes such as Russia and China face the domestic challenge of slowing economies.
Trump is therefore pressing his advantage. Liberation Day is only the start of a franchise of sequels – watch out for Tariff Harder, Tariff With A Vengeance and A Good Day to Tariff, coming soon to a movie theatre near you. Financial market volatility is here to stay. Yippee Ki Yay.
Helen Thomas is the CEO of Blonde Money