Economic Uncertainty: The True Cost of Trump's Tariff Powers

How One Man's Control Over Trade Policy Is Eroding The Real Economy

The Market's Dilemma: From Trade Isolation to Global Agreement

The stock market prices tell us the consensus estimate of future earnings. Why is the market crashing? Why is it volatile? It's the uncertainty.

Day to day we can lose sight of that. Donald's decision to apply tariffs and maybe make deals have left the stock market with a huge cloud of uncertainty. On one extreme is the outcome that the US stops trade with all other countries. That would send the markets down an easy 50%, but Trump would get his wish of ending trade deficits for goods. The other extreme is a new free trade agreement encompassing most of Earth. That would send the markets to new all-time highs in short order. The outcome will likely be somewhere in between.

The Hidden Damage: Uncertainty's Cumulative Effect on Growth

However, there is another dimension besides these two extreme outcomes, which is the length of uncertainty. As we discussed in Is Trump 2.0 Serious, each day of uncertainty is slowing the real economy, lowering future cash flows. Raising future debt costs for the US. The uncertainty costs are building. The impact of these costs means that even a good deal by Donald could come too late to keep people from losing jobs now. As a result, I would expect a rational market to continue its downward trend until the uncertainty is lifted.

The Attention Factor: Why Trump May Prolong the Uncertainty

Here is where the problem lies, and for all of our sakes, I hope I am wrong. All of this uncertainty is caused by one man, a man who loves attention. Who, as discussed in a previous post, has a pathological need for as much attention as possible.

My theory here is that Trump will keep as much attention as he can, for as long as he can. As a result, uncertainty is bound to last for quite a while. Look for Trump to eventually provide smaller deals, smaller lifting of uncertainty. Enough to calm the markets, but not enough to remove all uncertainty and therefore all attention from Trump.

As this drags on, the real economic damage is going to cause a hysteresis effect in the economy. If all policies returned to January 18th policies, we aren't getting 3% real growth, 3% inflation, and 4% unemployment back. The S&P 500 is not going back to $6,100 unless a fundamentally better deal is struck, and the attention is gone from Trump.

A Call to Action: Restoring Constitutional Balance in Trade Policy

While we can debate what a win looks like here, I hope we can agree that we need the uncertainty lifted. Let's root for something else that requires daily press conferences from Trump. Not a hot war, not a tariff war, but deals with our smallest trading partners, how awesome his hair is, or even a daily infomercial selling cars. Alternatively, let’s root for the courts to declare Donald’s “emergency” illegal or for Congress to reclaim its delegated power

In closing, consider sending this message to your congressman. It's not about attacking a party. It's not about blame. It’s not even about trade policy. It's about following the Constitution and relieving uncertainty.

Dear Senator,

I am writing to express my serious concerns about Congress relinquishing its constitutional "power of the purse" to the executive branch regarding tariff policy. The current situation, where the President can unilaterally impose or remove tariffs, is creating economic uncertainty and instability for American businesses and consumers.

As you well know, the Constitution deliberately placed the power to regulate commerce and taxation with Congress, not the executive branch. The Founding Fathers, wary of concentrated power, established this separation to ensure thoughtful deliberation on matters affecting our economy. They never intended for a single individual to have the authority to make dramatic changes to tariff policy on a whim.

The current arrangement not only contradicts the constitutional vision of our Founders but is proving economically harmful. Businesses cannot plan effectively when tariff policies might change overnight. Investment decisions are delayed, supply chains are disrupted, and ultimately American workers and consumers bear the costs of this uncertainty.

I urge you to work with your colleagues to reassert Congressional authority over tariff policy. Establishing a more predictable, deliberative process for trade decisions would better serve our economy and honor the constitutional framework established by our Founding Fathers.

Thank you for your consideration of this important matter.

Sincerely,