15 Nov

The Trump Juggernaut

“Are all lights green for Trump 2.0?” – The Lonely Realist

The government shutdown is over. The Democrats folded their cards, ending the longest government shutdown in American history. It was another Trump triumph…, and another Democratic Party loss, a reminder that there is no cohesive “Democratic Party opposition” in American politics today. As one House Democrat observed, “It’s an awful deal and a total failure to use leverage for anything real.” The Democrats are disorganized and bereft of both coherent policy prescriptions and effective leadership. The opposite is true of the Republican Party. Its CEO President is intent on achieving his goals without compromise. The consequence is that the President’s determination has been unprecedentedly successful. Those who support him are being rewarded…., and those who challenge him are facing Presidential retribution. There Is No Alternative to “The Trump Juggernaut” – we’re in TINA territory.

This President’s playbook has been effective at cowing opposition. A case in point is Doug Ford, the Premier of Ontario. His was not a retaliatory challenge to Trumpian policy. He merely questioned the efficacy of tariffs with a “free-trader” Ronald Reagan ad. It was a mistake. Ford’s intent was to rally Congress against a tariff regime that flagrantly violates the USMCA trade agreement imposed in 2018 by Trump 1.0. No Republican Congressman would dare do so. And it now is clear that no foreign official should either. The President terminated American-Canadian trade negotiations and levied a tariff increase of 10% on Canadian goods. Premier Ford now understands why it is foolish to tug on the President’s cape.

But perhaps such attacks on Presidential policies have had an impact. Polls have been showing that the President’s popularity is in rapid decline. Commentators have noted that tariff consequences and “government shutdowns tend to reinforce the sense that Washington is broken—and while both sides may take heat, the President typically bears the brunt of the blame.” However, without an effective opposition party and with a cowed Congress (including many cowed Democrats), today’s CEO President can apparently do as he pleases without consequence…, and President Trump has made it clear that doing what he pleases is precisely what he intends to do. It apparently was too much to ask the Democratic Party to capitalize on its November 4^th election day victories. Although those victories were far from a national plebiscite, they presented the potential for Democrat-driven initiatives that could pressure Presidential policies. That is the opposite of what happened. Democrats instead surrendered. Their apparent hope is that the Trump Juggernaut will self-destruct. It’s unclear how realistic that hope is.

Inflation remains a significant Trumpian risk and, although it represents a perpetual government challenge, it appears to be of secondary concern to this President. His goal is to effect interest-rate suppression reductions to further stimulate business activity (in apparent reliance on Modern Monetary Theory) and thereby increase tax revenues. One organ of national economic policy that stands in President Trump’s way is the Federal Reserve, the focus of which is a mandate to maintain economic stability. The President is not a fan of Chairman Powell and his brethren: “We have an incompetent head of the Fed…, but he’ll be out of there in a few months, and we’ll get somebody new,” the President recently told business leaders in Tokyo. Jay Powell’s term ends in May and the President will be appointing a new Chair who, he has assured Americans, shares his “fiscal dominance” agenda. He previously appointed one such Board replacement, Stephen Miran, and has made it clear that he will pack the Fed with a like-minded majority. His goal is a benchmark rate of 1%. Doing so would reduce the Federal government’s interest burden and its annual deficit, but also would increase inflationary pressures and reduce demand for US Treasuries…, which perhaps explains China’s timing last week in issuing $4 billion in Dollar-denominated bonds at the same yields as equivalent US Treasuries. China is suggesting that its credit is as good as America’s. If so, that would undercut belief in the U.S. – both its Dollar and its Treasuries – as the global benchmarks. It also emphasizes the conclusion that America has been the loser in the tariff dispute with China.

The Trump Tariffs (which to-date have accounted for ~$215 billion in revenue) remain center stage, with recent Supreme Court oral arguments suggesting that they will be ruled unConstitutional. What then of the legal, administrative and revenue impact…, and what of requested tariff refunds? What then of foreign country promises based on tariff threats? And what then of the de-tariffing impact on America’s stock and bond markets?

Although American equities continue making new highs, pundits question its AI bubble efficacy. Analysts are raising similar concerns about overextended credit markets in light of recent collapses at Tricolor Holdings, First Brands, Cantor Group and 777 Partners that include questions concerning alleged double-pledging. “When you see one cockroach, there are probably more,” said Jamie Dimon after the Tricolor collapse. Hopefully, he’s wrong.

Which raises the question of what, after all, could possibly damage a President who already has admitted to sexual misconduct, heaped scorn on the Constitution’s emoluments clause, and accepted gifts in exchange for Presidential favors and pardons, a President who has said that he “could stand in the middle of Fifth Avenue and shoot somebody, and I wouldn’t lose any voters”? (The Epstein files? The $20-40 billion bailout of Argentina? The Tucker Carlson/Nick Fuentes Hitler-Stalin lovefest? Immigration backlash? Anti-immigration/H-1B backlash? What?)

There are, of course, unforeseeable “black swan” events as well as a panoply of potential geopolitical crises, any of which could derail the Trump Juggernaut. As the WSJ has reported, because President Trump has distanced America from NATO, “Europe is now caught somewhere between war and peace,” a balance that would be tipped by a Russian victory in Ukraine. Then there is America’s use of deadly force against “drug dealers” in the Caribbean and its military buildup against Venezuela (“Operation Southern Spear”), with Gaza, Lebanon, Syria and Iran (among others) as additional trigger points. India and Pakistan remain at loggerheads, as do Pakistan and Afghanistan, Thailand and Cambodia, America and North Korea, China and Taiwan, and … a host of others.

To paraphrase Herb Stein, the Trump Juggernaut will not roll on forever. At some point, it will stop. Such a stop, however, does not appear imminent.

Finally (from a good friend)