Letters from an American - April 2, 2025

Episode Date: April 3, 2025

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Hello, this is Michael Moss. Heather Cox Richardson is traveling today and her travel arrangements did not allow her time to read today's letter, so I will be reading it in her place. April 2nd, 2025. Just five months ago, on October 19, 2024, The Economist ran a special report on America's economy. That economy was, the magazine said, the envy of the world. Today, stock market futures plummeted after President Donald J. Trump announced that he will impose a 10 percent tariff on all imports to the United States with higher rates on about 60 countries he claims engage in unfair trade practices, including China, Japan, Vietnam, and South Korea, as well as the European Union.

Dow Jones' industrial average futures lost more than 1,000 points upon the news, falling by 2.5%. The S&P 500 dropped 3.6%. Trump's erratic approach to the economy had already rattled markets, which dropped significantly in the first quarter of this year, and consumer confidence which recently hit a 12-year low. Trump waited until the stock market had closed today before he announced the new tariffs. Then, in a speech in the White House Rose Garden, he said, For decades, our country has been looted, pillaged, raped and plundered by nations near and far, both friend and foe alike. But it is

not going to happen anymore. Instead, he said, tariffs would create the golden age of America. Never before has an hour of presidential rhetoric cost so many people so much, former Treasury Secretary Lawrence Summers posted. The best estimate of the loss from tariff policy is now close to $30 trillion, or $300,000 per family of four. The Trump tariff tax is the largest peacetime tax hike in US history, posted former Vice President Mike Pence. Trump claims he is imposing reciprocal tariffs and said they are about half of what other

countries levy on US goods. In fact, the numbers he is using for his claim that other countries are imposing high tariffs on US goods are bonkers. Economist Paul Krugman points out that the European Places tariffs are less than 3% on average on US goods, while Trump maintained its tariffs are 39%. Krugman said he had no idea where that number had come from, but financial journalist James Shorowicki figured out that the White House just took our trade deficit with each country and divided it by the country's exports to us. He called it extraordinary nonsense.

Washington Post economic writer Catherine Rampell posted that she was reluctant to amplify Shurowicki's theory that the tariff rates were based on such a dumb calculation, but then the office of the U.S. Trade Representative confirmed it. Certain observers in business had apparently persuaded themselves that Trump didn't really intend to raise tariffs very much, and that his many vows to do so were simply rhetoric. tariffs very much, and that as many vows to do so were simply rhetoric. Since economists agree that tariffs are a tax on consumers and will raise inflation and slow down growth, today's tariffs are higher than expected, and business leaders are alarmed. JPMorgan tonight said that they view the full implementation of these policies as a substantial macroeconomic

shock not currently incorporated in our forecasts and that these policies, if sustained, would likely push the U.S. and global economy into recession this year. Economist Brad Setzer of the Council on Foreign Relations agreed. He told David J. Lynch and Jeff Stein of the Washington Post, In the short run, the effect is probably a recession. It's going to raise the price of so many goods that can't be made in the United States. In the long run, it's a vision of the U.S. that is very isolated from the world. But not from every other country. While Trump imposed tariffs on Australia's remote herd and McDonald Islands, which are

uninhabited except by wildlife like seals and penguins, it did not put tariffs on Russia. A different financial shift lifted sanctions against senior Russian negotiator Kirill Demetriev to permit him to travel to Washington DC today to meet with US Special Envoy Steve Witkoff for what Alex Markhard, Jennifer Hansler, and Elena Trean of CNN refer to as, talks on strengthening relations between the two countries as they seek to end the war in Ukraine. Senator Chris Murphy, a Democrat of Connecticut, noted tonight that the tariffs make no economic sense because they aren't designed as economic policy.

The tariffs are simply a new, super dangerous political tool. Murphy suggests they are a way to make private industry dependent on the president the same way he has tried to make law firms and universities dependent on him. Industries and companies will need to pledge loyalty to Trump in order to get sanctions relief. Murphy warns that the tariffs are designed to create economic hardship, so that Trump has a straight-faced rationale for releasing them, business by business or industry by industry. As he adjusts or grants relief, it's a win-win. The economy improves and dissent disappears. There is also Trump's apparent fascination with President William McKinley, who held office from 1897 to 1901 at a time

when high tariffs concentrated wealth in the hands of industrialists while workers and farmers, as well as their families, faced injury, hunger, and homelessness from dangerous working conditions, low wages and commodity prices, and seasonal factory closings. Trump has frequently claimed those years were the nation's wealthiest, and today he helped explain his focus on that era when he referred to the 1913 Revenue Act, a law that has angered the right wing for decades. That act began the process of replacing the high tariffs of the late 19th and early 20th

centuries with an income tax, thus shifting the burden of funding the Treasury from ordinary Americans through tariffs to wealthier Americans through the income tax. At least some of Trump's tariff plans seem tied to his enthusiasm for tax cuts on wealthy individuals and corporations. But in trying to reestablish the financial patterns of the late 19th century, patterns that led to profound economic instability in the United States, including economic crashes, Trump is undermining the system of global trade that has fostered international cooperation since World War II. CNN global economic analyst Rana Forouhar told CNN's John Vowse,

this is Trump saying, I am going to overturn globalization as we've known it. She added, I'm hoping it doesn't push the U.S. and the world into recession. Josh Marshall of Talking Points Memo makes the important point that presidents have no inherent power over tariffs whatsoever. The Constitution gives to Congress, not the President, the power to impose tariffs. But the International Emergency Economic Powers Act allows the President to impose tariffs if he declares a national emergency under the National Emergencies Act, which Trump did today, declaring a national emergency to increase our competitive edge, protect our sovereignty, and strengthen our national and economic security. That same law allows Congress to end such a declaration of emergency,

but so far, Republicans have declined to do so. Today, the Senate rebuked Trump by passing a resolution to block his tariffs on Canadian products with four Republicans. Susan Collins of Maine, Mitch McConnell of Kentucky, Lisa Murkowski of Alaska, and Rand Paul, also of Kentucky, joining Democrats to pass the resolution. House Speaker Mike Johnson is unlikely to take the measure up. Letters from an American was written by Heather Cox Richardson. It was produced at Soundscape Productions, dead in Massachusetts, by Heather Cox Richardson. It was produced at Soundscape Productions,

dead in Massachusetts. Recorded with music composed by Michael Moss.