What motivates the chaotic, stop-and-go, incoherent tariff movements of President Donald Trump? On April 9, a few days after his “reciprocal rates” had come into force and after he was worried about cracks in financial markets, including the market for treasurys, he announced a 90-day break for most “mutual rates” more than 10%. He explained that people “got a little scared”. “I thought people were jumping a bit out of line. They became Yippy.” Eventually, he said, the break “was written from the heart.” (“Why Buckle Donald Trump?” Financial timesApril 9, 2025.) It is interesting that the dictator of Venezuela Nicolás Maduro, who drove his country into the ground, said something similar: “I trade out of love” (“Nicolás Maduro, the disputed president of Venezuela” Financial timesAugust 2, 2024).
If Trump’s apparent incoherence is not powered by love, is there a big plan hidden behind it? Financial times Columnist Janan Ganesh argued that there is none: it is irrationality pure and simple. For example, he says that Trump both the Maga goal to comprehend China and to contain the purpose of the “Liberation Day” to get import from friendly countries (“The hopeless search for Trump’s cunning plan“April 9, 2025). Ganesh concludes:
In the end there are just too many contradictions in the Trump world to justify a conversation about a large plan. … if strategy means something, it has an idea of the connectedness of things. There is nothing of that here.
The problem with this type of hypothesis, although seductive in this case, is that it can explain everything and the contrary. It is safer – and more natural for an economist – to start with a rational choice vein, even if some qualifications are needed. Like every individual in the ordinary course of life, the first goal of Mr. Trump is to promote his own interest. This motivation is especially strong in politics. The preferences and interests of Mr Trump contain an unusual need for recognition and a devout delight to power. However, he seems to opt for resources that are ultimately not consistent with his goals, that is to say instrumental rationality (Unlike the logical coherence of transitive preferences) is defective. This is probably due to his deep ignorance about how society and world work work, something difficult to understand without economy. (If he becomes president of life, I will have to revise my hypothesis of instrumental rationality failure, and Gonesh will have to admit that the president had a cunning plan.)
Individuals make mistakes in their private matters, but they have strong stimuli to correct them. When one reaches the top of the state, the costs of his mistakes are mainly worn by others, and his incentives to correct them are lower Ceteris Paribus. The more power he has, the more expensive he can afford – or at least he thinks.
The big plans of states are usually nothing but what is in the self -interest of the rulers. The self -interest of a ruler requires that he rewards his more useful supporters, who are usually special interests and election contributions. The needs of a ruler to meet the interests of useful supporters will often give his policy the appearance of incoherence. Moreover, a populist ruler tends to take his decisions ‘intuitive’, as Trump said he would do before he made exemptions for what electronics (”Trump excludes smartphones from mutual rates after Marktroute” Financial timesApril 12, 2025). After all, the populist leader has the truth in his guts, who are the guts of “The people” he embodies. So far the planning rationality of the glorified state. Yesterday, less than two days after pausing most of his rates for 90 days, Mr. Trump announced that the break does not last that long (”US Tech Tariff exemption will be temporary, says Trump” Financial timesApril 13, 2025).
“This is starting to look more like stand-up comedy than ‘tariff policy’,” says Jose Pablo, a businessman and investor who often gives comments on this blog.
The idea that the trade cramps of the current president are aimed at concluding ‘deals’ in favor of ‘his’ people illustrates his ignorance of both economy and the minimum ethics needed to maintain a free society. The imposition of rates on another country is in reality to impose a tax on someone’s fellow citizens. When Trump repetition “What they charge us, we charge them,” he really says “what they charge their citizens or subjects, I apply mine.” He seems to recognize this intuitively when he makes exceptions. The moral error is in the deal of the abductor: he kidnaps you and then offers you a deal, a ransom against your freedom. This “art of the deal” was practiced by Unchained Leviathans against their citizens, foreigners or both.
Why do voters not see that or do they take so much time to discover it? An important explanation proposed by the public choice theory lies in the ‘rational ignorance’ of voters. Because the individual voter has no influence on an election result, he has no incentive to spend time and other means collecting and analyzing political information (see also my Regulation part “Mencken’s theory of democracy“).
The libertarian and classic liberal ideal is primarily aimed at limiting rulers and preventing them from causing damage. What saved us for a few hundred years in many Western countries were the many strong institutions (‘institutions’ in the sense of both sets of rules or ‘standards’ and powerful countervailing groups) that ensured the decentralization of power. A widespread belief in individual freedom ruled. These factors protected us, even if they are imperfect, against the will and grilling of the people and his demagogues.
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