Trump is already governing from Mar a Lago, lobbing threats of tariffs at China, as a penalty for China's deadly fentanyl export. And he's used the tariff threat to put Canada and Mexico to work on stopping the border invasion.
Cue the tariff inflation alarmists …
Keep in mind, these are the same people that, just a few years ago, thought cramming ten years worth of money supply growth into a two-year period would result in just "transitory" inflation.
Remember, as we discussed earlier this month, if we look back at the three years prior to covid, when the Trump trade war was full blown: The U.S. economy grew at an average of 2.7% annualized (the best three-year average growth since 2007), with an average of just 1.7% inflation (PCE).
That said, growth was good, business confidence was at 37-year highs, but key to the Trump agenda in his first term was structural reform, repairing global trade imbalances. The priority, over optimizing for growth and short-term stability, was fixing this …
With that, if we look back at the Trump first term, he was clearly willing to do unpopular things, and at unpopular times. He was willing to act on threats (which he did), and willing to escalate to force concessions and get to a deal, particularly with China. All of this, even if it meant impeding the economic strength at the time, or creating waves in financial markets (which he did).