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The administration's trade war - 6 months later

In a landscape dominated by alarmist predictions of economic collapse, Joeri Schasfoort offers a startlingly nuanced counter-narrative: the trade war that was supposed to wreck the American economy has, six months in, produced a paradoxical mix of muted inflation and resilient markets. What makes this analysis essential for the busy listener is not just the data, but the specific mechanism Schasfoort identifies—how foreign exporters are absorbing costs and how political chaos is inadvertently forcing allies to fix their own internal trade barriers. This is not a story of total victory or total defeat, but a complex recalibration of global power dynamics that defies the binary headlines.

The Myth of Immediate Inflation

Schasfoort immediately dismantles the most feared consequence of tariffs: a sudden spike in consumer prices. He notes that while economists predicted a dramatic rise in import costs, "inflation has not gone up. It continued to fall." This observation is crucial because it challenges the conventional wisdom that tariffs are a direct tax on the consumer. Instead, Schasfoort points to a more subtle reality where companies are absorbing the shock. He cites research suggesting that "foreign exporters are paying 53% of US tariffs so far," a figure that validates Trump's claim that others are footing the bill, even if the mechanism is less direct than a simple price hike.

The administration's trade war - 6 months later

This evidence holds up well against the backdrop of recent data, though critics might note that this absorption of costs is likely temporary. If foreign firms continue to slash margins to maintain market share, their own domestic economies could suffer, eventually forcing a price adjustment that hits US consumers later. Schasfoort acknowledges this by noting that importers also stocked up on goods before the tariffs hit, creating a buffer that may eventually run dry.

The Dollar and the Stock Market Paradox

Perhaps the most counterintuitive finding in the piece is the behavior of the US dollar. Traditional economic theory suggests that tariffs reduce imports, which should strengthen the currency. Yet, Schasfoort observes that "the US dollar went down by a lot since Trump started talking about tariffs." He attributes this to a shift in investor sentiment, where "foreign investors... have increasingly been looking to invest in relatively stable places like Taiwan, Switzerland, and the Euro area rather than in the United States."

This distinction between trade flows and capital flows is the piece's analytical high point. It explains why the market initially crashed on "Liberation Day" only to recover. Schasfoort attributes the recovery to two factors: massive corporate tax cuts and a market belief that Trump will eventually "chicken out" on the most extreme tariffs. As he puts it, "what some people on Wall Street have called the taco trade where taco stands for Trump always chickens out." This framing captures the speculative nature of the current market, where investors are betting on policy volatility rather than economic fundamentals.

The taco trade is real: investors are betting that Trump's most extreme threats are bluffs, and so far, the market has been right.

Unintended Consequences for Allies

The most surprising section of Schasfoort's coverage is his examination of how US trade aggression has paradoxically benefited America's traditional rivals and allies. He argues that the chaos has forced the European Union to confront its own internal fragmentation. "Facing trade barriers from the US, the EU realized that its most important trade barriers are actually still inside the block and set out to try to remove them." Similarly, he notes that Canada is now actively working to reduce internal trade barriers between its provinces, which the IMF estimates are equivalent to a 21% tariff.

This is a compelling argument for the idea that external pressure can catalyze internal reform. Schasfoort writes, "Trump's aggressive conduct has caused Canada to take a long hard look at its internal trade barriers... if Canada can now remove these thanks to pressure from Trump, he could have ended up doing them a major service." This reframes the trade war not just as a bilateral conflict, but as a global stress test that is revealing structural weaknesses in trading partners. A counterargument worth considering is that this "benefit" comes at the cost of short-term economic instability and damaged diplomatic relations, which may have long-term geopolitical costs that outweigh the efficiency gains of a unified market.

The Bottom Line

Joeri Schasfoort's analysis succeeds by refusing to accept the binary narrative of total economic ruin or unqualified success. His strongest point is the detailed breakdown of how foreign exporters are currently absorbing tariff costs, a dynamic that keeps inflation low but may not be sustainable. The piece's biggest vulnerability lies in its reliance on the assumption that Trump's "chickening out" will continue; if the administration follows through on its most aggressive threats, the current market stability could evaporate instantly. Readers should watch for whether the foreign absorption of costs persists or if the bill eventually comes due for American consumers.

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The administration's trade war - 6 months later

by Joeri Schasfoort · Money & Macro · Watch video

Trump's trade war. >> Inflation is dead. China, >> the economy, the best we've ever had. >> Yes, it's already been 6 months since Trump kicked off his presidency by announcing terrors against China, Mexico, and Canada.

This triggered a massive fall in the US stock market. But today, the stock market is higher than ever, despite Trump threatening more and more tariffs. And yes, the US dollar went down by a lot since Trump started talking about tariffs. But big picture, it's really not that much lower than just a year ago.

On top of that, tariffs have not caused much inflation in the United States. And yes, the US economy is projected to grow more slowly due to tariffs. But so far, the US is likely to keep growing quite a bit faster than other major advanced economies like Germany, the UK, and Japan. So, what was all the fuss about?

And what actually happened in these last 6 months? Trump announced tariffs, passed them, increased them, got some deals done, while others keep getting delayed. In this video, we'll create some order in all of this chaos by number one, giving you a visual overview of what actually happened. Number two, discuss what the effects on the US economy are so far.

Number three, discuss the effects on the US's biggest trading partners, some of whom could actually be benefiting a little bit here and there. And finally, number four, discuss whether or not Trump's plan to reindustrialize the United States and let foreigners pay for it is already working. So, let's jump right into Trump's trade war 6 months later. This graph by economist Joey Politano is the best graph I could find to summarize what Trump has actually been up to.

Tariffs are difficult to keep track of because they target different countries and different products. For example, Trump has put particularly high tariffs on countries like China and on products like steel and cars. But what does this actually mean for the American economy? That is what this graph is all about.

As it shows the average US tariff rate based on what type of good and from whom Americans imported in 2024. For example, and this is just hypothetical. If 10% of all US imports were steel and aluminum, then a 50% steel and aluminum tariff would raise the average US tariff rate ...