What we’re reading (4/7)
“U.S. Stock Meltdown Gives Way To Global Rout” (Wall Street Journal). “U.S. stocks took a heavy beating for two days in a row last week. On Monday, it was the rest of the world’s turn. Historic turmoil in financial markets left investors with few places to hide as President Trump’s challenge to world trade intensified stock losses from Hong Kong to France. Hopes that the White House would ride to the rescue over the weekend, pausing the tariffs, were dashed.”
“The Tariffs That Led To The Biggest Stock-Market Drop Since COVID May Have Been The Result Of An Error” (MarketWatch). “‘The idea is that as tariffs rise, the change in the trade deficit will depend on the responsiveness of import demand to tariffs, which depends on how import demand responds to import prices and how import prices respond to tariffs,’ AEI senior fellows Kevin Corinth and Stan Veuger pointed out. The problem is the White House used 0.25 as the elasticity of import prices. Per the research paper the USTR cited in the tariff determination, the elasticity is actually closer to 1, or 0.945 to be precise. The AEI authors say the White House may have used the elasticity of retail prices instead of import prices. The AEI team went and recalculated tariffs based on using correct numbers — and found no tariff rate would exceed 14%, and most would be at the 10% floor the Trump administration set. It stands to reason that if the revised calculations were used, the stock-market reaction would have been much different.”
“Donald Trump Tells Americans Bracing For Economic Collapse: ‘You Have to Take Medicine’” (Vanity Fair). “The self-proclaimed ‘Tariff Man’ spent the weekend golfing and says he plans to stay the course despite Wall Street turning on him and stocks making wild swings in response to his new policy.”
“China Says It Will Never Accept US ‘blackmail’ In Escalated Tariff Threats” (DailyMail). “China said it will never accept the "blackmail nature" of the United States after the latter escalated tariff threats against it, the Chinese commerce ministry said on Tuesday. The U.S. threats were ‘a mistake on top of a mistake,’ a ministry spokesperson said in a statement, urging the U.S. to properly resolve differences with China through dialog with mutual respect and on an equal footing.”
“Trump’s Tariffs Will Wound Free Trade, But The Blow May Not Be Fatal” (New York Times). “The shock of Mr. Trump’s move is reverberating even more widely, given the larger size of the American economy and its place at the fulcrum of global commerce. Yet as with Brexit, its ultimate impact is unsettled: Mr. Trump could yet reverse himself, chastened by plummeting markets or mollified by one-off deals. More important, economists say, the rise of free trade may be irreversible, its benefits so powerful that the rest of the world finds a way to keep the system going, even without its central player. For all of the setbacks to trade liberalization, and the grievances expressed in Mr. Trump’s actions, the barriers have kept falling.”
