MARTIN ARMSTRONG: Trump's Tariffs Are Winning

Thank you to Martin Armstrong's "Trump's Tariffs Are Winning" @ Armstrong Economics, April 4, 2025. 

I have said on various podcasts that a 10% tariff is really a tariff. Beyond that, it is political to force free trade. Most countries are dropping tariffs on US goods, creating what Trump actually was trying to create – FREE TRADE. The belligerent one is, of course, France. Macron has a Napoleon Complex, which is why he has been pushing for war, offering nukes to Germany, and trying to supplant the United States as the savior of Europe, being the 3rd largest nuclear power.

"Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits," Donald Trump, Presidential Execute Order, April 2, 2025. 

“The tariffs give us great power to negotiate. They always have,” Trump told reporters Thursday aboard Air Force One a day after his Rose Garden “Liberation Day” tariff announcement sunk the market to its lowest point since the COVID-19 pandemic.

I have received many inquiries about the US Reciprocal Tariffs announced on April 2, 2025. The justification for these tariffs can be found in President Trump’s Executive Order, which may be found here. I am not an expert in tariff law. Nonetheless, parts of the Executive Order are open to interpretation by experts, and the end result remains fluid from one day to the next right now. Therefore, it is important to consult with a customs broker before importing or exporting to the US. It is always a matter of interpretation.

Macron is belligerent and, like Carney in Canada and Democrats in the USA, whatever Trump does, he must do the opposite. Macron, according to sources, is urging full retaliation against Trump that the EU should block all US goods and push for capital controls to prevent money from flowing to the US. He already uses non-tariffs pretending it to be “quality” control outright blocking some products.

However, Macron is also pushing for war with Russia, offering Germany nukes to replace the US as the savior of Europe. He thinks war will elevate France to the leadership of Europe because of its nukes. Macron has always had a problem with sparkling wines in California being labeled Champagne. The French reinterpreted the label “Champagne” to be the origin rather than how it is produced. Champagne, made in France, is produced using the méthode champenoise. If that bottle is produced using the exact same method, anywhere else, it must carry a different name, but that was part of the Treaty after World War II, and it was meant to punish Germany. But the US never ratified that treaty, so it never applied to the United States.

Sparkling wines have been produced in California since about 1860, and they were introduced by European immigrants, including those from France. Since then, the term Champagne has been used to refer to the type of wine, not where it was made. Here is an advertisement from 1866 offering North American-produced Champagne. Macron does not care how it is made; he wants to redefine the word “Champagne” to mean France as the area where it is produced rather than the type. This is just an example of dealing with the EU.

First, keep in mind that these tariffs, broad as they are, are being levied under the President’s “Emergency Powers.” This means that the usual statutory exemptions for antiques and other collectibles, which are referenced in the HTS Codes, may not seem to apply, depending on who does the interpretation. Does this executive order overrule the statutory exemptions covering antiquities when, in fact, the purpose of the tariffs focuses on currently manufactured goods, not antiquities of more than 100 years old?

While executive orders are powerful tools for presidential action, they cannot override statutes. In cases of conflict, statutes prevail unless the executive order operates within constitutional or delegated authority. Courts serve as the ultimate arbiter, ensuring adherence to the separation of powers.

So what does it mean for antiquities? According to Section 2 of the Executive Order,

The additional ad valorem duty on all imports from all trading partners shall start at 10 percent, and shortly thereafter, the additional ad valorem duty shall increase for trading partners enumerated in Annex I to this order at the rates set forth in Annex I to this order. These additional ad valorem duties shall apply until I determine that the underlying conditions described above are satisfied, resolved, or mitigated. However, since an executive order cannot act unconstitutionally, it should not be interpreted as overruling a valid statute defining the exemption.

Moreover, according to Section 3,

a) Except as otherwise provided in this order, all articles imported into the customs territory of the United States shall be, consistent with law, subject to an additional ad valorem rate of duty of 10 percent. Such rates of duty shall apply with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. Eastern daylight time on April 5, 2025, except that goods loaded onto a vessel at the port of loading and in transit on the final mode of transit before 12:01 a.m. eastern daylight time on April 5, 2025, and entered for consumption or withdrawn from warehouse for consumption after 12:01 a.m. eastern daylight time on April 5, 2025, shall not be subject to such additional duty.

Furthermore, except as otherwise provided in this order, at 12:01 a.m. Eastern daylight time on April 9, 2025, all articles from trading partners enumerated in Annex I to this order imported into the customs territory of the United States shall be, consistent with law, subject to the country-specific ad valorem rates of duty specified in Annex I to this order. Such rates of duty shall apply with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. Eastern daylight time on April 9, 2025, except that goods loaded onto a vessel at the port of loading and in transit on the final mode of transit before 12:01 a.m. eastern daylight time on April 9, 2025, and entered for consumption or withdrawn from warehouse for consumption after 12:01 a.m. eastern daylight time on April 9, 2025, shall not be subject to these country-specific ad valorem rates of duty set forth in Annex I to this order. These country-specific ad valorem rates of duty shall apply to all articles imported pursuant to the terms of all existing U.S. trade agreements, except as provided below.

https://www.whitehouse.gov/wp-content/uploads/2025/04/Annex-I.pdf

Therefore, under Section 3 (b) (v) of the Executive Order, it is suggested that things like antiquities should be exempt under the Executive Order because they are generally exempt from tariffs under the Harmonized Tariff schedule. Furthermore, there is a statutory exemption for “informational” materials under 15 USC 1702(b). While this certainly applies to artwork and our reports, informational materials are exempt. Additionally, I should note that, for the time being at least, there is a separate exemption for low-value shipments under $800 under 19 USC 1321, which an executive order cannot nullify.  

MARTIN ARMSTRONG: Most American manufacturers rely on foreign goods to operate or finalize their “Made in America” products. Hiking up tariffs will cause the cost of production to soar.

Most American manufacturers rely on foreign goods to operate or finalize their “Made in America” products. Hiking up tariffs will cause the cost of production to soar. The workforce will shrink as profits decrease. Consumers bear the brunt of these policies through higher prices.  --Martin Armstrong

Thank you to Martin Armstrong's "Tariffs Are NOT Reciprocal," @ Armstrong Economics, April 4, 2025.

How did the Trump Administration come up with these tariff rates? Why would a nation like Madagascar, for example, with a small economy, be hit with a 47% tariff? Reciprocal tariffs were determined based on America’s trade deficit with other nations. They took each nation’s trade surplus with the US by total exports and divided that number by two, proclaiming we are asking them for half of what they have been charging the United States.

The assumption behind this method is that a trade surplus means one country is “taking advantage” of the other. However, trade imbalances do not function in such a cut-and-dry manner. The US runs trade deficits with some countries while running surpluses with others. The global economy is interconnected, and imposing arbitrary tariffs based on a deficit does not reflect the broader picture.

For example, China may have a surplus with the US, but it also imports raw materials from other nations to manufacture goods. If the US places a retaliatory tariff, it does not necessarily mean that China has been unfairly charging the US. China’s advantages of natural resources and lower production costs are part of the trade deal. There is a reason the US and China were once the largest trading partners, as China relied on American consumers the same way that America relied on cheaper Chinese goods. China was then investing in US debt, which it once viewed as a safe trade, but that is no longer the case, and America will suffer as a result. All of these measures are causing America’s trading partners to flee.

Look at Canada, where the population is far smaller than America’s, which is one of many variables. There is less demand overall and while Canada relied on the US for numerous imports, America was not subsidizing Canada. A trade deficit is not a subsidy! The US pays for Canadian goods and services with USD, which Canada then reinvests in the US economy. This is how global trade works; it is not a one-way street where Canada simply takes advantage of the US.

We cannot expect a complete balance in trading. Look at poorer nations—they simply could never purchase the same volume from America. Wages in these nations are far less than the US minimum wage, and thus, production is cheaper from a labor standpoint alone. For example, no one from Cambodia will be seeking an American-made car. A Cambodian factory will not move operations to the US to avoid the 49% tariff.  They will look for alternative buyers outside of the US. Imbalances are a natural part of trade. Treasury Secretary Bessent said, “Let them eat flat screens,” but that is not the core of the issue. Americans did enjoy cheaper goods, but the bigger issue is that these tariffs make American investments LESS attractive as major companies cannot operate from a purely domestic standpoint.

The calculations do not factor in currency exchanges. Capital flows and currency values often influence trade deficits. If foreign capital flows into the US to buy Treasury bonds, real estate, or equities, it strengthens the USD, making US exports more expensive and imports cheaper. This is not a function of unfair trade practices but of the global demand for US assets.

By imposing tariffs arbitrarily, the cost of imported goods rises, which can negatively impact domestic industries that rely on those goods. Most American manufacturers rely on foreign goods to operate or finalize their “Made in America” products. Hiking up tariffs will cause the cost of production to soar. The workforce will shrink as profits decrease. Consumers bear the brunt of these policies through higher prices.

The assumption that tariffs should be determined by “half of the surplus” rule ignores the reality that trade wars are not linear. These tariffs are NOT “reciprocal” as the Trump Administration insists. They are not looking at the actual tariffs set by other nations. Those advising Trump believe that other countries will want to negotiate “tariffs” to permit free trade, but instead they are simply hoping to close trade deficits, and that simply cannot occur. Thursday’s sell-off is indicative of capital flowing out of the US. The Trump Administration basically told the world that America is closed for international business, and capital is responding to the threat. The real impact of these tariffs will soon come as we move deeper into a period of stagflation.

MARTIN ARMSTRONG: The real solution lies in reducing trade barriers and not relying on tariffs to increase the demand for domestically made goods

Thank you to Martin Armstrong's "Why the FED Cannot Reduce Rates to Offset Tariffs," @ Armstrong Economics.

President Donald Trump is urging the Fed to cut interest rates to offset the inflation that will be caused by tariffs. “The Fed would be MUCH better off CUTTING RATES as U.S. tariffs start to transition (ease!) their way into the economy,” Trump wrote. “Do the right thing. April 2nd is Liberation Day in America!!!” Reducing interest rates will NOT offset inflation caused by tariffs because the two variables are not directly related.

Tariffs increase costs due to supply, while interest rates influence demand. When tariffs are imposed, the cost of imported goods rise, increasing prices for consumers and businesses. This cannot be offset by lowering interest rates, as rate cuts stimulate borrowing and investment rather than addressing price increases caused by trade barriers. In fact, lower interest rates can exacerbate the problem by weakening the currency, making imports even more expensive, further fueling inflation.

Historically, tariffs have led to stagflation—rising prices combined with economic stagnation—rather than the demand-driven inflation central banks typically target. The Smoot-Hawley Tariff of the 1930s, for example, severely disrupted global trade and worsened the Great Depression. Similarly, Trump’s trade war with China during his first term did not lead to any economic boom but instead forced businesses to adjust supply chains, raising costs for consumers.

Lowering interest rates in this environment offsets capital flows, decreasing confidence and weakening the purchasing power of the currency. The result is a cycle in which consumers face higher costs while the central bank loses the little control it has to manage inflation. The idea that the Fed could actually control inflation is based on outdated Keynesian economics concepts that were drafted when the US had a balanced budget. Now, most demand comes from the government itself, the largest borrower and creator of debt. This is why Jerome Powell spoke out against Joe Biden for creating the largest spending package in US history and multiplying the public sector. The government will never pay off its debts, and the interest payments on that debt alone have been astronomical.

Relying on rate cuts to counter tariff inflation ignores the root cause of the issue. The real solution lies in reducing trade barriers and not relying on tariffs to increase the demand for domestically made goods.

#Trump2024 is arguably even more popular than he was in 2016, despite a four-year term during which the establishment got everything it wanted – including the #Covid #lockdowns.

Why do his supporters still consider him a threat to the establishment?https://t.co/rW8Rp10HFV

— Tom Mullen (@ThomasMullen) March 18, 2024

Manufacturing jobs never ever made up more than 30% of all jobs.  In fact, it was always lower than that, much lower and more into the 20%, 25%, 27% range except during WWII when they were just making bombs to blow up.  Now this didn't make anybody richer; it temporarily made the people who were unemployed . . . they got money but that was all inflation and taxation.  None of this was real.  It was the same thing Hitler did.  So apart from all the death camps and all the evil crap that Hitler did, he also sent everybody to work making bombs and stuff and then claimed he had solved unemployment.  Manufacturing never made up that large of a percentage of the population.  In other words, at its very peak, manufacturing jobs, 70% of the population was doing something else.  So I think people have this idea that Trump is going to put on tariffs, and people are going to stop importing manufactured goods and like 80% of the population is going to work in manufacturing.  No.  It was never the case at the height of American manufacturing employment, and it wouldn't be the case any time no matter how many tariffs you put on.  So it really is just completely a retarded idea.  Be that as it may, he didn't even follow through on that.  Okay?  His advisors, a few of his loyal advisors, the people who really believed in him, were saying, "Don't back away," but all the other ones, whom people call RINOs, some even call Libertarians although that's kind of a laugh that anyone in Washington DC at all is a Libertarian other than Thomas Massie and Rand Paul, two of them, two people.  His advisors tell him, "We're going to have a recession, you're going to lose the next election."  So he backed off.  

16:37  He made a deal in early 2020.  It was signed, and manufacturing immediately rebounded by the way.  So if you trace the IMS Manufacturing Index to see when it was in recession and when it came back, it locks in step completely with those tariffs and their removal.  So he didn't do that.  I keep wanting to think that his supporters are really antiwar.  I actually think Trump is sincere about not fighting at least as many wars.  And I always wondered is it just because he says that that his supporters go along with that when all they really care about is immigration and tariffs?  Or is there a critical mass of people who are sick of this crap?  If there is and if the antiwar part of his message is at all part of the reason why people want to reelect him, well, he didn't do that either.  He promised in 2018 he would be out of Afghanistan with all the troops home by Christmas, and then he sent more troops, and then he never left.  Then he made some deal, "Oh, we're going to get out, but you have to elect me again first."  No.  No, sorry, Donald.  We've heard that too many times.  The fact that it was Joe Biden that got the troops out of Afghanistan is just a travesty.  As despicable a person as Joe Biden is and as warmonger as he's shown that he is and corrupt, and everything else, to allow him to be the one to end the Afghanistan War is just inexcusable to me.

18:43  He bombed Syria twice.  Now there's some murmurings that he bombed empty buildings, and if that's true, that's good, I'm glad.  That was an intentional thing, "Look, I'm going to do this bombing to get all of these people off my back, but I'm not going to kill anybody."  I hope that's the case.  And when he refused to bomb Iran over them shooting down the drone, I give him full kudos for that too.  In fact, he came out and said, "Listen, I'm not killing 150 Iranians over an unmanned drone.  I'm just not going to do it."  I don't think I've ever heard a president say in my lifetime anything that sensible.  So that's good for him.  But we got to remember that the whole Iran thing was his high-pressure campaign that he let John Bolton run.  How'd he think that was going to turn out?  He almost got us into a war while he was saying he didn't want one.  He did that and he funded Ukraine.  Now he tried to hold up the funding pending an investigation into his chief political opponent.  Boy, that was a bad precedent to set, wasn't it, Donald?  But I think he was always going to send it.  And he still talks about Putin like a Neocon now.  A lot of the foreign policy, the positive parts, have faded away during this campaign and I don't exactly know why that is.  Now, he's still saying some