Tariffs are revenue, just like casinos. Trump thinks. (Updated)

Just add up the revenue! Ever think about how easy bankruptcy is?

Casino revenue will be the same every month, Trump said in his Atlantic City casino pro formas. Old Man Winter disagreed. Banks wrote off $500 million in Trump debt. Then Trump started adding up tariff revenue…Wow$er!

It took me going through some 12 different financial analysts’ articles to get the semblance of a lay person’s understanding. I give you what I put together.

China today increased its tariffs on U.S. imports to 125%, responding to President Trump’s earlier decision to hike duties on Chinese goods to 145%. Who could have thunk that the World’s largest market, the holder of $750 billion in U.S. Treasury bonds, would not crumble in fear?

Farmers will pay much of this price, as it will be a “NO SALE! “. Nada. Zippo. I see trade with the U.S. stopping.

European stock markets were trading down this morning in response to the new tariffs. In his first public comments on the escalating trade war, President Xi Jinping said Beijing is “not afraid” of “any unjust suppression.” Frankly, at these tariff rates, there will be no trade between the U.S. and China. Musk just cancelled all Model S and Y shipments to China. Those are not made there.

Here’s the underlying story: Trumpers have been claiming thoughtlessly that:

1. Others will pay the tariffs, not you. Tariffs won’t increase prices because foreign producers will absorb the cost. (Trust me! Producers always absorb all costs. That is why everything you buy is free.)

2. You will shift to buying domestic. Tariffs will cause a large shift in U.S. demand away from imports to domestically produced items. (If in Item 1, above, the producers did not increase costs, why would you change to buying domestic chocolate instead of Swiss chocolate? Wait. There is no domestic chocolate. All cocoa beans are imported.)

3. Tariffs will raise huge amounts of revenue. (Buying domestic, as Item 2, says does not create tariff revenue.)

Not wanting to tax your thunking thoughts, if you think about it for a minute, you realize that (1) is inconsistent with (2): If prices of imports don’t rise, why would consumers switch to domestically produced goods? At the same time, (2) is inconsistent with (3): If imports drop a lot based on solid domestic competition, tariffs won’t raise a lot of money, because there won’t be much to tax.

Chaos is so great. Chaos is rapid fluctuations fueled by heuristic trial and error. Normal tools to adjust the economy will not work during chaos. The Trump administration's ambitious agenda to reform the international financial system seems almost oblivious to the reality of America's extreme dependence on foreign capital as reflected in its net international investment position," said Chris Wood, global head of equity strategy at Jefferies,

I have to think that “almost oblivious to a reality” is a stark contrast to abject stupidity. Foreigners owned $33 trillion of U.S. debt and stocks at the end of 2024. We don’t have the cards. That interest bill is $952 billion this year. That is more than the U.S. Defense budget.

An advisor had to explain to Trump that U.S. debt costs interest, and we just sold 10 Year Treasury bills at 4.8%. Our overall rate stands at 3.347% now. That is 50% higher. Our credit rating decline is worldwide.

What does that have to do with you? The 10-year Treasury bill is a benchmark. Off of that benchmark spins the new mortgage rate of 7.1%. Off of that benchmark spins the new prime rate of 7.5%. Off of that spins your monthly credit card bill. Look at what you get for this month. Many will not qualify now to buy a house. Momma used to make potato soup for us as we got close to the end of the month. It was so good. Warming and filling. I understand now. Thanks, Donald.

Trump claimed that countries have been calling him wanting to make a deal in the lead up to the sweeping tariffs. "I'm telling you, these countries are calling us up, kissing my a**. They are. They are dying to make a deal," he said.

-ABC News' Hannah Demissie

It is just chaos. Trump is not getting it right. There is no national emergency. There never was one. The pain visited on you is never good. The gain…well, the recession is still coming. There is no gain here with Mr. Chaos. World leaders kissing his ass does not pay you any dividend.

When world leaders all say U.S. bonds are not worth the paper they are written on, you have no way to finance debt.

There is the shaft. No bond sales, the budget will have to get pared back to income. Balanced budget. Prices are also still going up on us no matter what. Eggs. I don’t want to talk about eggs. Question is, ”Do I buy or not?”.

[I don’t think I should say it that way. It would be more succinct to just ask, “Do I buy?”. I don’t think I need the “or not?”. I need help here editors.]

Yes, I buy at Sam’s Club, but not this boycott week. They have a 6-dozen box, large white eggs (on 2 flats). I had 3 eggs broken in transit. It is an okay buy. $3 per dozen.

We are heading for stagflation. Stagflation is resistant to the opening and closing of the interest-rate throttle. Cutting interest rates might mean you can still buy, but it will be a lot less Swiss chocolate. Raising interest rates will increase your debt load, lengthen your payback, and like a sponge absorb pay increases.

What will you do as your discretionary income vaporizes; gas, groceries, electricity, and the rent go up; and then climate change sends you the coldest Winter followed by the hottest Summer on record. (We get new records every year now.)

You will do without. You will learn to can and cook. And potato soup is good. Restaurants will become an unaffordable luxury—until they all close for good. That overnight trip to the beach, maybe next year.

It took Japan over 10 years to work out of stagflation.

We’ve seen this movie before. In February, Democratic Senator Elizabeth Warren tweeted that there was “one thing” she would be watching for with Trump’s implementation of tariffs: “Which billionaires and giant corporations will buy themselves loopholes? In his 1st term, well-connected insiders got tariff waivers. This is one more way to make corporate CEOs kiss Trump's ring.” She is right. The numbers don’t lie.

Let me summarize the consumer rights advocacy group Public Citizen from January issue of Journal of Financial and Quantitative Analysis. Public Citizen’s report “Trump Loves Tariffs, Just Not for the Rich and Well-Connected,” noted:

“Roughly 1 in 7 companies applying for exclusions from 2018 to 2020 were approved. Those chances shot up to 1 in 5 if the company had contributed to Republican candidates, and dropped to 1 in 10 if they contributed to Democratic candidates.”

Surprise!

Trump 2.0 tariff waivers will be Trump 1.0 waivers on steroids. The plan, as the author puts it is to “cause pain with one hand, reward loyalty with the other.”.

On Wednesday, Trump was asked by reporters about waivers for some companies:

Reporter: “Would you consider exempting some US companies – maybe some larger companies who have been hit hard in the markets the last few days...?”

Trump: “Well, I'll take a look at it as time goes by. We're going to take a look at it. There are some that have been [hit] hard. There are some that, by the nature of the company, get hit a little bit harder. We'll take a look at that, yeah.”

Reporter: “How will you determine it…?”

Trump: “Just instinctively, more than anything else. I mean, you almost can’t take a pencil to paper. It’s really more of an instinct, I think, than anything else.”

“Instinctively.” Supported by 6 bankruptcies, the 34-count felon is not well advised, if you get my drift. Those that watched the mega developer as a successful businessman on TV were spoon fed a contrived persona that had never existed. Incompetent stumblebum, blew an inherited fortune on a series of businesses failures. He drove into the ground, one after the other,:

Trump Steaks, Trump Water, Trump Board Game, Trump Taj Mahal, Trump Castle, Trump Vodka, Trump Mortgage, Trump Magazine, Trump Ties, Trump Cologne, Trump Vitamins, Trump Ice, Trump Suits, Trump Homes, Trump Financial, Trump Institute, Trump New Media, Trump Shuttle Airline, Trump Plaza Hotel, Trump University, New Jersey Generals, Tour de Trump, Trump Magazine, etc. Every single one failed, some spectacularly.

I want everyone to stop for a moment and revisit the stable economy that Obama handed off to Trump in 2017. Then stop for a moment and revisit the stable economy that Biden handed off to Trump in 2021. Trump blew both of those stable economies—and killed 1 million Americans while doing that.

And so it ends with you and me. The need for the U.S. to sell more bonds to raise cash to pay for the fiscally irresponsible tax cuts for the oligarchs will be a hard sell to foreign governments. They are not stupid. I call that No Sale! They now hold 12% of U.S. debt, as it is. They will not dig deeper into that sinkhole.

So at the Treasury bond auctions, prices will fall steeply. Those bonds will have a much higher nominal yield to make up for the added risk. The 10-year Treasury bond passed a payout of 4.5% this week. All consumer borrowers were willing to suffer as overall interest rates must go up now: 30-year mortgages went to 7.1%. Fewer can qualify. Housing sales will decline.

Want to stop the tariff business? Just sell your U.S. bonds. That will devalue holdings of other bondholders when they are already facing margin calls. This is what Canada did to get Trump to CAVE (with a capital C).

CHECK this out. Canada mustered a group of countries that holds those U.S. bonds BIGLY. If China, the EU, the UK, Canada, and Japan chose to dump their $4 trillion in U.S. bond holdings at the same time, the damage would be significantly amplified. They have agreed to sell together slowly. HENCE CAVE!

What happens then? Bond prices tank. For the new bond sales needed to finance the tax cut, the bond yields (interest payments) go way up. I think I see the U.S. sending out 50% of its income to service its debt, in that case. That is instead of the 30% it spends now.

Even after Trump’s CAVE, the stock market continued to tumble yesterday, signaling renewed investor concern about the worsening trade war with China and the destabilizing effects of Trump’s tariffs. In the government bond market, U.S. Treasuries started to sell off again, with the yield on 10-year Treasuries climbing to around 4.5%, the highest since February. I see 6% coming.

The 1-day bounce in stocks will not stick. Up and down will vacillate. Tariffs will be on, then off. This is easy for Trump.

Major issues and fundamentals still remain unresolved and unbalanced respectively. Trump’s promises can’t all be met because many require contradictory economic policies. The outlook is not looking good.

We cannot win a trade war with China. Butting heads serves no purpose. All trade will stop between these countries. China will not be the first to call. Face is at stake here.

The Road Ahead. Trump already asked our military to shoot our citizens on the streets, “Can we shoot them in the legs?”), but the military refused. Now he plans to arrest protestors. You know about how far with this that Trump will go, but no one knows what will unfold. Grab a flashlight, because we are at a dark fork on this American road.

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