Your Discomfort Means It's Working

This tariff sea change reverses the gears of a machine that has been in motion for decades.

It has been one whole day since President Trump implemented his tariff agenda.

With the amount of squirming and outright panic in the news media, markets, and on social media, you’d think we were 50 years into a 100-year bout of famine, plague, depression, and pestilence.

Let’s all just gather our heads for a second.

At a very basic psychological level, people are opposed to change. It doesn’t matter whether it’s changing their cable provider or taking a detour in traffic.

Extrapolating from this, people are really opposed to bigger, more consequential change.

Extrapolating from this, in the world of finance, I have consistently argued that market participants have been falsely conditioned by our monetary and fiscal policy in this country to always expect comfort and never expect interruptions from the market moving higher, or the quality of life status quo that we believe we are entitled to here in the United States to suffer.

This concept was the basis for my article explaining why I thought the next market crash would “break the brains” of market participants.

Now let’s zoom out and think about what President Trump is trying to accomplish with his tariff agenda. He is essentially saying that the status quo in the United States isn’t working and large changes need to be implemented—changes that will shock the global economy—to remedy the issue.

“Who is the status quo not working for?” some of you will ask me from your Porsche, driving down PCH, or from your desk overseeing your millions in the market.

If I had to venture a guess, I’d say it’s not working for people in towns like this:

Or people whose grandparents used to work at places like this:

And the status quo definitely isn’t working for the bottom 50% of Americans here, represented by the yellow section that is so small you have to zoom in to see it:

Billionaires (other than Trump, it seems) have a difficult time answering questions like “What happens when we run out of middle American towns to gut?” and “How has your quality of life been negatively impacted by monetary policy over the last 20 years?”

The reason they can’t answer these questions is because they don’t have any idea. Monetary policy helps them accrue more wealth and power, and they don’t live in middle America. But if you take a trip to a place like Flint, Michigan, or Bethlehem, Pennsylvania, the answers to these questions become a lot clearer.

Abandoned Bethlehem Steel plant

The direction the country was heading in monetarily and fiscally was simply unsustainable. Deficits too big. Debt skyrocketing against GDP. Wealth gap accelerating. Drug and alcohol addiction ravaging cities.

We were walking a path that decimated the lives and the purchasing power of the people who need it most and took American jobs away from people who needed them the most.

Worse off, it made the United States dependent on adversaries like China to simply go about our day-to-day. When global supply chains were cut off during COVID, it was obvious that our quality of life was 100% dependent on imported goods—everything from consumer electronics to clothing to the ingredients used in pharmaceuticals.

Recalibrating the country away from being dependent on adversarial nations is not a simple and inconsequential thing to do. On the contrary, it’s about as consequential of a decision as we can possibly make, alongside of trying to get our fiscal house as a nation in order.

Consequential means change. Change means discomfort. Discomfort requires courage. On a positive note, to me, it seems like the first time our government has taken more than a 10-day outlook on the future of our nation.

Time and time again, I have complained on this blog that monetary and fiscal policy in this country are run like an infant in a candy store. We do whatever we want, spend whatever we want, throw a tantrum when we don’t get what we want, barely think about the decisions we make, and sacrifice and mortgage anything not nailed down to ensure that our quality of life as it exists today can continue for just one more day (speaking of which, have we audited Fort Knox yet?).

The nearsightedness of our policymaking in this country has been breathtaking.

Trump’s tariff agenda scratches to a halt the record of complacency that’s been playing over the sound system of the United States for the last 50 years. It sends a signal to the world that things aren’t OK the way they’re going and, more importantly, it makes the decision to proactively arrest the problem in its tracks before it reaches a terminus on its own. If the country got into such a precarious position that we had to react to the problem instead of being proactive, we would lose any and all leverage we’d have to make deals to try to recalibrate our position.

Being proactive about the issue puts us in a position of strength. Yes, even when your precious Apple stock is down 7%.

There are going to be some consequences. Trump knew that in advance. Prices may go up near term, supply of goods may dwindle going forward, and we may go into a recession. But recessions can also create investment opportunities for people that have been priced out of the market for the last 20 years. When was the last time middle Americans had a dip in the housing market to put their cash to work? 17 years ago, in 2008?

The market moving rates lower could also offer us a chance to re-finance trillions in debt that needs to be rolled over, which can’t be effectively done at today’s rates.

And the people bearing the brunt of the negatives of this policy are the same people who disproportionately benefited from the previous policies. The top 1% who got infinitely richer thanks to quantitative easing and now have to go through the horrifying exercise of watching their multimillion-dollar portfolio fall a little bit are going to take larger dollar and quality-of-life hits from this policy than the lower middle class, who likely have very little invested and who probably won’t even notice a difference in quality of life because of the squalor they are already living in.

And as I said at the beginning of the article, it has been one day. One goddamn day.

The shock of this event will eventually begin to wear off, and we will achieve a new level of homeostasis—just maybe with financial asset prices lower. Future volatility may come from a cascading deleveraging in the financial world, and I don’t see this as a negative either. Does Fartcoin still have a bid? Yes? Well then, all the excess that should have been carried out has not been carried out yet. And who knows—maybe at about the same time the lower and middle class starts to get their financial footing, stocks will actually return to somewhat of a reasonable valuation so that John Q. Public can get a chance to take a bite of the apple.

And lest we forget, before you piss yourself any further, many of these consequences are based on the assumption that these tariffs are going to be in place for a long time. Given how quickly Trump has shifted his stance on trade with other countries after negotiating, I don’t really find it probable these tariffs will stay in place for years, as many people are acting like.

Some people want to argue that the policy isn’t a net positive—it’s just generating other trade-offs that “aren’t worth it”. Even if on net balance that’s the case, I still think it’s worth it as a method of breaking the chains of the directional status quo in this country. If we have to rearrange the furniture to bring manufacturing back to the U.S. and give people in middle America something to do other than abuse fentanyl smuggled into our country, I’m for it. Bring manufacturing, not drugs, to Kensington. I’m ready to buy American and I know I’m not alone.

This sea change reverses the gears of a machine that has been in motion for decades. The discomfort in the market and in media means that it’s working. And the idea that we’re doing it proactively is a positive, not a negative.

The very same discomfort you feel that makes you want to cave in and just say tariffs are a bad idea is the same discomfort many foreign leaders will feel. Trump won’t be the only leader under pressure to try to resolve this issue, and so it then becomes a test of wills.

America was a country founded by rugged individuals, but there’s nothing rugged about throwing a fit because your NASDAQ investment, up 150% over the last 5 years, is down 5% today — especially when the “problem” likely will be resolved to some degree within a matter of weeks, if not months.

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For the (strongly) opposing view, which I always suggest you consider, you can read this piece by my friend Anton Wahlman, with whom I usually agree on most things finance and politics.

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