President Donald Trump speaks with reporters outside the White House. Photo / AP
President Donald Trump speaks with reporters outside the White House. Photo / AP
COMMENT:
Some people think Donald Trump's failed attempt to buy Greenland last week is the stupidest thing he's said or done yet.
It might be the weirdest.
But when history is written, I think the line that will haunt Trump's legacy, and serve as an enduring reminder of his idiocy,is a tweet from March 2018.
Despite a long list of contenders, this may prove to be the stupidest thing he has ever said.
Here's the full version of the tweet - for those Trump fans who bafflingly think the media makes this stuff up.
"When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don't trade anymore - we win big. It's easy!"
A year and a half later the trade war is getting worse and the world is creeping closer to recession, dragging New Zealand with it.
We're talking about negative interest rates, quantitative easing and inverted yield curves at a time when we should have been enjoying a sustainable economic recovery.
Trump has done everything that the US constitution allows him, to cut it short.
He has deployed fiscal stimulus when it wasn't needed, cutting taxes to briefly turbo-charge US growth. And he started a trade war.
Last week, Reserve Bank of Australia governor Philip Lowe warned the trade war between China and the US is the biggest single threat to the global economy.
Aussie mining giant BHP warned that it was starting to hit earnings. In New Zealand we're seeing the commodity slump hitting dairy and logs.
A year and a half later the trade war is getting worse and the world is creeping closer to recession. Photo / AP
Growing recession risk in the US has forced Trump to change his tune.
He now says recession is a small price the US might have to pay to win the longer-term economic war with China.
Although he's maintained that the Chinese pay the tariffs (they don't, US importers do), he's decided to delay his next round of sanctions until after Christmas - knowing full well they'd hit Americans in the pocket at a bad time.
Meanwhile, he continues to call out the "fake media" for beating up recession stories despite the fact the business journalists don't do economics - we report it.
The media has reported that tariffs already imposed on China have cost the average American household US$600 per year.
It is estimated that figure will rise to US$1000 if Trump carries through on his plan to levy tariffs on another US$300 billion of US imports from China.
Those reports don't come from journalists, they come from analysis by JPMorgan Chase - a big, gnarly Wall Street bank that's only interested in its clients making money.
Likewise, it is bond market analysts who get really freaked out about inverted yield curves (when returns for long-term bonds fall below short-term returns, indicating investor pessimism).
Journalists are actually biased to reporting more exciting moves on stock markets - which don't really reflect economic growth.
But we've learned you can't ignore bond markets because they do accurately forecast recessions.
So Trump's conspiracy theories now extend to economists, Wall Street analysts, bond traders and, of course, the US Federal Reserve.
He's doubled down on attacking the US Fed for not cutting rates fast enough.
And he's already started talking about his next round of fiscal stimulus - i.e. more tax cuts to head off a recession at the pass.
Unfortunately Trump is entirely unmeasured in everything he says and does. Photo / AP
That's got the same economists and commentators, who Trump accuses of beating up recession talk, worried that he'll stimulate too early while the labour market is still near capacity.
The fear is that he'll just postpone the downturn, leaving nothing in the Federal finances to deal with it when it really matters.
This highlights Trump's utter lack of ability to put things in a realistic context.
On the one hand, he says the economy is "sooo strong" and "doing great!".
On the other, he's screaming at the Fed to slash rates and restart quantitative easing, and talking up emergency tax cuts.
Nobody is saying the US economy is that bad yet!
What the market and the financial media is saying is that the trade war has hit global growth and the damage it's doing appears to be accelerating.
Gloomier forecasts have forced central banks to start cutting rates again and the odds of recession are rising.
This situation is nuanced and requires a measured response.
Unfortunately Trump is entirely unmeasured in everything he says and does.
His reaction to each twist in the economic narrative is knee-jerk and child-like.
He doesn't seem to care what damage he does to the global economy. And as the trade war bites his only domestic policy goal is to pump things through the 2020 election cycle.
It will be fascinating to see how his voter base handles the shift in rhetoric as China digs in for a long fight and the squeeze goes on the US economy.
Are US truckers and farmers ready to bear the economic brunt of their dear leader's foreign policy?
Likely we'll see more weird diversionary tactics like the manufactured stoush with Denmark.
But in the league tables of presidential stupidity "trade wars are easy" is a line that will only get harder to beat.
