Special Edition: CRASHING!

It's a total cliff dive today!

Apr 04, 2025

Today people start jumping out windows as the once overheated stock market burns to the ground.

It seems like only yesterday I wrote …

First, you will see the direct recoil in markets from today’s announcement. Then you will see various jolts from the announcements of other nations as their retaliation arrives in spurts.

… because, oh yeah, it was only yesterday when we saw the market first recoil, and today China delivered its predictable retaliatory response, and the market recoiled by even more.

The trade war, which was obviously going to heat up rapidly, is doing exactly what was expected here, and it is causing markets to recoil further after a single new major jolt because the jolts are so huge when they come from a major trade partner like China. Good thing the president decided to take on the entire planet at the same time, while none of those he is warring with face any trade challenges from other nations, because US v. world is bound to end up great!

Of course, the next part of that forecast of things to come quickly was …

Then you’ll see what Trump does in retaliation against all of that, one nation at a time, after each nation levies its best retaliation, as Trump has already promised to retaliate against retaliation.

We shouldn’t be surprised to see that wave by the end of today.

As things stand here near the top of the day while I’m composing this, the Dow’s second day down is -1,600 points. The S&P is now down 15% from its peak, if the market closes at this level. Maybe it will hit a full bear market by end of day! That would be a fun ride! However the worst news today so far is for the rapidly plummeting Nasdaq, getting wiped out by those Magnificent Seven stocks and especially the AI stocks that “could never fall because they’re the wave of the future.” The Nasdaq is already set to officially close in a bear market, if the action holds and the plunge-protection team fails, as I am sure it will. That will give us, at least, two major indices that have crashed into bear markets in response to these grinding tariffs.

Wharton’s Jeremy Siegel says today that the Trump Tariff War is the biggest policy mistake in 95 years. I agree. That takes us back to the Great Depression, which is where this is likely to take us.

I think this is the biggest policy mistake in 95 years. I don’t know why Trump didn’t learn the lesson of the Smoot–Hawley Tariff Act, because I know the Fed learned the lesson of its mistakes in 1930, ’31 and ’32…. This is a self-inflicted wound. It’s an unforced error—did not have to happen.

Well, I don’t know how much the Fed learned because it has delivered us some of the worst policy for decades, causing us to endlessly go through boom-bust cycles due to their central management of the US economy, as I put together in this little book, but I do know anyone should have been able to learn from the history of the Great Depression that major tariff wars at a time when you are already sinking into a recession, are certain to send you to the bottom of Davy Jones’ Locker.

What I agree with from Siegel is that this is entirely a self-inflicted wound that did not have to happen and should not have happened. As I wrote earlier today elsewhere,

Trump might take a little blame for a global trade war that we certainly didn't need on top of the recession that was already forming because last I looked the US was making trillions of dollars in trade--a vast fortune--and the tariffs he claims are so unfair are exactly the ones he negotiated and told us all they were a great deal; but, hey, we need Canada, I guess, so whatever it takes to strong-arm them into humble submission. Not sure why he and his supporters want to add a vast liberal state across the northern tier, against its will, and add French as another national language on top of English and Spanish because the only way the French are joining that deal without a civil war is if they keep their language printed on every package in America. But, hey, empire! Ain't it grand when you can get it?

Since one reader asked me to spell out what I would be doing differently than all the chaos Trump is creating, this is a good time to spell it all out. So, I shall:

Tariff Wars and Tax Troubles

If the tariffs that exist between the US and Canada and Mexico are unfair, that is entirely Trump’s fault. He is the one who negotiated for them years ago and put them in place and told us all they were great for everyone, but the fact is, none of this is really about confiscatory tariffs and trade imbalances. The US will always run a major trade deficit with any one nation because we love to have a lot of stuff, we love to get it cheaply if we can, and we have the money to do it. So, we will, so long as we are economically strong, always buy more from other nations than they buy from us. So what?

I would start from a position of ignoring trade imbalances completely. They are what they are. We love the stuff. Let it go!

What matters is whether tariffs are unfair, but there is a lot of blatant dishonesty or incredible stupidity coming from Team Trump right now. The tariffs they are complaining about are their own tariffs that they agreed to. If nations are cheating on any of those tariffs, then, of course, that should be called out, but it doesn’ take a tariff war to sit down and point out clear cheating and then get tough on specific points with specific measures. Most of what you are hearing, however, is baloney.

For example, people talk about the huge confiscatory tariffs charged by Canada because Team Trump keeps pointing out the massive tariff rates. What they do not tell you is that most of those tariffs have never been charged! There is a reason for that: They were put in place as a pressure-relief valve in case the agreement caused trade to swing way out of whack for either nation. Only if trade rises above so many hundred billion dollars (the amount of the tariff and the level it kicks in being different for every single item that crosses the border), does the massive tariff kick in. Its purpose is to rapidly throttle down trade on that one item that is running overpressure like the governor on an engine or the pressure-relief valve on a steam boiler. It is there to quickly let off pressure.

What Team Trump is also not telling you is that the USA has the same kind of confiscatory tariff levels on every single item that trades across the border, too. And they, also, have never been actually charged. Trade imbalances have not risen to such a degree for either nation that the pressure-relief valves had to kick in. That also means trade imbalances were already accommodated for in the agreement.

Another thing Team Trump IS telling you, which is a blatant lie or incredibly ignorant, is that the value-added tax that Canada charges when goods cross the border is a veiled tariff. It is not even remotely so. Canada charges the same VAT on all of its own goods and services. It is a sales tax. If they did not apply the tax to imported goods, they would be deliberately handicapping all of their own manufacturers and service providers. They call it a “Goods and Services Tax” (GST). I, frankly, cannot tell the difference between the VATs that other nations have and Canada’s GST. I think they’re just trying to be different, like drinking moose piss to show you’re a man or something.

Anyway, it is not a tariff any more than any other kind of sales tax is a tariff. Canada charges the GST at each point where a product changes hands for the value that is added. US goods have not had those hits applied to them, so Canada assesses them all when the goods cross the border because, they have to level the playing field. There is no reason foreign products should get an unfair advantage against Canada’s own domestic products. A tariff is one-sided. The GST applies to all products in Canada, either as they made in Canada at each step in the process or as they cross the border.

Now, I hate a VAT more than most taxes because only government could come up with such a mangled way of adding a sales tax. You have to be sadistic to the level of wanting people to feel as much pain at as many points as possible. Most US states charge a sales tax, and it is a simple rate charged only on the final point of sale. Easy and quick.

One thing I would do differently than tariffs, if I were revising the tax code, is I would switch to a national sales tax and abolish income tax entirely. It can be made as progressive as you want to make it, including by cutting a check to every person in the US for the amount of sales tax you compute the poorest class would have to pay, so they have the money to pay the tax up front each year. You give the check to everyone, no matter how rich, so there is nothing to figure out. For the rich, who buy a lot of stuff at very high prices, the check is almost inconsequential. For the poor, it may be everything. Above that base provision, everyone pays the same tax, and the tax rate is calculated to take the cost of the checks into consideration. Or just don’t make it progressive or don’t apply it to food purchased in grocery stores or medical services or drugs.

I’d also save Social Security by one simple measure—ending the cap that protects 99% of the income gained by rich people because absolutely none of my income gets shielded. Why should most of theirs be shielded just because they make so much of it? That would allow you to lower the FICA rate (SS tax) for everyone and still have enough to give everyone on SS a real cost-of-living increase! End or story. Mission accomplished. (That means I would apply the SS tax to their capital gains where they make all their money, too.)

I would also end the truly obscene and privileged capital-gains tax rate, which has never helped create better paying jobs for the middle class. It is THE VERY REASON the gap between the rich and the rest has endlessly expanded since the Reagan years. I’ve written about this a number of times, so I won’t go into detail. Suffice it to say, the very fact that capital gains get to be rolled over tax-free for endless decades until the full gain is finally realized (like a 401K) upon sale of the asset is more than enough benefit for asset investors.

The big thing here is that I would never start a tariff war. Their history is insanely awful for everyone. I would deal with any remaining imbalances in tariff systems rationally, fairly and individually. I would also HONOR the agreements I had already made. Why on earth Canada and Mexico would even consider negotiation with Trump when he is withdrawing from the agreements he made and championed and heralded as great for everyone is beyond me, other than to say it must just be cowardice—fear of engaging the battle. I would never trust someone who is welching on the very deal he recently signed and praised.

Finally, if I were going to go against nations on an individual tariff-by-tariff basis for clear imbalance that we had not already signed a recent agreement on or because they were cheating on the agreement we had just made, I certainly would not go after ALL THE FREAKIN’ NATIONS ON EARTH AT THE SAME TIME! That is about the dumbest approach I can possibly imagine.

I’d pick the worst offender—the biggest guy in prison, so to speak—and beat the crap out of that one nation and make sure everyone sees me doing it, and then say, “So, do the rest of you now want to negotiate over these obvious indiscretions you have?” Why on earth would it be in the best interest of the United States to align the entire world against the US at the same time by starting trade wars with every nation on earth? Wouldn’t it be a whole lot smarter to find the worst offender with whom you have a major trading relationship and go after them and align the rest of the world against them in mutual tariff wars against that nation (because other nations are likely experiencing the same trouble from that offender)?

Taking on the whole world at once when your own nation is rich from trade is just beyond dumb and cocky. Seriously. In that situation NONE of the world’s nations have the same handicap you just gave yourself. Hence, self-inflicted wound. They are all able to trade as tariff-free as they wish with each other in order to find relief via other supply chains, which you have cut yourself off from.

You are certain to get retaliatory tariffs applied against your goods from everywhere at once, AND your own people are going to get hit with your own tariffs from all directions because that is who you are actually taxing! Not so in any of the other nations where their people can avoid only your products in order to get hit with no tariffs at all. It’s like picking a fight with the entire prison at one time.

Immigration on insanity

Actually, Trump is doing a somewhat good job at the border, but I would have solved the problem in my first term and done so without a lame and ugly and expensive wall. I have no issue with people of other nations and any race coming into the country, but we have too many people. We’re full, and they certainly do cause major wage suppression. So, it’s not about their race or nationality with me. We just have enough, thanks!

I would, however, make immigration very easy for people who marrying someone from outside the nation because those are the immigrants who have vested interest because of their family in seeing the nation do well.

The reason Republicans have talked border security for decades and never done anything to enforce their own laws is that, like the Democrats, they want to create a peasant class. An “unlanded” people, meaning people who own no homes and don’t live in a land of their own, have not voting rights and must take whatever is handed to them must work for whatever they get. This caters to the party cronies in big business. This is how we outsource labor by bringing it into the nation for jobs that cannot be outsourced by sending the work out—such as making beds in hotels, harvesting local crops, washing dishes, etc.

I would never have allowed all of that in the first place, and perhaps Trump wouldn’t have either, though I strongly suspect he hires them where can to save money in his own hotels, but maybe I’m wrong on that. The problem we face now is that we have for decades created an entire economy built on this cheap labor, and if you expel all of it, you’re going to see some serious labor inflation and shortages as we make up for all those years of wage suppression. It needs to happen but in a measured way, not in one massive slam dunk that harms yourself.

Forget the dumb wall. What you need to do is jail the people who hire illegal aliens. I would do it in degrees. First time your business is inspected (or raided), you pay fines and have to fire the people who do not have the right paperwork to work here. The automatically remove themselves from the nation because they have no job, and, now that you’re serious about enforcement, no one is hiring. Or you round those up and send them across the border at their employer’s expense since the employer provided the jobs that drew them in. You don’t need to process them in courts. That’s absurd. When they arrive at the border and don’t have the right paperwork, we simply don’t let them enter. You don’t file a court case to turn them back. There is no reason you cannot treat them the same way if they have already entered: you don’t let them enter; you send them home. Knowing their employer will not be hiring them again, they will be far less likely to return.

The second time that employer gets caught hiring people without the right paperwork/visa, you fine the employer more and put them in jail for a month to stew about it. Few employers are not going to want to spend time in jail to save money by hiring illegals. Now, while Trump has the whole of congress, is the time to intensely press through any legal changes you need in order to make that happen. CEOs at the top get to go to jail, too, as you make it their charge to make sure their company has all there right documentation for every employee. Next offense, for anyone who did decide saving money was worth jail time, is you go to jail for three months. Next offense six months, etc. until you finally get the memo.

Very few people would actually go to jail, and the jobs would dry up quickly if you are staunch about enforcement. To keep from collapsing your economy, you don’t hit everyone at once. Again, you go after the worst offenders and make a big parade out of them. You also have to do all you can to cut off welfare for people who are here illegally, so they’ll leave or starve. I’m not sure how to do all of that since much of the welfare exists at state levels, but that is a process that needs to be happening that I do not see happening. I guess if individual states want to unequally burden themselves by taking on all the charity cases in the world, that is their problem. Move to a state that is smarter if you get stuck with that nonsense. We do not owe the world jobs or a new nation.

Debloating government

There is no question that we have to downsize government in order to balance our budget once and for all, and I would be quick about it, BUT NOT THIS QUICK! You still have to be smart, and putting high-schoolers in charge is not the way. (Well, practically high-schoolers.) I’d use DOGE to ferret out the worst uses of government money but give DOGE NO power to fire. The firing would be done by the competent cabinet members I put in charge (or why have them) and their subordinate leaders.

They take the DOGE recommendations, and decide based on that and their own best studies and judgment and knowledge of their agency’s needs what departments and what individuals need to go. I’d make sure I do the firing within the obligations I inherit from their labor contracts so I don’t look foolish with judges saying I have no right do what I am doing. Don’t need any needless losing battles because I know I have to honor the contracts, like them or not; but I would give incentives, as Trump has done, for those under employment agreements to leave, and I would leave positions unfilled by attrition.

Instead of clobbering our economy with massive firing, I could now show credit agencies I am taking completely responsible action to pare down government, and I, by going through the right legal steps, give people and departments time to adjust. But I still have to show I am completely rigid about it, and I have to make certain all my cabinet appointees are completely on board with the idea of downsizing their departments.

Definitely do all Trump is doing to end a lot of foreign aid. Too many nations have been too thankless for the decades of help we have given them way beyond what other nations give. Stop using foreign aid for social engineering, regime change, etc. Keep it basic. It’s not our responsibility to fix the world. Make sure it is happening only where it is building strong and appreciative relationships with other nations.

Military mania and imperialism

Here we get to what appears to be one of the ACTUAL reasons for Trump tariffs—to strong-arm Canada into becoming part of the US. I would never engage in ANY imperial acts of trying to take over other lands. It’s all-out horrid and reeks of Hitler’s fascism. Trump has said Hitler was a great leader, and I think the unbridled power and land grabs are a big part of what he admires and covets in his own desire to become an emperor.

I have spent most of my life living close to the Canadian border, and I have never yet actually met a Canadian who wants to become and American. In fact, many of the ones I’ve met seem to have a little vanity in thinking they are better than Americans—more civil etc. If you ever shopped among them, you know what a load of nonsense that is. If you have ever managed a resort filled with them, as I have, you know what nonsense that is. They are as ungovernable and irascible as anyone is. I’m surprised they don’t all kill themselves. However, I’m also surprised WE don’t all kill ourselves. I think we’re getting closer.

End all military, sanction-based, tariff-based attempts to gain control over other nations or seize their land. What Trump is doing with Canada and Greenland is the worst example of American imperialism I’ve ever seen. Acknowledge that for what it is if you are Trump supporter. He won’t even say use of the military is completely off the table. In fact, he says it is a possibility. This is exactly the worst form of Americanism run amok that is the very reason so many Canadians think they are better than us.

Dumber still, doing this at the same time you are supposedly trying to seek free trade assures your trade war will fail. Canada is NEVER going to be strong-armed into joining America, nor should it ever be. It’s the worst form of all-out arrogant, bullying behavior: “We’re bigger; we hold all the cards; so give us what we want!” It means Canada cannot agree to Turnip’s trade terms because he won’t stop until he gets ALL of Canada. Talk about confiscatory tariffs!

Trump has put us in the position of being predatory neighbors—the kind no one wants to live next do. Doing it by economic means, rather than military means, makes you no different than the worst of hostile corporate takeovers—the kind of stuff that made movie villains out of Wall Street.

Like Trump, I would never have supported a coup in Ukraine, though the grassroots rebellion was more than merited if done only by Ukrainians on their own, given Russia’s interference in their elections getting Putin’s own evil thug in power who had already been thrown out by the Ukraine Supreme Court after winning the election by fraud. The guy was a gangster, but not our problem.

That said, it is hypocritical for Trump to be telling Putin he needs to sign a peace agreement when we are busy with a hostile economic takeover of Canada and Greenland and the Panama Canal (though that one used to be ours, and we paid for it, so that’s a little more reasonable). I’d stay with policy that intensely focuses on stable borders right where they are, but it is not our job to fight other people’s wars or police the world.

I would also have worked to continue denuclearization, not to have exasperated it as Bush did; but that is a problem Trump inherits as I would if I were president. I have no respect for Putin as he is every bit as imperial as Trump and even more vile in killing all his competition by sending them on long walks off short rooftops or feeding them beryllium borscht, but we need to work toward denuclearization without agreeing that it is fine for him to snitch lands he wants in order to rebuild the old Soviet empire.

Still, those are other people’s problems, so I’m not suggesting we go to war over them. Putin made his career as an old-world Soviet commie in charge of lying to Europe. It’s called being the head of European disinformation. That means he’s the best-trained, slyest liar on earth who knows how to wrap a lie in the bacon of truth and make it taste desirable. Work by measurable incentives; but “trust by verify.”

I, frankly, don’t know what I’d do with Iran, but letting it get a nuclear weapon has got to be bad for everyone. So, I’ll give Trump the latitude there to make a tough choice. I don’t want nations who consider the US the Great Satan to have nuclear arms, so it is not in our security interest to allow such empowerment to happen, but we also need to stop acting like the Great Satan by exporting our vapid culture, as Biden was hell-bent (literally in my opinion) on doing and by pressing for democracy in nations where I wouldn’t want the US-hating people to rule their own country anyway. (It is not as if democratic rule by people who hate you is any more in your best interest than totalitarians who hate you; So, just stop creating reasons for them to hate you.

Bottom line: What kind of government or economy countries choose is their problem, not ours. If communism is bad (and I am absolutely certain it is), then it will certainly fail on its own demerits. Let it. If that takes a hundred years … NOT OUR PROBLEM. Who cares? I wouldn’t be fighting wars to change regimes.

My opinion was that we had a legitimate reason to pursue our enemy into Afghanistan and get him, but no reason to go after Iraq, Libya and Syria. Not our problems. Achieving regime change in Afghanistan, nor our problem either; but we had a right do whatever we needed to do to pursue Al Qaeda. Keep the focus tight is all I’d say. Of course, if you believe we took out our own World Trade Center, that’s another story; but I do not yet share that belief.

Stop thinking we’re going to be welcomed as “the great liberators” such that the people of Iraq are going to thank us for deposing Saddam Hussein at the expense of killing their fathers, husbands and children and ripping their cities to shreds. I’m pretty sure they are not!

Back to crashing bigly!

Well, that’s enough for now because I want to get these few headlines out. The market has truly plunged over the cliff. I started writing this with the headline that the Dow was down 1200 points. That quickly got revised on the fly to 1600, but that plunge has deepened to close at 2200 down at the time when I am now closing this as a final draft, so this is now a major waterfall, all the more underscoring what I said yesterday about the market getting jolted down again as soon as a nation like China retaliated.

The size of this impact will now embolden other nations to do the same in order to kick the United States (deservedly) as hard in the teeth as they can in order to try to end the tariff war. Why shouldn’t they gang up to take their more-than-hostile and arrogant neighbor down to the ground? There is a reason they call these things tariff WARS.

The stock market was pounded for a second day Friday after China retaliated with new tariffs on U.S. goods, sparking fears President Donald Trump has ignited a global trade war that will lead to a recession.

How about a very, very deep recession … as in the Second Great Depression if someone doesn’t stop him?

China’s commerce ministry said Friday the country will impose a 34% levy on all U.S. products, disappointing investors who had hoped countries would negotiate with Trump before retaliating.

How about adding, “incredibly naive and foolish and greedy investors?” Because that is what they were for thinking these nations would not retaliate, especially now that their very lands are at stake. The rest of the world can see that Trump, by picking a fight with the entire prison, has started a fight that will pound the US into the blood-stained concrete. Trump has made certain we’re going to get our collective butts kicked for being so ungodly arrogant!

“The bull market is dead, and it was destroyed by ideologues and self-inflicted wounds,” said Emily Bowersock Hill, CEO and founding partner at Bowersock Capital Partners.

Dead! Bloody and stomped into the earth in less than one week, and this war has just begun. The nations we have made our enemies can now smell our blood because China just kicked us to the ground! More kicks are coming.

China’s efforts to respond to Trump’s tariffs extended beyond reciprocal duties of their own. Beijing added several companies to its so-called “unreliable entities list,” which asserts that the firms have broken market rules or contractual commitments. In addition, China opened an antitrust investigation into DuPont on Friday, sinking shares 12%.
The 10-year Treasury yield fell back below 4% Friday as investors flooded into bonds for safety, pushing prices up and rates lower. The CBOE Volatility index, Wall Street’s fear gauge surged above 40, an extreme level seen only during rapid market declines.

Can anyone say “collapse,” brought on as an entirely self-inflicted wound—both from years of profligacy and rigged economics and massive debts, but especially now due to completely needless damage? US trade was doing great. Not anymore.

Stocks are now ten-trillion dollars down since Trump was inaugurated. More to come. A lot more if Trump doesn’t back down, and I don’t think he’s going to. One article, using some hard language by a White House insider, said Trump doesn’t give a flip what the market does at this point, but repeatedly using a harsher term than “flip.”

The war is on, and our reckless czar doesn’t care what damage it brings because he believes he can take on the entire world at once and win, even seizing their lands. That is going to go a whole lot worse than he thinks, and we’ll all suffer extra because of it. Putting it all very clearly, even Trump’s golfing buddy, Rand Paul, in the headlines below says someone has to stop him.