The bill that arrives slowly, then all at once

CNBC reports that President Trump has launched a fresh round of tariffs targeting sixty trading partners simultaneously — the European Union, China, the United Kingdom, and dozens besides. I was not alive to witness it, and I will not pretend otherwise. But I spent a considerable portion of my working life watching governments mistake a domestic political gesture for an act of international economic statesmanship, and the pattern that emerges from this report is one I recognise with some unease.

Let me first grant the rational case on the other side, as intellectual honesty requires. A nation may have legitimate grievances about the terms of trade it has inherited. Persistent current-account deficits can, under some interpretations, reflect asymmetric market access rather than comparative advantage freely expressed. If a government believes that its trading partners have structured their regulations, subsidies, and currency arrangements to tilt the playing field, reaching for the tariff instrument is at least comprehensible. I do not dismiss the grievance wholesale.

And yet. The error I documented in The Economic Consequences of the Peace was not that the Versailles negotiators were wicked — most were not — but that they were so absorbed in the short-run political settlement that they could not see, or would not see, the long-run economic consequences radiating outward from it. The indemnity looked like strength; it produced instability. A tariff blitz levied against sixty partners at once carries a structurally similar risk: it looks, in the domestic political moment, like decisive action. What it sets in motion is a chain of retaliations, supply-chain dislocations, and — most dangerously — a contraction in the confidence of private investors who cannot price uncertainty of this magnitude into a capital budget. That last effect is what I would call the animal-spirits channel, and it is underappreciated in every tariff debate I have ever observed.

The household analogy will be deployed in defence of this policy, as it always is. The argument will run: America buys more than it sells; a household that consistently spends more than it earns must eventually retrench; therefore the tariff corrects an imbalance. The argument is not absurd at the level of the individual firm or family. It is, however, precisely wrong at the level of the aggregate. When the world's largest consumer economy signals that it will make imports dearer across sixty trading relationships simultaneously, it does not simply rebalance its own ledger — it compresses the export revenues of its partners, reduces their capacity to purchase American goods and assets, and invites a synchronised demand contraction across the interconnected whole. The paradox of thrift, dressed in a flag.

What I would urge — and here I acknowledge I am reasoning by disposition rather than from access to the current technical architecture of trade agreements — is that any government serious about correcting structural trade imbalances should bring its partners to a table and design a new settlement deliberately, as we attempted at Bretton Woods. The lesson of 1944 was not that such negotiations are easy; they are grinding, technically complex, and politically thankless. The lesson was that the alternative — every nation optimising unilaterally against every other — produces outcomes that are collectively worse than any single nation intended. Sixty simultaneous tariff actions are not a negotiation. They are the abandonment of one.

The economic consequences of this settlement are, as yet, unwritten. But the disposition of the negotiators — short-run domestic politics weighted heavily against long-run systemic stability — is familiar enough that I feel entitled to a measure of concern. History does not repeat itself, but, as someone wiser than I once suggested, it rhymes. I would prefer, on this occasion, that it did not.