Tariffs: Populism’s Price Tag
Readers asked for my take. Are tariffs a fix or a flare-up of a crumbling dollar empire?
Drawing from conversations with great thinkers on my podcast, my career in the stock market, and insights from Ray Dalio's works including "How Countries Go Broke" and "The Changing World Order": here’s what I see.
Tariffs represent a predictable populist reaction to the dollar's role as an unanchored reserve currency.
A global reserve fiat currency eventually undermines itself by enabling political profligacy and structural deficits requiring long-term monetary accommodation.
Had a hard money standard been sustainable (difficult as communication technology outpaced gold's relevance), economic imbalances would have been more self-correcting.
One inevitable imbalance: trade deficits emerge where the world's dominant currency purchases goods from low-cost production regions, essentially trading dollars for manufactured products.
This hollows out the manufacturing base while accelerating financialization—profits generated through financial engineering rather than goods and services—widening income and wealth gaps.
In a democracy, the majority eventually exercises political power to implement corrective measures.
Equity markets are falling globally because tariffs disrupt free market principles, introducing political inefficiencies into the global economy. They will produce results, but at a cost.
Some argue the US as global economic leader stands to lose more from global friction than it gains from unilateral actions benefiting domestic constituencies. Others contend that if these "costs" fall on foreign countries losing market share and domestic asset owners rather than workers, the domestic economy may be much better off.
Whether or not tariffs maximize total domestic economic benefit, they offer clear political value to the dominant country in the near term.
Tariffs can be viewed as political intrusions into the laws of economics, similar to how Keynesian principles prioritize political benefits over economic fundamentals.
Ultimately, tariffs represent the pendulum swing from decades of globalist economic policy toward nationalist priorities, signaling not just a trade strategy but a fundamental realignment of how we balance economic efficiency against political imperatives in an increasingly fragmented world order.
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