We’re toast, people. After a bloodbath in markets worldwide on Thursday following the announcement that the federal government would be tanking its own economy, the second day looks even worse in stocks.
The highest average tariff rates in the world are imposed by The Bahamas, Gabon, Central African Republic and Djibouti. None reach 19%. These are not wealthy countries. Tariffs do not make a country rich.
Yet the Trump administration is imposing tariffs of 50% on Lesotho and 48% on Laos. The rate on the Democratic Republic of Congo is ‘only’ 11% – because it has nothing to do with tariff rates, just trade deficit, and they don’t have very much to export. So-called reciprocal tariffs were placed on countries that don’t even impose tariffs on the U.S.
American Airlines shares spent much of today below their lowest point from early in the pandemic.
Current @AmericanAir stock price drops below the lowest point of the pandemic. pic.twitter.com/t4CxNtLoe4
— gary leff (@garyleff) April 4, 2025
Foreign visits to the U.S. were already off about 20% in March. And there were several signs of recession. Now, we look pretty cooked.
That’s not because of the performance of the stock market. Stocks could rise and tariffs would still be a terrible idea. More trade, having people and companies produce goods at the lowest cost and using the fewest resources is how we stretch the world’s resource – including the scarcest resource of talent – the farthest. It’s how people societies become wealthier and people become better off. Trade is good, and imports are good. They’re cheaper winter coats and food. They’re iPhones that everyone can afford, not just the wealthy.
Adding friction to this process limits global trade and by extension it limits specialization by comparative advantage, meaning less total wealth in the world. And much of that wealth has been accruing to the United States not to the countries with the highest tariffs.
Earlier, the administration announced tariffs on Mexico and Canada but backed off, declaring a negotiated victory. But now, imposing new tariffs on most countries in the world, they can’t head fake victory over everyone, right? How do we give them a face saving out, if they’d even take it?
These tariffs probably aren’t even legal. The International Emergency Economic Powers Act has never been used to impose tariffs before, and – in replacing the World War I-era Trading With The Enemy Act – the intention was never to confer that authority. It talks about investigating and regulating the flow of trad but not the imposition of taxes or tariffs.
In fact, the President’s authority to impose tariffs – capped at 15% – is limited to 150 days, by section 122 of the Trade Act. Such broad authority as the president is claiming must be conferred by Congress, and it cannot be assumed. That’s the Supreme Court’s ‘major questions doctrine’ (e.g. West Virginia v. EPA). We need plaintiffs, we need stays, and we need them now.
We’re cooked. Dow down ~4,000 points in just two days! It’s the President’s fault. 100%. Own it.
This is a business entity whose liabilities exceed its assets. The fair vaule of AA’s stock is 0.
If you’re worried about American’s low stock price, consider a dynamic and curated flight on Delta.
First and foremost very few people, including me know jack about tariffs. It was talked about when I was in grad school from 1992 to 1996, many years ago. I’ve forgotten what was said and what was said might have been bullsh….
Like everything in life there’s no free lunch. Forcing manufacturing back to the US, or at least encouraging it means the loss of cheap overseas labor. Naturally companies do not want to lose that advantage. If your $15 an hour maid/housecleaner now was going to cost you $28 an hour would you and you spouse go out to dinner to celebrate?
Trump seems to think it will be a net positive. Higher priced goods and/or lower profit margins but a return of good paying American jobs and benefits therein. I question that assumption but again I’m not an expert so unlike others I don’t claim that tariffs are going to cause the next Depression.
And Al and Peg Bundy do not decide not to go to Disney or see Aunt Mattie back east simply because Trump announced tariffs. Al and Peg don’t have the slightest clue to what a tariff even is.
Why is Congress not stopping this and demanding their power be respected?
I would wager that Trump’s family shorted the market and will buy back in just before he removes the tariffs.
Where are the advocates to tell me that POTUS is playing 186-dimensional chess and the collective wisdom of markets is far inferior to HIM
@Matt — (He’s still got it!) That’s an excellent idea, good sir. Please do… Keep Climbing!
@George N Romey “And Al and Peg Bundy do not decide not to go to Disney or see Aunt Mattie back east simply because Trump announced tariffs.”
Al and Peg Bundy’s employer cuts back on hiring. They cut back on travel spend. Al and Peg Bundy’s retirement accounts get decimated. State budgets get put under pressure (because plunging stock market means lower returns for their retirement plans), which restricts state and local government services. They cut back on hiring and travel, too.
Meanwhile, the cost of the stuff Peg and Al Bundy buy goes up, from food to winter coats. That leaves them less to spend on anything else like “Disney or see Aunt Mattie back east” .. if they still have jobs.
The idea that this somehow doesn’t affect the ‘real’ economy is silly. It amounts to the largest tax increase on the American people in history.
You may have a finance background, but you clearly don’t understand this issue. It’s complicated and anyone who says that these tariffs are all bad, or all good, is wrong. Why didn’t the tariffs under Trump 1.0 cause massive inflation? Tariffs are a tax & increase the price of goods. At the same time, countries will respond to them by deflating their currencies to offset the increase to the price of their goods in Dollars. Other countries, e.g. Vietnam, will eliminate or reduce their tariffs on USA goods leading to freer trade between the USA and those countries. Foreign companies and U.S. multinationals will also increase production in the USA, increasing American jobs and wages, and offsetting some of the increased costs on goods brought about by tariffs. So, when your article proves completely wrong, will you admit it? I don’t have all the answers, but I do know this article is hysterical doom & gloom and will prove to be totally incorrect.
The actions of the Trump administration are just insane. Attack our neighbors and long-time allies. Don’t honor our principles.
They don’t seem to understand basic economics. They don’t seem to understand that America’s competitive strengths are intellectual property, software, media. We attract worldwide talent and create and invent. We will never be a competitive manufacturing country and should not strive to be.
Trade benefits us. Tariffs destroy efficiency and value. Any mainstream economist worth his salt can explain this.
It’s amateur hour at the White House and this will not end well.
Time for the Republicans in Congress to put on their big boy pants and stand up for rationality and take some control.
@George N Romey — Paraphrasing your opener: “I don’t know what I’m talking about and didn’t pay attention in school, so everyone listen to me as I tell you about the Emperor’s beautiful new clothes!”
And here come the euphemisms: ‘No free lunch’… If the ‘other team’ did anything like this, they would have already impeached, tarred and feathered them all. C’mon, man. Own it.
Also, Al and Peg aren’t going to take their trip because the President and the richest man on earth decided to dismantle Social Security and Medicare (did you forget that the ‘red’ team is doing that, too? It’s crazy, to kill the economy and the social safety net at the same time…what are they thinking!), not because of their ‘concern’ over mere stocks. Bah!
AA was on its way down the toilet way before Trump came to office via gouging its business PAX and treating the rest of those on board as cattle.
These are the smartest MBAs in town running an airline. When things get tough, just file Chapter 11. It’s the panic button of the 21st century taught in every MBA class.
@Chris – I think you just don’t know your history of tariffs during the first Trump term, which were targeted primarily at steel and aluminum, plus agricultural products, washing machines and solar panels and a series of Chinese goods (most of the tariffs fell on Chinese imports).
The impact of agricultural tariffs during this period was so severe on U.S. farmers that the administration wound up subsidizing one-third of farm income as a result.
This is not designed to lead to free trade, Chris. These tariffs are imposed even on Singapore which doesn’t impose tariffs on imports from the U.S. And the President talks about the revenue source replacing income taxes – not possible if the tariffs are dropped!
Obviously if the administration backs down, then the effects will be mitigated. If if these tariffs are sustained they will be a huge drain on the economy.
Sorry Gary you must not know Al and Peg very well. I traveled all through out COVID and had plenty of time to sit in the terminal and at gates (as clubs were closed). People in loud conversations were talking about how they were using either/or their “stimmy checks” and enhanced unemployment to travel. I personally found it shocking and it was a real wake up to me. But admittedly I come from a different time.
As long as people have either money in their bank account or enough credit on a credit card and fares are reasonably cheap they’re going to travel.
I remember in the 1970s how my parents reacted to stagflation even though they had very secure, well paying jobs-power plant engineer and nurse. Despite their income levels they’d fret over buying a new $300 tv from Sears because they heard John Chancellor on NBC Nightly News talk about the poor economic numbers. Those days are well past.
Well said, Gary. I doubt there will even be assistance for the farmers (or anyone) this time. There are no more ‘carrots,’ just sticks.
The Bahamas is a wealthy country. It has a higher GDP per capita than South Korea! It is also not true that more trade is always better. The optimal tariff is low but non-zero and should be moderately high for capital-intensive industries that require economies of scale (like heavy end-product manufacturing).
Tariffs also serve national security purposes by ensuring that a foreign adversary like China cannot cripple the US through export bans before a potential war. US protectionist policy contributed to the Great Depression but it also helped defeat the Nazis during World War II by enabling a rapid switch from commercial maufacturing to military hardware manufacturing. Had the US been reliant on German exports the Allies would have been toast. Trump has been explicit that part of his rationale is to prepare for potential war.
Modest, well-targeted tariffs also reduce inequality by improving blue collar wages. While they reduce aggregate GDP, they may actually increase total utility because poor workers have a higher marginal utility of wealth than the wealthy. The Trump tariff levels are in my opinion too high and the implementation has been slapdash (to put it mildly), but the opposite extreme of pure, unfettered trade is also suboptimal (even if most convenient for travel aficionados like us).
@George N Romey — That’s quite the gish-gallop you got going on there. Look over here! Distraction!
The demand-side $3,200/person in total stimulus checks during the pandemic was not the primary cause of global or even domestic inflation. Domestically, in the US, one could argue it was more so those PPP loans that small (and some large) businesses abused, and the billions of dollars of government assistance given to large corporations like the $59 billion to the airlines (which they then used, not to retain their pilots so much as to just do stock buybacks, great for the rich!) But, really, the cause was the supply-side issue of ‘shutting down the whole world for a once-in-a-century pandemic’ that caused inflation.
So, your reasoning is flawed, and does not apply to the current issues at all.
@ 1990 — Best two days in years! Keep it comin…We just need another 5-6 more days like this, and then we’ll be scooping up some cheap S&P500 index funds. If Jerome Powell is fired that should really be the kicker. Markets won’t like that, but that’s the entire plan, right?
There are methods adults use to accomplish the stated policy goals.
Throwing the chess table upside down, scattering the pieces and declaring victory is more akin to what one sees maladjusted 4 year olds do in poorly managed day care.
I once had a job where i had plenty of time to spend in the company archives. It was interesting reading the 1930 WSJ articles praising Smoot Hawley.
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This is the tip of the ice berg. Travel from Canada and Mexico could drop ny over 50%. I would also expect a drop of tourists from Europe. This will impact both the airlines and the hotels. I’m expecting an increase on unemployment. The real wild card is going to be credit card delinquency.
@Gene — Bah! Can’t wait for the end of this second Gilded Age. I’m so ready for a new Progressive Era. Give us a Teddy Roosevelt 2.0!
@ 1990 — Time for PPP 2.0!
We are not “toast”. I’m down around $350,000-$400,000 the last 2 days (today’s loss is still settling and will check final damage on Saturday) but I take a long term view and my only actions will be to (a) do some tax loss harvesting Monday morning and (b) put some additional equity into the markets. This is a classic overreaction and I assure you markets will be higher a year from now. I’m retired but make more than enough in pension, social security and dividend/interest income to cover my expenses so no reason to sell.
As for tariffs, I think they were deployed too broadly and the higher numbers beg for a “deal” which I think will be forthcoming pretty soon. That being said, why should people in the US be able to buy goods cheaply from countries with slave wages (looking at you SE Asia) or that have tariffs or other barriers to US entry? Ross Perot was right about a “great sucking sound” as US jobs would go to Mexico when he was debating NAFTA. Trump is a businessman, not a politician. Frankly I have no problem with people paying more for a US made product. Not sure what all the outrage is except for people that are counting on cheaper imported goods – just buy US products.
Buy low, sell high???
Tariffs are typically what Democrats want. Trump is showing that he is a good Democrat. He donated money to Hillary Clinton and other Democrats. He was even a registered Democrat before. He is really an abortion supporter but doesn’t want to admit it. He doesn’t read or know the Bible.
In fact, Trump might be the best thing going for the Democrats. Either he is in power, a closet Democrat, or will cause the Democrats to win. Perfect mole against the Republican Party. (He is likely a true Democrat except he likes his taxes low, not increased).
Anyone still supporting Trump deserves to be deported to a prison in El Salvador. From what I hear we don’t even need a trial and once you’re there it’s not possible to come back.
Joking… mostly. But seriously. Anyone still carrying water for this disaster of a President has zero credibility. TDS is very real. But it’s the deranged ability for his supporters to ignore the simple truth that his 2nd term is nothing short of a disaster. And the sooner he is removed the better off we will all be.
@1990 I have no idea of your reading comprehension. I said nothing about the value of “stimmy checks” or enhanced unemployment or the impact of the deficit, etc. What I said is that at one time people were much tighter with their discretionary income, particularly if the “economic news” was grim. I grew up around adults that lived through the Great Depression and many of them like my father never felt financially secure despite his paycheck (around $300K a year today) and his obvious job security. Some of his behavior was outright bizarre for a man without a mortgage and many cash filled bank accounts. The guy used to keep a couple thousand of dollars in cash in the attic “just in case.” (I actually raided it a couple times for much desired beer money). It’s a good thing we didn’t have COVID when I was a child, my parents would have had a nervous breakdown.
As far as tariffs, again you’re reading comprehension fails. I said I don’t have enough information to have an exact opinion. Trump is using this as a tactic that I get. But Trump can do boneheaded things like claim he’s going to take over/buy Iceland, listening to Fauci, Operation Warp Speed, etc. I reserve judgement for now.
LOL, the article’s interpretation of reality is hilarious. Several countries have already backed down, and are removing their tariffs. Many more will follow. The President absolutely has the authority to impose them. 77 million of us voted for exactly this. Short term pain = Long Term Gains, as with most things economy-related. BTW, when Biden imposed his 100% tariffs on most key sectors from China in 2022 and Obama in 2014, I must’ve missed all the doomsayers as well as the plethora of negative MSM coverage. Oh wait, there wasn’t any. LMAO. You may cooked, but most of us who can survive a short term bump, aren’t.
This is what I expected the day he opened his mouth about these tariffs. Why do you think he spoke at 1600 Eastern? It didn’t give the markets too much time to react just then. The next day, the blood was on the floors. So far, over $9 trillion dollars in value have just evaporated. Don’t look at your retirement accounts until you have a good stiff drink (or two).
This will go down in history as the worst self inflicted wound ever.
@Ritz “The President absolutely has the authority to impose them. 77 million of us voted for exactly this.”
That’s not how law works.
To the ones who voted for tRump….EAT YOUR CAKE, I have no sympathy! For the sane folks….we will be ok!
Better get those “buy” orders in while it’s low.
Asking because I don’t know: how is AA’s stock performing compared to its peers, especially UA. Since both operate hubs in DC is some of the stock performance related to softening business pax demand in a profitable hub?
Other than that, this has been a fascinating conversation. And surprisingly respectful, LOL!
Good grief, Gary… ya got it ALL backwards. Why did you even bother to fabricate a scenario about layoffs? Significant commitments to ramp up manufacturing IN THE USA have been made — both foreign AND domestic. Companies including automotive & chips have already begun those ramp-ups.
Jobs Report 4/4/25: Hiring Jumps, U.S. Adds 228K Payrolls vs. 130,000 expected.
The American govt coffers right now are very broke, dangerously in debt, dependent on foreign countries lending us money, and VERY VULNERABLE to any foreign action that disrupts trade (Covid-19, for example). POTUS has a choice: either kick the can down the road and hope nothing happens during his term, or proactively FIX IT NOW.
America absolutely needs to increase its manufacturing and reduce its dependency on other countries. Biden wanted to make America poorer by increasing the # of federal govt workers. Trump seeks to make America richer by increasing productive private-industry jobs. That’s obviously wiser.
USA imports $3.2 trill/yr. But our GDP is $27.72 trill. So, tariffed goods amount to only 11% of what we produce.
IF:
–our importers stupidly pay the ENTIRE tax that the foreign exporter is supposed to pay US govt, and
–if importers stupidly pass that on to consumers,
THEN:
–11% of goods will cost 10% more. That’s a 1% increase to consumers.
Janet Yellen re: Trump 2025 tariffs: “I don’t believe consumers will face any meaningful increase in the price of goods.”
Thus, you & your party are “freaking out” about a worst-case-scenario of 1% price hikes. And that hike occurs once. ONE PERCENT IMPACT yet you are losing your mind. So… get a grip.
Tariffs are not inflationary. By definition they are a one-time price increase. Tariffs cannot sustain any inflation. But people like you that spread fear about it are making it easy for some of us to profit off that fear. Anybody of sound reason and courage knows that opportunity abounded today in U.S markets.
@Lindy – Look at that jobs report, it was from prior to the announced tariffs. The economy was doing well! This is entirely self-inflicted harm. And in that jobs report there was already tons of open manufacturing jobs with companies wanting to hire, they can’t, there aren’t workers to fill the jobs. So what is this on-shoring supposed to accomplish? Other than shifting jobs out of high wage, high value export-oriented jobs and into lower paying ones manufacturing things currently being made in lower wage countries?
Chris’ post at Apr.4 at 2:42 pm IS SPOT-ON accurate. So is Steven’s post on Apr.4, 2:52 pm.
1990 apparently hasn’t seen the all-day-long footage of Nancy Pelosi opposing China’s unfair tariffs and the loss of U.S jobs to China. Or Obama’s same sentiment. And Chuck Schumer’s same sentiment. And 1990’s whining about Social Security getting dismantled will look silly when the budget bill passes that quits taxing seniors’ SocSec benefits.
Gary seems clueless that these reciprocal tariffs are targeting trade imbalances and thus aren’t equal to each country’s U.S tariff. And it WILL lead to free trade… so you’re exactly wrong.
AC wrote on Apr.4 at 3:25 pm that foreign goods are cheaper due to slave labor, and that’s correct. Any person who has any concience wouldn’t be demanding that cheap goods made by slaves continue to flow into the U.S. without taxing the slavemasters.
@Lindy – the tariffs aren’t ‘targeting trade imbalances’ they are imposed at levels that have nothing to do with each nation’s tariffs (they’re even imposed on Singapore where there are none, and Israel that already removed theirs). But so what? Trade restrictions harm the country imposing them. Why should we harm themselves just because other countries do self-harm?