Then he can back off from the "right medicine"

Trumps tullar

Then Trump may be forced to back down

Andreas Cervenka

Reporter and economic commentator

This is a commentary text. Analysis and positions are the writer's.

Updated 14.48 | Published 12.35

Donald Trump wants to build a new, stronger USA but has instead exposed the country's weaknesses and punctured a bubble.

His biggest problem is that it will hit his own voters the hardest - how long will his own party's patience last?

Stock market crash shakes the world for the third day in a row. Historical parallels are already being drawn to both the 2008 financial crisis and the 1930s.

Stock prices are not everything, they always go up and down and sometimes there may be too much alarm.

But it is not just stocks that are falling. The price of oil has fallen sharply and interest rates on government bonds are plummeting.

This can be interpreted as the world now preparing for a broad and deep recession with all that this entails, not least higher unemployment. And it affects everyone.

It is important to remember that the US stock markets in particular have had an exceptional period behind them. From the financial crisis of 2009 until mid-February this year, for example, the IT-heavy Nasdaq index rose by over a thousand percent. Even after the recent days of decline, the rise is over 90 percent in five years.

Photo: Alex Brandon / AP

It can be seen as a gigantic bubble that has been building up. The question many have been asking themselves for some time is what can make it burst? Maybe we have the answer: Donald Trump.

The fact that the US's large deficit and the rapid increase in the country's national debt are unsustainable is also something that many have signed on to, as is the unhealthy fact that house prices have only continued to rise and are much higher than before the crash in 2008.

If Donald Trump's goal was to start talking more about the weak sides of the US economy, he has succeeded.

But when all the world's economists and stock market experts are shouting in unison about the idiotic nature of tariffs, it may be worth trying to understand what he really thinks.

One way is to listen to the MAGA movement's house organ: Steve Bannon's podcast "War Room". There, Donald Trump's tariffs are described as a revolutionary war against the economic elite who have long plundered at the expense of the middle class by shipping jobs abroad.

The fact that Wall Street is collapsing is not seen as a sign of failure but, on the contrary, a signal that Trump is right - the "elite" is fighting back!

Somewhere in the analysis there is a point.

The biggest winners from globalization are American corporations, but the profits have not been distributed evenly. The share of corporate profits that go to wages has fallen for decades and corporate tax payments as a share of GDP are the lowest since the 1930s.

This has driven up stock prices, but the richest 10 percent in the United States own over 90 percent of all stocks and funds.

The fact that large corporations have extracted the biggest profits from globalization is something that Nobel laureate Joseph Stiglitz, among others, has highlighted.

Does this mean that Donald Trump's tariff policy is the right medicine and that the American working class is facing a golden age?

Well.

Tariffs are something that history has shown only creates losers. And if Donald Trump wants to change the trade balance with large countries like China, going to war with the whole world, including the United States' closest allies, is hardly the right way to go. Especially since the tariffs are based on made-up figures.

Hedge fund billionaire Bill Ackman, who has previously been a big supporter of the president, writes in a post on social media that Donald Trump's tactics are equivalent to a nuclear war against the rest of the world, something that destroys trust in the United States and risks a split in the entire economy.

It is a sign that the support that Trump has had in the business community is now rapidly disappearing. A survey conducted by Forbes magazine among 50 heavyweights on Wall Street found that 66 percent said they do not support the economic policy.

In the short term, tariffs act as a tax that is ultimately paid by consumers in the form of higher prices, i.e. inflation. And it hits those who are already living on the margins hardest.

In the states that gave Trump the election victory, such as Ohio, Pennsylvania and Michigan, the number of people who cannot pay their debts is increasing, a sign of economic stress.

Support for Trump is plummeting among the American people. The Financial Times writes that a week before the tariff announcement, 63 percent of Americans had a negative view of economic policy, the highest level since measurements began 50 years ago.

 

Although his core voters still support him, trust in Trump has plummeted among the rest, bad news for other Republicans who are looking to be re-elected. Which is the goal of most politicians.

It is no wonder that opposition has already begun to grow within Donald Trump’s party. Senators Rand Paul and Ted Cruz are warning of a disaster in the upcoming elections if the tariff war continues.

So far, Donald Trump has shown himself surprisingly indifferent to an economic bloodbath.

A looming political bloodbath could prove much harder to endure, even for Trump.