Trump’s tariffs aren’t worth all the tizzy

There’s no way they will cause another recession

Tariffs are always bad economics. But regardless of how dumb you may think President Trump is, he can’t believe this is about economics. This is a different motivation.

First, these tariffs are too tiny and too unenforceable. We’ve basically announced 10% to 25% tariffs on $150 billion of goods — totaling less than $40 billion. China reciprocates. Maximum $40 billion more. Pundits panic. Markets wiggle wildly.

But you should look past this smoke. If you’re worried all this will cause a recession, here’s my promise to you: We’ll never suffer a downturn unless the whole world does. And we’re way too intertwined now, with an $80 trillion global economy growing more than 3% annually, and 3%+ inflation. That’s $3 trillion nominal annual growth, so the combined Chinese and American tariffs of $80 billion at worst knock 2.7% off that expansion. Really, it’s pebbles pitched into an $80 trillion — with a “t” — lake.

The tariffs imposed by the infamous Smoot-Hawley Act of the Great Depression era were more than 100 times bigger relative to the average of all imports of the day, a hugely bigger effect on all countries. But these new tariffs don’t amount to even a fraction of $80 billion.

Single country tariffs, like these, are toothless for the exact reason economic sanctions against countries always fail. Imagine: We and 20 countries sanction North Korea and won’t sell them beans or diddly. So our bean and diddly vendors sell to the other 175 countries, who — for a tiny brokerage commission — resell to North Korea. It costs North Korea maybe 1% at most. We can’t control 175 nations. So, on $150 billion of tariffed goods, that’s maybe $1.5 billion. A piece of my net worth — much less that of Kim Jong Un, North Korea’s leader.

So here’s how it plays out. We sell overseas. Those countries resell to China. China sells to countries who resell to us. These tariffs are mostly on easily retradable basic materials, commodities and some industrial goods.

Folks raised a big stink about the

250,000 U.S.-made cars shipped to China each year. Funny! Most of those are European models made here. Excluding Tesla, U.S. automakers exported just

29,000 cars from here to China.

So now China will buy from Europeans while we sell ours back to Europe. It’s so fluid. To think traders aren’t wilier than tariffs is just dumber than dirt.

Trump’s tariff announcements opened a lengthy public comment period. Trump’s M.O. is this: Start negotiating from brash positions — see his book, The Art of the Deal, on that. This is a ploy to get China talking. But about what?

Almost surely not some silly Swisscheesy tariffs! Trump loves evasion and head fakes. So I suspect this is about North Korea.

Connect the dots. How could this play out? Trump wants to meet with North Korea’s Kim. Kim had never left North Korea until recently. Trump can’t go there safely.

So, Trump announces tariffs. The next week, Kim is visiting Beijing! Why? North Korea ain’t squat without China’s support, and we can’t negotiate with Kim without China’s help. The tariffs on China prod the whole process along.

Yes, the markets fear sweeping protectionism and trade wars. But fear of a false factor is always bullish. And fear is in capital markets now. The reality? This ain’t no Smoot-Hawley. Even if I’m wrong on North Korea, these tariffs are simply too tiny and unenforceable to cause a recession — as cameoed in my March 18 quiz. Buying fear is almost always a long-term profitable trade.

Ken Fisher is the founder and executive chairman of Fisher Investments, author of 11 books, four of which were “New York Times” bestsellers, and is No. 200 on the Forbes 400 list of richest Americans. Follow him on Twitter @KennethLFisher

The views and opinions expressed in this column are the author’s and do not necessarily reflect those of USA TODAY.

China will buy cars from Europeans while we sell ours back to Europe. To think traders aren’t wilier than tariffs is dumber than dirt.