Tumultuous Trade Trilemma

The magnificent seven stocks have supported global growth over the last few years, driving a divergence between the US and the rest of the world. The winds of political change and the new US trade policy are imperiling the permanence of American exceptionalism. First, expanding tariffs will lead to countermeasures against US exports, ultimately decreasing global efficiency. Second, higher prices will lower demand for a price-sensitive US consumer, obviating the need to invest in US manufacturing. Third, the political objective of increasing US exports is incompatible with the first two objectives. Furthermore, tariffs cannot generate sufficient revenue at the proposed rates to sustain income tax cuts, which would increase interest rate costs. This tumultuous trade policy could return global markets to the 1970s, or worse, the 1930s. Better to beggar thy neighbor than thyself.