Tariffs as a Negotiating Tactic: Undercut by Wall Street Expediency

With all the economic and political turmoil from the anticipated American tariffs, it may be tempting, especially for financially-oriented CEOs and billionaires looking at quarterly reports, to call the whole thing off even though doing so would deflate the American attempt to renegotiate trade bilaterally with other countries. The concerns of the wealthy, whether corporations or individuals, have their place, but arguably should not be allowed to "lead the proverbial dog from behind, lest the dog run in circles and get nowhere." Moreover, the notion that any goal that is difficult and takes some time to materialize can or even should be vetoed by momentary passions at the outset is problematic and short-sighted. That U.S. President Trump's announcement of bilateral tariffs quickly brought fifty countries to the negotiating table is significant as a good sign for the United States, as long as that country's powerful business plutocracy (i.e., private concentrations of wealth that seek to govern) can be kept from vetoing the emergent trade policy, which at least in part is oriented to trade negotiation and ultimately to the notion that fair trade is conducive to increased free trade. 

As of 3:10 pm (CET) on April 7, 2025, the Euro STOXX 50 was down 5.27 percent, and the STOXX 600 lost 5.15 percent of its value. “The bloodbath is in full swing, and that’s exactly what you see when you look at the European markets. There is no safe haven; equity markets have entered a complete free-fall with no clear bottom in sight,” according to Zaye Capital Markets.[1] Meanwhile, the Dow Jones opened down 3.2 percent.[2] “The sheer volatility was enough to spook CEOs on that rainy Monday in New York. The Dow “briefly erased a morning loss of 1,700 points, shot up more than 800 points, then went back to a loss of 629 points.”[3] The S&P 500 “likewise made sudden up-and-down lurching movements”.[4]

U.S. President Trump had “announced a 20% across-the-board tariff on imports from the European Union, set to take effect on 9 April,” with steel, aluminum and cars being subject to a separate 25% rate; over all, over €380 billion in E.U.-made products could be affected.[5]

In that uneasy context, I contend that two markers are worthy of attention, only one of which is arguably productive.  E.U. President von der Leyen proposed to her counterpart, U.S. President Trump, that both unions cut their respective tariffs to zero; essentially, there would be a free-trade agreement on industrial goods. Just such an overture is in line with President’s intent that other countries get rid of their unfair trading practices, which, the president believed, had aggravated the U.S. trade deficits for decades. In this regard, President von der Leyen’s proposal can be viewed as an overture, which could lead to a counter-proposal that not only tariffs, but also non-tariff barriers of the E.U. be removed (or that the E.U. compensate the U.S. for those annually).

Adam Smith’s ideal of competitive free-trade rather than mercantilism presupposes trade that is free even of non-tariff barriers so comparative advantage can be a major factor in international trade. To be sure, national-security concerns are arguably legitimate constraints on Smith’s ideal of competitive advantage. Being dependent on China for computer chips would be risky for both the E.U. and U.S. because China could hold either or both unions hostage as Taiwan is invaded by China with impunity.

So von der Leyen’s response was in “the right direction,” if free and fair trade was among Trump’s goals in unilaterally imposing tariffs—that is to say, to the extent that the announcement of tariffs was geared to triggering real negotiations.

That the billionaire hedge fund manager, Bill Ackman, a supporter of President Trump, just one day earlier, had “urged the president to pause his sweeping new tariffs, warning they could economically devastate America if implemented, as planned,” can be likened to a driver unilaterally letting some air out of his own car’s tires just before a race.[vi] Ackman may have been rich, but his intelligence was lacking in his assumption that the tariffs would be permanent even though fifty governments were already willing to negotiate on trade with the American government. Also, his understanding of negotiation could have used a spare tire.

It is one thing for a republic to be an open society, and quite another for a dog to be led by its own tail, meaning for the U.S. Government to be led by greedy and short-sighted finance managers and CEOs of even major corporations. The enlightened self-interest of whom would be focused on the wealth that could be obtained from fewer trading obstacles in other countries, for the money that an American-based (and owned) company can possibly be made on exports from the U.S. is hardly nugatory. The capture of legislative and regulatory bodies by private companies and billionaires is a danger not only to democracy itself, but also to a country’s pursuit of its long-term strategic interests globally. A dog that is led by its hungry tail doesn’t get very far, and an argument can be made that such a dog doesn’t deserve to get very far, for weakness within a polity is hardly laudatory. Put another way, that elected offices in a republic have terms of years rather than, say, just a few months, is an important impediment to short-term passions in society seeking to get their way in policy. Sometimes long-term goals require momentary sacrifice even if the measures are erroneously assumed to be permanent rather than negotiating tactics.

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1. Angela Barnes, “European Markets Dive as Global Tariff Fears Shake Investor Confidence,” Euronews.com, April 7, 2025.
2. Ibid.
3. The Associated Press, “Stocks Are Making Wild Swings as Markets Assess the Damage from Trump’s Trade War,” Apnews.com, April 7, 2025.
4. Ibid.
5. Jorge Liboreiro, “Von der Leyen Offers Trump ‘Zero-For-Zero’ Tariffs Deal on All Industrial Goods,” Euronews.com, April 7, 2025.
6. Lee Moran, “Billionaire Trump Backer Warns America of ‘Self-Induced Economic Nuclear Winter.” The Huffington Post, April 7, 2025.

Autocratic Regimes: Subject to the Domino Effect?

"In Beirut, gunfire broke out and crowds of people waved Egyptian flags. In Yemen, they gathered in front of the Egyptian Embassy chanting, 'Wake up rulers, Mubarak fell today.' In Gaza, they fired shots in the air and set off fireworks. . . . [However,] in a telling sign of the divide between the rulers and the ruled, the region’s leaders, presidents and monarchs remained largely silent." This depiction by The New York Times of ripple effects across the Middle East in the wake of the resignation of Egypt's Mubarak in February, 2011 intimated the hoped-for and feared possibility that the popular unrest could spread.  Moreover, the entire world, which had been been glued to the events unfolding in Cairo, wondered if a domino effect might be in store in countries under autocratic rule. Indeed, The New York Times wrote of a possible domino effect quite explicitly: "The popular uprising that started . . . in Tunisa had claimed its second autocratic government, this time in the largest country in the Arab world. With more protests planned in coming days, some governments were clearly worried they could be next." But do autocratic governments fall like dominos?  That is, is revolution contagious? Fawaz Traboulsi, a prominent Lebanese writer and columnist, thought so in the days following Mubarak's resignation. “All the regimes are shaking now . . . They are becoming more and more fragile. This is just the beginning.” In Bahrain, King Hamad Bin Isa al-Khalifa apparently thought so too, for he ordered the equivalent of $2,650 be given to every Bahraini family a few days before a planned "Day of Rage" protest. “Arab people discovered their ability to make change,” said Nabeel Rajab, a human rights activist in Bahrain. “And with Egypt in the leadership once again, the change will reach all the Arab world.” In Yemen, President Ali Abdullah Saleh announced he would suspend constitutional amendments that allow him to remain in his office for life. He also raised salaries for the military and civil servants and cut income taxes in half. In Algeria, the government promised to lift the state of emergency that had been in effect since 1992. To be sure, nineteen years is a rather long time for an emergency.  Such efforts can be likened to building up wetlands or widening a beach to take the wind out of the hurricane out at sea should it hit. In other words, it appears that there was "revolution watch" in effect for the Middle East in the wake of the fall of the Egyptian regime. One might reasonably question, however, whether revolutions are contagious.

It could be that autocracy itself had been weakened by the success of the protests in Egypt.  On the other hand, there had been revolutions before and dictatorship was not evicerated from the face of the earth. The belief that the Tunesian and Egyptian revolutions were the start of a wave that would flood all autocratic powers in the Middle East (or the world) might also consider that even autocratic states differ in their respective internal conditions. To use the hurricane analogy, some beaches are better protected than others. If the unrest in Tunesia and Egypt were linked in such a way that other countries could be impacted internally, the ensuing domino effect could perhaps be compared to that among Wall Street banks in September 2008.  The collapse of Bear Stearns, Lehman Brothers, and Merrill Lynch as independent or viable going concerns contained a momentum that was beginning to bring down Morgan Stanley and threaten even Goldman Sachs when the ex-CEO of Goldman Sachs at Treasury effectively pushed for the construction of a fortified sand-dune (TARP) a.k.a. an infusion of funds into the remaining banks from the U.S. Government and the Federal Reserve.  As a result, the force of the strengthening winds ceased to intensify and began to diminish, leaving the economy in a long rainy season (i.e., a recession and a subsequent nearly jobless recovery).

In the wake of the fall of the Egyptian regime, were the other regimes in the Middle East like Morgan Stanley and Goldman Sachs after Lehman Brothers declared bankrupcy?  In other words, are autocratic regimes subject to a "run on the bank" in another? If so, there would still be a notable difference between the big banks and the governments.  Namely, the banks were deemed too big to fail, while the autocratic rulers were deemed too powerful to rule. That is to say, the continued viability of the Wall Street pillars was deemed essential to the world economy, while it was thought in the wake of the Egyptian regime of Mubarak that the world was better off less one autocratic regime. Hence there would not be likely to be a TARP program arranged to prop up dictators. Even with this difference noted, I contend that both big banks and big dictators are too big to exist in a world that values freedom and individual rights. Perhaps we ought to have been cheering the domino effect on Wall Street just as we cheered the fall of the Tunesian and Egyptian dictators. In both cases, destabilization that could lead to the collapse of the global economy and civic order would of course need to be avoided.  However, I contend that the U.S. Government could have intervened to maintain order on Wall Street by assisting as the big banks split into pieces, none of which being too big to fail and thus more in the public interest than retaining the big banks as such.  In the case of public autocratic regimes, their demise and replacement can typically be handled domestically, as in the cases of Tunesia and Egypt, rather than by an international organization such as the U.N.

In general terms, the "run on the bank" in Tunesia and Egypt may or may not be contagious in its nature, yet a consideration of the possibility of a domino effect can remind us of the domino effect that we witnessed in September of 2008 on Wall Street. Making this connection might prompt us to ask whether autocratic governments and big banks aren't both too big to exist. In other words, the collapse of one badly run bank after another and the subsequent need to deal with the question of such banks as going concerns can perhaps be likened to the collapse of one badly run government after another.  Was the world finally noticing around the end of the first decade (and the beginning of the second) of the twenty-first century that enormous concentrations of private capital (and thus power) and of public autocratic authority were not necessarily givens, and thus could, and perhaps should, be taken down? In other words, were long-standing givens finally seen as replacable?  The world was stunned when huge investment banks that had been around for more than a century were suddenly collapsing, just as the world was stunned when the government of the largest Middle Eastern country suddenly fell after two weeks of popular protests. Pillars, even those that are thought vital, can indeed fall, and the world can discover through the experiences that they are not essential--and they might even be bad for the public good. Surely this is the sense of the free world concerning autocratic governments, yet we are less convinced concerning the danger in continuing to allow banks too big to fail to continue to exist as they have for decades. In both cases, the domino effect may be natural and good, provided it is managed so public order does not collapse in the process. 

Source: http://www.nytimes.com/2011/02/12/world/middleeast/12arabs.html?_r=1&ref=todayspaper

Saudi Arabia Beheads a Member of the Royal Family: Justice for All, Atrociously

On October 18, 2016, Saudi Arabia executed a member of the royal family for committing murder during a brawl. Prince Turki bin Saud bin Turki bin Saud al-Kabeer was put to death most likely by beheading in a public square—as this was the usual method at the time. As horrific as such an execution is, the point that law applies to everyone is laudable—especially “on point” for countries in which the rich can “get away with murder” by hiring the best (and most expensive) lawyers.  The atrocious means of execution coupled with the dictum that the law really does apply to everyone renders this case particularly difficult to analyze from an ethical perspective.

“The greatest thing is that the citizen sees the law applied to everyone, and that there are not big people and other small people,” Abdul-Rahman al-Lahim, a prominent Saudi lawyer wrote.[1] In other words, the verdict and sentence sent the message that no one is above the law. To be sure, thousands of people are in the Saudi royal family enjoying perks not available to the rest of Saudi Arabia’s 20 million people; yet that the member executed was from a prestigious arm of the family sufficiently makes the point that no one is above the law.

This lesson is a valuable one for the United States, as financiers got away with fraudulently mislabeling the risk of sub-prime mortgage-based bonds before the financial crisis of 2008. Yet, interestingly, the Saudis could look to the United States for a lesson on how to execute people humanely. I submit that this combination of lessons demonstrates that a country can be very ethical in one sense yet abysmal in another. This point in turn impedes claims that some countries are more humane, or advanced ethically, than others. Within a culture, insistence on justice in one sense can coexist with toleration for injustice in another sense. Put another way, the human mind seems able to compartmentalize justice, without realizing the cognitive dissidence involved.

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1. Ben Hubbard, “Saudi Prince Is Executed for Murder,” The New York Times, October 19, 2016.