Trump's economic delusions are already hurting America

Here is the English translation: Donald Trump's economic delusions are already hurting America President Trump is increasingly out of touch with reality. Editor's Note (March 6): The latest news is that Donald Trump has announced that the tariffs on goods from Mexico and Canada covered by the NAFTA agreement (which the White House says account for about half of their total exports to the US) will be suspended until April 2. So the threat of steep tariffs and massive uncertainty still hangs over the global economy - the subject of our editorial. In his March 4 speech to Congress, President Donald Trump painted a rosy picture. He claimed the American dream is thriving as never before. His tariff policies, he said, will save jobs, make America richer, and protect the nation's soul. Unfortunately, in the real world, things are not so. Investors, consumers and businesses are already showing signs of discomfort with Mr. Trump's vision. His erratic and aggressive protectionism is playing with fire. Also on March 4, Mr. Trump imposed 25% tariffs on goods from Canada and Mexico, effectively "igniting" one of the world's most integrated supply chains. While he belatedly delayed auto tariffs by a month, many other industries will be affected. He has also raised tariffs on China and threatened action against the EU, Japan and South Korea. Some of these tariffs may be delayed, others may never materialize. But in both the economic and diplomatic realms, policy is clearly being made on the spur of the moment. This will cause lasting damage at home and abroad. When Mr. Trump won the election in November, investors and business leaders cheered. The S&P 500 index rose nearly 4% in the week after the election, as people expected the new president to scrap red tape and enact major tax cuts. Investors hoped his protectionist and anti-immigrant rhetoric would not translate into action. A market correction or inflationary surge would surely curb his worst impulses. Alas, those hopes have evaporated. DOGE from Elon Musk is causing chaos and grabbing headlines, but there is no sign yet of a deregulatory boom. (Mr. Trump's order banning federal agencies from buying paper straws does nothing to help American businesses' profits.) The budget blueprint passed by Congress in February preserves the tax cuts of Mr. Trump's first term, but does not expand them further - even though this has added trillions to the national debt. Meanwhile, Mr. Trump's tariff commitments will push the average effective tax rate back to levels not seen since the 1940s, when trade volumes were much smaller. No wonder, despite Mr. Trump's boasts of a robust recovery, the markets are flashing red. The S&P 500 has nearly erased all its post-election gains. While economic growth remains decent, in recent weeks 10-year bond yields have fallen, consumer confidence has plunged, and small-business confidence has also declined, portending a slowdown. Meanwhile, inflation expectations are rising, perhaps because of Mr. Trump's talk of those wonderful new tariffs. Underlying this anxiety is a growing realization that Mr. Trump faces fewer constraints than investors expected. Though rising prices have dented Kamala Harris's presidential ambitions, the inflation outlook has not deterred Mr. Trump, who insists the damage from tariffs is worth it. In his first term, he basked in the stock market's long boom; this time, the market is not playing along with his many social-media boasts. His delay of auto tariffs is too short for the industry to adjust. Mr. Trump remains convinced tariffs benefit the economy. Crucially, the people around the president also seem to lack influence. Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross are both financiers, but if they have tried to rein in Mr. Trump, they have clearly failed. Rather than being wise counselors, they come across as lapdogs, constantly explaining why tariffs are necessary and Wall Street is irrelevant. Few business leaders are willing to risk Mr. Trump's wrath by telling the truth. So the president appears ever more divorced from reality. This poses a threat to America's trade partners. For some reason, Mr. Trump is particularly hostile to Canada and the EU. Given the lack of any coherent logic to his actions, it is hard to know how to avoid his threats. If he follows through on his promise to Congress to impose reciprocal tariffs, it would be even worse. Such reciprocal tariffs would match the tariffs foreign countries impose on American exports. This would create 230 million separate tariff lines, requiring constant adjustment and negotiation - a bureaucratic nightmare that America unilaterally abandoned in the 1920s. Reciprocal tariffs would be a mortal blow to the global trading system, in which each country has a single tariff rate for goods outside its free-trade agreements. If that were not bad enough, the tariffs will also damage America's own economy. The president says he wants farmers to know he loves them. But shielding 1.9 million American farms from competition will raise food bills for nearly 330 million American consumers; and compensating farmers for retaliatory tariffs will swell the fiscal deficit. Whatever Mr. Trump thinks, tariffs will raise input costs and thus hurt economic growth. If businesses cannot pass on the costs to consumers, their profit margins will shrink; if they can, households will effectively face a tax increase. Mr. Trump's policies are also in deep conflict with the Federal Reserve, which will be torn between raising rates to curb inflation and cutting them to spur growth. The Fed is one of the few remaining independent institutions in America, and it will have to confront an angry president accustomed to doing as he pleases. The government has carefully kept monetary policy at arm's length when it has tried to seize regulatory powers. How long can that distinction be maintained? The "Make America Great Again" mania The global economy is in a perilous moment. If Mr. Trump were to ignore reality (and the Constitution) after losing in 2020, only to stage a comeback and win in 2024, he would have no patience for being told he is wrong. His faith in protectionism is fundamentally misguided, a fact that may take him a long time, if ever, to grasp. As the voices warning of the damage he is doing to the economy grow louder, he may lash out at his advisers, the Fed or the media. The president may remain lost in his protectionist fantasies for some time. The real world will pay the price.