The disappointment of the failed tariff disaster

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Armageddon has been deferred. The doom that was supposed to follow President Trump’s tariff revolution, according to almost all economists (and by even more noneconomists—we live in an age when experts are so little trusted that everyone has become one) has so far stubbornly failed to materialize.

The report on gross domestic product for the first three months of the year was harder than usual to decipher. The 0.3% annualized contraction was accounted for by a surge in imports, which might have been related to stockpiling ahead of expected tariffs, though other parts of the report were cloudier, and overall the picture painted wasn’t one of an economy in free fall. Then we learned that in April, the month that began with “Liberation Day” and saw an equity, bond and currency market panic, the employment report showed another month of solid job growth, calmed unemployment and relatively benign wage inflation.

It is still much too soon to celebrate. Actual tariffs imposed so far—as opposed to those threatened, announced and paused—are still relatively modest. Anecdotal, real-time and small-set data from ports, transportation companies and retailers are unsettling—they speak of the hit to come from tariffs if they aren’t negotiated down or away, especially the 145% duty on imports from China.

The policy uncertainty from Mr. Trump’s desultory approach to his principal economic initiative may weigh more heavily on business activity, although we haven’t yet seen real signs that investors have given up on America. Markets have pivoted from Chicken Little to Dr. Pangloss. Perhaps on hope that deals will be struck and the overall impact will be much smaller, stocks have recovered all the ground lost since April 2 and bonds have clawed back most of it.

All this prompts a question: Have we misjudged the impact of the Trumpian disruption? Could the effect be less that of a devastating weather event and more a change in the climate? The experts are surely right that the impact of reducing our economic engagement with the rest of the world will undermine growth. But perhaps all this is better understood in the context of the wider process of deglobalization under way for a decade or more, and perhaps we are better off managing it rather than fearing it.

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