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Forbes
15-04-2025
- Business
- Forbes
Trump's Tariffs on China, History, and Uncertainty Bias
WASHINGTON, DC - APRIL 02: U.S. President Donald Trump departs after signing executive orders ... More imposing tariffs on imported goods during a 'Make America Wealthy Again' trade announcement event in the Rose Garden at the White House on April 2, 2025 in Washington, DC. Touting the event as 'Liberation Day', Trump announced sweeping new tariffs targeting goods imported to the U.S. on countries including China, Japan and India. (Photo by) The newswires are replete with anecdotal arguments about why the markets will or won't rebound from President Trump's comprehensive tariffs. People who assert that markets will return draw our attention to the early 2000s when the market adjusted to steel import tariffs under President George W. Bush even though most experts braced for perpetual financial chaos. People who assert that market will not return focus on how the 2018 US tariffs on China allegedly were not a one-off negotiating tactic but a move that compelled firms to dismantle and rebuild supply chains and rethink the fundamentals of globalization. While many people will agree with the facts about historical incidents, these scenarios do not allow to predict the future about how the current tariffs will unfold. In addition to considering anecdotes, we need to focus on the overall arguments on both sides. The following explores the logic behind the arguments about whether and how markets will bounce back and uses an unconventional approach to determining which one is more compelling. Economy will bounce back Tariffs, while disruptive, are generally perceived as short-term political interventions and not as long-term structural shifts, and investors have learned to distinguish between short-term volatility and long-term fundamentals. Monetary easing by central banks can mitigate the damage, and businesses are adept at restructuring supply chains to pass on costs. When policy certainty slowly reemerges—either in negotiated trade deals or change in the ballot box—confidence tends to rebound, resulting in a rebound of consumption, and market valuations. The general argument that markets won't rebound in the short to medium term from tariffs relies on the assumption that these trade barriers are an indication of a deeper, more structural shift towards long-term protectionism and economic fragmentation. According to the Council on Foreign Affairs and the International Institution of Economics, the current tariffs are unilateral and politically driven rather than part of a coordinated shift in global trade rules or institutions, meaning they reflect temporary policy choices rather than a fundamental reordering of the global economic system. Economy will not bounce back As opposed to earlier instances, the current tariff wave—particularly under Trump—represents a deviation from the rules-based international trading system, introducing enduring uncertainty undermining investor confidence. Stephen Miran, who is current Chair of the Council of Economic Advisers, argues that Trump's tariffs a part of a strategy that also includes, currency interventions, and security-linked trade agreements aimed at reducing U.S. trade deficits and reviving domestic manufacturing. This strategy is part of the proposed "Mar-a-Lago Accord," which seeks to realign international economic relationships while maintaining the U.S. dollar's status as the global reserve currency. Tariffs are a tax on buyers, taking away buying power and cutting demand. All in all, this volatility, reduced investment, and slowed growth foretell that markets may remain subdued well beyond the initial shock. While both sides use economic arguments to make compelling arguments, a psychological perspective compels me to believe that some of the fears are exaggerated while a legal concern is what we should be most worried about right now. Amid the diverging opinions of pundits on both sides of this issue, all parties can agree on one thing: President Trump is unpredictable and the economic future is uncertain. Uncertainty is the most powerful emotion at play and is driving the doomsday narrative, which is based in part on uncertainty bias. The fact that we do not know for sure what will happen next makes people with a low tolerance for ambiguity uneasy, often triggering an overreaction to situations and an overestimation threats. We have seen economies of all sizes bounce back from drastic changes and this one will be no different. According to Larry Summers, an American economist who served as United States Secretary of the Treasury from 1999 to 2001, the primary concern for the American people should not be barriers to trade but the erosion of the country's judicial institutions. In an interview on GZEO World media, he said, 'economies move in cycles, economies fluctuate. Even egregious economic policy errors can be reversed and economies can recover. But the rule of law and traditions of democracy, once those are lost… they often are not regained.' (Ian Bremmer interviews Larry Summers on GZERO World, April 9, 2025)
Boston Globe
24-02-2025
- Politics
- Boston Globe
Frank Wisner, seasoned diplomat and foreign policy adviser, dies at 86
'I could recite the names of every prime minister in the world,' he told Foreign Affairs magazine, 'while my friends could tell you the starting pitchers in the American and National Leagues.' Advertisement Mr. Wisner became a Foreign Service officer in 1961 and came of age during the Vietnam War, joining a diplomatic circle that grew to include his friends Richard C. Holbrooke, who helped negotiate an end to the war in Bosnia, and Leslie H. Gelb, who became a journalist and chaired the Council on Foreign Affairs. Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up Unlike them, Mr. Wisner was seldom in the limelight. But he made a vivid impression in world capitals: bald and barrel-chested, with a fondness for claret, hunting, and cigars. President Carter named him ambassador to Zambia in 1979, and he was tapped as top diplomat in Egypt by Ronald Reagan, in the Philippines by George H.W. Bush and in India by Bill Clinton. For a few hours in January 1993, the day of Clinton's first inauguration, he served as acting secretary of state. The position came in between a pair of influential Washington postings, as undersecretary of state for international security affairs and undersecretary of defense for policy. Friends who knew him in Vietnam, where he was stationed for four years at the height of the war, recalled him as 'short and straight-backed, handsome and rakish,' as journalist George Packer wrote in his 2019 book 'Our Man: Richard Holbrooke and the End of the American Century.' 'He spoke in a slightly old-fashioned diction that was only half jest, using phrases like 'in due course' and 'well in hand,'' Packer added, 'and he believed in old-fashioned concepts like having a good war, which meant seeing one's share of action.' For Mr. Wisner, who was assigned to an interagency 'pacification' program, that meant accompanying soldiers on night patrols. Advertisement While serving as ambassador to Egypt from 1986 to 1991, Mr. Wisner sought to ease tensions in Cairo after Saddam Hussein invaded neighboring Kuwait, generating panic among American expats in the region. On his next assignment, to the Philippines, he worked to stabilize relations with President Corazon Aquino, although he had less success lobbying for a lease extension that would have kept the US Navy's sprawling Subic Bay military base in place. Mr. Wisner remained an influential voice in US diplomacy even after he retired from the Foreign Service in 1997, turning down a reported offer to serve as ambassador in Paris so that he could start a second career in business. He served as a vice chairman of the insurance giant AIG for more than a decade, and was a board member at Enron Oil & Gas (now EOG Resources) and an international affairs adviser at the lobbying and legal powerhouse Squire Patton Boggs, where he worked until his death. While on his way out of the State Department, Mr. Wisner helped the Clinton administration in negotiations with Boris Yeltsin's government in Moscow, aiming to curb Russian weapon sales to Iran. Eight years later, the George W. Bush administration enlisted Mr. Wisner's help negotiating Kosovo's status as a sovereign state, an effort that was largely successful - even as Mr. Wisner lamented that Serbia, Kosovo's northern neighbor, still refused to recognize the country's independence. Advertisement Mr. Wisner returned to the news in 2011, when he was recruited by the Obama administration to meet with Egypt's authoritarian president, Hosni Mubarak, amid antigovernment protests that were sweeping through the Arab world. Secretary of State Hillary Clinton later said that she had selected Mr. Wisner to coax Mubarak, a key US ally for three decades, into easing the country toward a democratic transition. The two men had a close relationship that dated back to Mr. Wisner's ambassadorship in Cairo. But the envoy's appeals were ignored, at least at first: When Mr. Wisner left the country not long after their meeting, Mubarak was still holding tightly on to power. Days later, Mr. Wisner made headlines when he appeared to contradict President Obama while addressing an international security conference in Munich. 'You need to get a national consensus around the preconditions of the next step forward,' he said, adding that Mubarak — rather than step aside — 'must stay in office in order to steer those changes through.' The administration distanced itself from Mr. Wisner, with a State Department spokesman clarifying that he had spoken as a private citizen, not a US envoy. Mr. Wisner drew further scrutiny after British journalist Robert Fisk reported that Mr. Wisner's employer Squire Patton Boggs did business with the Mubarak regime, in what appeared to be a 'blatant conflict of interest.' The episode was overshadowed when Mubarak resigned the next week, under pressure from millions of Egyptian protesters who had taken to the streets. His ouster set the stage for a tug-of-war among protesters, the military, and the long-banned Muslim Brotherhood, with retired general Abdel Fatah El-Sissi taking power in 2014. Advertisement To Mr. Wisner, the revolution's chaotic fallout underscored the importance of the patient approach he had advocated for in Munich. 'We ought to have been calling for an orderly transition, rather than telling Mubarak 'get out of town, get out of government,' with no strategy for what happens next,' he told Washington Post columnist David Ignatius in 2016. 'We needed a responsible path to stability and evolution, not revolution.' Mr. Wisner, then ambassador to India, presented Mother Teresa an award of honorary American citizenship in 1996. Anonymous/ASSOCIATED PRESS The oldest of four children, Frank George Wisner II was born in Manhattan on July 2, 1938. The family moved to Washington after World War II, and Mr. Wisner spent part of his school years in England, when his father, also named Frank, was posted in London as CIA station chief. The elder Wisner had served in World War II with the Office of Strategic Services, a precursor to the CIA, and later oversaw the CIA's clandestine branch, playing a role in US-backed coups in Iran and Guatemala. He was diagnosed with manic depression, now known as bipolar disorder, and took his own life in 1965, three years after he retired from the CIA. Mr. Wisner's mother, the former Polly Knowles, was a fund-raiser for Washington arts organizations and a close friend of Katharine Graham, the longtime chair of The Washington Post Co. After her husband's suicide, Polly married newspaper columnist Clayton Fritchey. As a young man, Mr. Wisner prepared for a diplomatic career by traveling overseas, living 'with a couple of old ladies in a suburb of Tours' to learn French. After graduating from Woodberry Forest boarding school in Virginia, he studied Arabic at Princeton University, wrote his senior thesis on Algeria's war for independence, and received a bachelor's degree in 1961. Advertisement The next year, he arrived in Algiers, where he settled into his first State Department posting just as the country was celebrating its independence from France. Mr. Wisner was sent to South Vietnam in 1964 and, after postings in Tunisia and Bangladesh, joined a presidential task force managing the resettlement of some 1 million Vietnamese and Cambodian refugees. His first wife, Genevieve de Virel, a French advertising executive, died of cancer in 1974. His second marriage, to Christine de Ganay, the stepmother of future French President Nicolas Sarkozy, ended in divorce. In 2015, he married Judy Cormier, the owner of a New York City art gallery and design business. In addition to his wife and son, David, he leaves a daughter from his first marriage, Sabrina Wisner; two stepchildren from his second marriage, Caroline and Olivier Sarkozy; two stepchildren from Cormier's earlier marriage, Jamie Nicholls Biondi and Christopher Nicholls; a brother; and 12 grandchildren. Interviewed about foreign affairs after his retirement from the Foreign Service, Mr. Wisner repeatedly championed the importance of political engagement over military action. He joined another former ambassador, Edward P. Djerejian, in publicly cautioning against the US-led invasion of Iraq in 2003. 'We cannot allow ourselves to be seen to be dictating to the world,' he had said in an oral history a few years earlier. 'We must be in search of partnership, of balance. Not of assertion, but of compromise.'
