I have known several economists, including one son-in-law, and, as a group, they are a pecuniary lot. I have concluded that I don’t have to leave a lot of money to my heirs as they seem to be doing fine.

President Trump is, by degree, an economist, although it’s only recently that the Wharton School of Finance made a significant note of this and only after a lot of hand-wringing. At the same time he enrages the financial establishment (articles in Bloomberg Business Week and the Wall Street Journal, for example) with his tariffs on Chinese imports. There were similar though muted concerns about his tariffs on Mexican and Canadian goods.


As my experiences have shown, most “economists” use their expertise to get the best deal on a quart of milk, the best prices on autos, auto insurance, whether cable or streaming is better and generally stay in the same house — which they purchased after a lot of number crunching — for a long, long time. They get “real” jobs after graduation as airline pilots or government employees.

Those economists that go on to graduate school, generally getting an MBA, often gravitate to Wall Street where they use their expertise to get people to buy stocks, bonds, or hedge funds, where they generally do pretty well on commissions.

Then there are the academic economists who write doctoral dissertations and become masters of charts, data, often teach the upcoming economists and write a book or two. Don’t take this group lightly, however. Even though there is often — and quite significant — disagreement, I’m of the opinion that we would go off the rails as a society without their valuable input.

Trump, based on widespread accounts, doesn’t listen to academic economists for advice, but occasionally he will have one on his staff who agrees with him. He probably got his fill of this stuff at Wharton. A conference to discuss resolving trade differences between the United States and China is scheduled for October, but few are optimistic the structural issues will be resolved in time.

Trump might be somewhat correct on the Chinese tariff point. But he is probably wrong on most economic issues. China is highly invested in the United States economy, and the tariffs have resulted in a high stakes policy change that has the potential to re-tool the American workforce. On the other hand, political experts argue that China will never concede on a trade war and hopes to get a Democratic President.

If managed carefully — and that’s the rub, since Mr. Trump has a very spotty record in seeing the big picture — this possibly could be a gain for the US. But it also could be a big blunder. It’s like asking Napoleon to launch a carefully nuanced invasion of Russia.

For tariffs to work, Trump must be right in general principal, e.g. this hurts China more than the U.S. (maybe a 60/40 proposition). Second, he must be nimble and recognize when and how to back off if it doesn’t (probably a 10/90 proposition). And third, he has to have some measure of when to declare victory (5% likely?).

When you stack up all the pros and cons, the odds of success and the benefits are pretty modest, and the odds of major economic damage to the U.S., as well as the rest of the world, seem pretty high.

Wall Street traders are having a hard time predicting the market cycles recently — their bread and butter — and I’m of the belief that is why they have been so openly opposed to the tariffs. Recently, there has been some backing off from the financial establishment, and I’m wondering if this is because Wall Street insiders have some assurance that they will have an advance notice of Trump’s intentions.

So, putting my citizen cap on — and since I myself do very little trading on my own, but own some mutual funds — how will we know if the tariffs work and when to stop them? I suppose it doesn’t matter because if Trump doesn’t listen to Nobel Laureate economists, the financial establishment, or political advisers nothing will stop him. I also think Trump will never back off from them, so knowing the actual consequences (and recording for history) is probably the only thing that will come from this.

Finally, academic economists agree that their past record in predicting recessions is pretty dismal, yet they seem to think in the last month or so that the odds are 50% or perhaps less that we will actually get a recession in 2020. They also stress that confidence in the economy, while subjective, has been pretty high in the Trump Administration. And this could be the key to the whole thing.

Dave Pyatt writes from Mount Airy.