The coming economic devastation

There’s a lot of things I could write about Donald Trump. After all, it was the MAGA movement that finally broke me away from Christianity. He’s declared himself a king, he’s “joked” about running for a third term, he’s said he wanted to be a dictator. He’s literally doing everything a dictator would do and we’re watching what might be the collapse of the US Republic. But there’s one thing Trump is doing that might undue everything, because there’s one thing Americans care about more than anything else in this world – the economy.

Don’t get me wrong, when the economy is going fine Americans don’t care. In fact, we get bored and vote in Donald Trump. But when the economy goes bad? Americans are unforgiving. The moment it gets turned around they’ll go and vote for the party that caused all the problems in the first place, because Americans are also very stupid, but though we’re stupid, we’re also very predictable, and if you crash our economy we’ll crash you.

The good news is it looks like Trump is driving us straight off an economic cliff. While there’s no way to predict the economy in steady times, it takes a massive amount of hubris to predict the economy over the next year in volatile and unpredictable times. Trump could wake up in a few hours and tweet something during his morning shit that throws all my analysis completely off.

Regardless, I think it’s important to look at the economic impact Trump is going to have and what it could do to his regime. Consider the following:

• Trump plans to implement 25% tariffs on Canada and Mexico

• This will come with a 10% additional tariff on China

• We’ve already put a 25% tariff on all foreign steel and aluminum (to go into effect in March).

• 75,000 federal employees took a buyout for their jobs and anywhere from 16,000-33,000 have been fired, but that could swell up to 220,000, or 9% of the Federal workforce.

• We're going to cut USAID by at least 90%

• The rhetoric we’re seeing from Vance and others toward the EU should lead everyone to believe that we’ll inevitably end up in a trade war with the EU at some point this year, likely over the US attempting to get them to deregulate for America’s oligarchs

There are many other economic factors to consider, such as the dismantling of essential departments, but if we focus on just these few issues it's troubling enough. We're not even getting into the open racism of this administration, Trump's war on the LGBTQ+, the abusive and inhumane immigration deportations, and the list goes on. Let's just focus on the economic stuff.

We’re already seeing consumer confidence slipping away alongside the DOW depending on the day, an incredibly troubling sign coming off a “strong” economy (line went up!). The volatility and cuts to USAID and educational programs has already caused the unemployment numbers for March to likely tick back up.

It doesn’t take a lot of guessing to imagine where the economy will end up. Anyone who knows anything about economics and the history of economics can look at that list and go, “Oh shit.” Any economist who looks at it objectively is going to say that, best case, you’re looking at a transformed economy that simply won’t be as dynamic as it once was. But what does that mean? What does that look like?

It's impossible to look into the future and know what will happen, especially with economics. The further away from now a guess, the less likely it is to be true. There's thousands of variables I'm not including, nuances I'm missing, and events that could happen that would change all of this. But, all things being equal, let's look at what the economic future might hold. These are just following economic principles.

Jobs -

The overall job numbers go up, but not shockingly. Adding the 200,000+/- to the current rate of 4%, that would bring you to 4.14%. Assuming that some industries that are directly affected by the stoppage of contracts or shutdown of government offices, but offsetting for job growth in other industries, you give a slight buffer to mitigate. Basically, you take what we know will be lost and apply some logic to the fact that tariffs and government shutdowns result in job losses, since it's a loss of trade and revenue. Still, at 3 months it's not going to be a lot. A lot of companies have other clients and will scramble to pick up other clients to fill the void, and some will succeed. That's going to offset the major job losses. But over time?

What people don't consider is that our economy is an ecosystem, not just numbers on a chart. Affect one thing in one area and you might change everything in another - and while you won't see that relationship in numbers on a chart, you will see it when looking at the economy at a living organism.

Let's imagine a small federal office with 40 employees in a small suburban city gets shut down. Closing a federal office of 40 employees in a small town removed 40 consumers from that local economy. If there were businesses, such as diners, around that office they've just lost 40 potential customers during the lunch hour. Immediately, this doesn't impact anything - 40 people isn't a lot.

But down the street is a company that employs 10 people who had a contract with the local federal office that just shut down. They weren't the only client, but they accounted for 40% of their cash flow, so now this small 10 person business has to look at cutting pay and maybe even letting one or two people go. Now we have more unemployed people.

Of course, this impact spreads out to other businesses in the area. Coupled with other canceled government contracts, as well as a reduction in welfare (money that people take and spend back into the economy), we begin to see more people laid off. Laying 40 people off, based on the data in the area (if it's affluent, poor, middle class, commercial, industrial, etc) laying off 40 people could result in an additional 10-80 people being laid off within that community. The thing is, this multiplying effect would apply to those people as well, meaning that 10-80 could translate into 15-120 other jobs.

If there's a labor surplus then the above doesn't change as much, because then those people can go and fill those jobs. However, those jobs are almost certainly going to pay less, which will reduce overall demand for the community, which will - ironically - reduce the demand for lower-paid jobs as well.

And this pattern repeats itself down the line, like millions of dominoes all being pushed and crashing into each other, not the fault of the one that hit it before and not intending malice when hitting the one after.

GDP

The GDP continues its downward trend and shrinks. Though currently sitting at 2.3%, after a few months of trade difficulties and chaos, it's going to slip. On the supply side, increased production costs coupled with supply chains will drive up the cost to supply goods. Meanwhile, reduced government consumption coupled with reduced consumer confidence could lower demand in key areas.

The way a tariff works is the US is charging a tax on imported goods. When we bring something in from Mexico - an avocado - there's an automatic 25% tax slapped on it. Whatever it cost the company in the US to buy that avocado will automatically cost 25% more once it crosses the border. This increases the costs for that company, meaning they'll either switch to an American avocado vendor or just purchase fewer avocados overall. If they switch, they'll buy local (within the US), but because these will be costly as well and because they'll be limited, they won't buy as many.

When you start looking at things like wheat, sugar, fruit, vegetables, oil, gas, lumber, and other everyday items, you begin to realize how a tariff can limit supply. If something outside the US suddenly becomes more expensive and there's not a quick and cheap alternative in the US, then the supply of that item will drop because vendors won't buy as much of it. It's too expensive and they can't sell it for the price that's being asked. So the tariffs begin to multiply over months, but it does take time (usually).

On the demand side, higher prices for items mean people won't want something as much. As an analogy, let's say that 40% of our avocados come from Mexico and the rest are grown in the US. Suddenly, 40% of the supply is 25% more expensive. That's going to cause a rush on the remaining American avocados, forcing them to increase their prices just enough to still compete with the 25% Mexico avocados, but still profit off the rush. With the prices going up, people won't want to pay as much, and so they'll stop buying.

Of course, the reality is that 90% of our avocados come from Mexico. With a 25% tariff on Mexico, that means 90% of the avocados coming into the US will get hit with a 25% tariff. The remaining 10% simply won't be able to meet the demand, justifying them increasing their prices, though not to surpass the Mexican avocados. Of course, if there's a rush on the domestic supplies then the supply chain could back up, causing the domestic price to increase and even surpass the imported price. Having such a large portion of just one fruit getting hit with a tariff will cause ripple effects across the economy.

Think of restaurants and other companies that use avocados. It'll cause their prices to go up, which will inevitably result in other people raising their prices.

Over time, this results in lowered demand across the board. You really like avocados, so you go ahead and buy one at an insanely expensive price. Because you did, you don't buy something else that you would have otherwise, depriving that company of your money. When you have hundreds of millions of people facing increased prices because we're charging 25% on everything coming in from our three biggest trading partners, you can see how this lowered demand begins to affect multiple industries over time.

And that is how it affects the overall GDP of the nation, and why it is we'll see a slowdown pretty quickly, but I wouldn't expect recession territory (that's when you're at negative GDP growth) for a while. It sickens me to my stomach, but we'll likely sign trade deals with Russia before the end of the year, and I dare not think what those deals will entail. Regardless, this will likely prop our GDP up a bit as we can sell to Russia, but we'll discover rather quickly that they're horrible partners.

Inflation (what matters most to us)

While inflation isn't the "real economy" and there really isn't a "real economy," it does hit most everyone where it matters most. We're currently at 3% inflation which is high for anyone used to the 2010s, but is low for now. With disrupted supply chains this is where we see the biggest impact the quickest. It doesn't take a lot to imagine how increased prices at the border will translate into more inflation here as those prices eventually trickle out.

This creates a self-feeding cycle in consumers. When there's chaos or inflation or anything that challenges the norm, consumer confidence gets shaky. When that happens people stop spending as much, reducing demand, causing more layoffs, reducing consumer confidence, and so on. Inflation is the surest way to kill consumer demand, and with tariffs and everything else, inflation is inevitable.

Lessons from kansas

Why are we doing this? A question historians will ask about us for centuries to come, assuming there are any historians or people remaining when it's all said and done. I think what strikes us is how all unnecessary it seems. It feels like two bullies getting back at the world for perceived harm, being so privileged in their lives that they've never known what it is to struggle. It feels like Trump and Musk are doing this to get back at a nation that's laughed at them for most of their lives. Maybe there's a bit of motivation for that, who knows. What is known, is that drastic actions like this can take something good and absolutely destroy it - look at Kansas.

Being from Kansas, even though I didn't live in the state during the Brownback years my family did so I followed what was happening rather closely. For the uninitiated, Sam Brownback was the governor of Kansas from 2011-2017. During that time he and the Kansas Republicans took complete control of the state government and launched the "Kansas Experiment." Brownback cut taxes on the wealthy significantly, to the tune of over $200 million in the first year. In order to really "generate" revenue, a lot of state services - such as education - were cut and handed over to privatized efforts. As a result, the tax cuts and budgets cuts were so bad that the Republican legislature voted to repeal the law in 2017, over Brownback's veto. But the damage was done and the state was left hundreds of millions of dollars in the hole, and likely won't recover anytime soon.

What we're seeing with the economy is what happened in Kansas, but on steroids and to the nth degree. The motives behind it are going to vary, but in the end greed is going to be the ultimate motive behind any of these decisions. Whoever in power supports these decisions doesn't support them for the good of the country, but because they can personally benefit. Every single action ciphers more money and more power to those in charge - it's a hostile takeover at the federal level.

We're not powerless to stop this, however. The fact is, the Republicans are tired of their own voters yelling at them, but the big point there is it's not even April and people are already tired of what they voted for. A collapsing economy could result in a loss of power and influence for the people doing the damage. That is what happened in Kansas, after all. But the question is - will there be enough of a State remaining to recover? And to that, I have no answer. What we're facing is unprecedented, but all signs point to it having some pretty negative effects.