Sobering

Donald Trump just conceded that grocery prices are not going to go down. “It’s hard to bring things down once they’re up,” he said.

Sobriety seems to be catching up with the president-elect as he counts the days remaining before he reenters the White House. All throughout the long presidential campaign, he bravely promised voters that prices will go down “very quickly” as soon as he gets elected. “As soon as day one,” he said. Millions of voters were gaslighted.

The postponement of disbelief cannot go on forever. Soon enough reality bites. Trump can no longer lie through this one.

Prices always tend to be sticky. The only way for prices to dramatically decrease is for the US economy to enter into deep deflation. Trump can still make that happen by pushing ahead with his most outrageous policy proposals – mostly embraced by the circus Cabinet he is putting together.

If the US economy enters into a deflationary phase, that will pull down the rest of the global economy. The last time prices dropped across the board in the US was during the Great Depression.

The best that the Trump II administration could do is to bring down the inflation rate. It now appears to have occurred in Trump’s mind that bringing down the inflation rate and bringing down prices are two very different things. Even as inflation slows, prices will still be rising – albeit at a slower pace. Groceries will not be cheaper.

For a while, Trump toyed with the idea of firing the chairman of the US Federal Reserve, Jay Powell. Late in his first term, Trump called Powell an idiot for not bending to his will. During the campaign, he suggested he should have a say in monetary policy, being a rich man. Finally, he realized the Fed Chair enjoys a fixed term in office – precisely to guarantee independence from politicians who might want to toy with policy.

Trump lately declared he will not force out Powell. Wall Street heaved a sigh of relief. The last thing corporate America needs at this time is chaos in monetary policy.

Much of everything else Trump says he wants to do with the US economy will be inflationary.

He has been obsessed with raising a tariff wall around the American economy. Trump insists, against common wisdom, that raising tariffs will be a penalty on America’s trading partners who, almost uniformly, enjoy trade surpluses with the US. He even threatened to raise tariffs on goods coming from Mexico and Canada, ignoring the fact that both countries are partners in the North American Free Trade Area.

Some of Trump’s people quietly admitted that the tariff threat was meant to bully Mexico to win support in suppressing migration across America’s southern border. Mexico’s new president was not impressed. Mexico is the source of much fresh produce for American consumers and vital inputs to US manufacturing. A tariff wall will force up prices in the grocery stores.

Nor were the Canadians impressed. One Canadian provincial governor recently declared that if Trump imposed tariffs on Canadian produce, the country could simply cut off supplies of oil and gas to the US. That will produce severe dislocations in the US economy.

It still has to dawn in Trump’s mind that tariffs are really a sales tax on American consumers. If he raises tariff rates on imports, that will push up prices for American consumers.

Remember the Boston Tea Party that set the stage for the American revolution? British colonial authorities decided to increase taxes on tea by a mere three percent. That helped spark an independence movement. Now Trump wants to raise tariffs by as much as 50 percent – even as high as 200 percent for imports coming from China.

Raising tariff rates will not even protect the struggling American car industry. There is no such thing as a 100 percent US-made car. Most components of the final product are imported. Only by importing more components can American manufacturers hope to be price competitive. A higher tariff wall will actually sink American manufacturing.

Trump is trying to shock and awe the rest of the world with his wild tariff threats. The rest of the world is not impressed.

Should the returning American president insist on waging a tariff war against the rest of the world, all other countries will simply trade among themselves. This will leave the US out of the mainstream of global trade. Reliant on tariff walls, American industry will simply rot away. Filipinos should know.

There are other cobwebs in Trump’s mind.

He has been accusing Taiwan of “stealing” chipmaking from American manufacturers. Taiwan built up its chip industry by itself. The fact is more than 90 percent of high-performance chips are manufactured by South Korea.

Trump remains obsessed with the idea of mass deportation of immigrants. That will be a very costly proposition, not only in terms of constructing detention camps and actually shipping out millions of illegal immigrants. It will also create a large labor gap that Americans cannot fill.

There is little the rest of the world can do about Trump’s flagrant transgressions of economic sensibility. Our best hope is that this barely literate man will be too confused, too senile and too disorganized to get any of his most destructive policy options through.