I was wrong about Trump's tariff masterplan

So, …….. my last video, about how there was actually a MAGA masterplan behind the tariff chaos we’ve seen so far, was WRONG.. because I failed to mention 3 crucial factors. But, if we do add these 3 factors to the MAGA plan, the tariff madness we’ve seen starts to make sense again. In fact, with these 3 factors in place… Trump even becomes — dare I say — somewhat predictable.

Yes, that’s right, I’m still here to show that we cam actually make SOME sense of Trump.

A guy that imposed sky high tariffs on Islands inhabited only by penguins, used clumsy formula’s seemingly written by ChatGPT, raised tariffs, then lowered tariffs, while raising them against China. By the end of this video, it will all fall into place.

You see, in my previous analysis, I focused too much on Trump’s smartest advisors — Scott Bessent and Stephen Miran — and not enough on the power struggle between MAGA economists vying for Trump’s attention.

Like the carefully scheming ‘dynamists.’ The aggressive ‘trade warriors.’ The techno-nationalists whispering about Cold War strategies. And, finally, even the ‘industrialists’, Republicans who want to learn from communist China to rebuild America’s factories.

But, before we dive into the volatile court politics of Trump world, let’s quickly review:

Which parts of my previous analysis held up and what my 3 mistakes were.

Essentially, in my previous video I made the case that, Trump’s extreme tariff actions are NOT COMPLETELY MAD. They are primarily driven by THIS chart, which shows how manufacturing in the US has become far less important, especially under the neoliberal trading system designed by US president Ronald Reagan. Under this system, China became the factory of the world. The previous Trump trade war and Biden’s industrial policy did not stop this trend. So, the Trump team now believes that drastic action is needed.

Now, I think THAT point about Trump’s ultimate motivation still holds up really well, given that according to a recent report by American journalist Tanner Greer, who interviewed over 30 prominent MAGA politicians and thinkers the one thing they all agreed on is that

“””America’s commercial and financial relationship with China underwrote the rise of a powerful rival while undermining America’s own industrial base. “””

However, when it comes to the three-step MAGA masterplan I presented — I now see that I made one small mistake… and two big ones. But, before getting into these, here’s a quick overview of the plan I presented, which was based on speeches and papers by two key Trump aids: Scott Bessent and Stephen Miran.

In my presentation of their MAGA masterplan, the first step was using tariffs as negotiating leverage. This step clearly held up, as since then Trump has hit pause on many of the tariffs, and as Scott Bessent has said:

“bessent””we are moving quickly with many of our most important trading partners. So we had Vietnam and last week we had the Japanese in on Wednesday, South Korea next week.”””

The second step I talked about was that the main aim of reciprocal tariffs would be leveling the playing field, to counter BOTH tariffs from other countries AND —as Trump said himself during the now infamous tariff announcement—

“”trump” currency manipulation and trade barriers,”

In fact, my previous video was recorded BEFORE this announcement and because —big picture— everything presented there was in line with my video, I decided to publish my video right after, … without changing anything.

This I think really shows that it made sense to study closely what Trump advisors like Miran and Bessent had been saying.

However, when it comes to the DETAILS, the tariff announcement included TWO controversies that could NOT be explained by my analysis. First, if the MAGA masterminds were so smart, why did they calculate the tariff level in such a weird way, by dividing the trade deficit in goods of a country over US total goods imported FROM that country and then RANDOMLY diving that by 2? Second, they applied this formula blindly, — handing sky-high tariffs to places like Lesotho or, bizarrely, islands with no people at all.

This brings us to my first mistake. Which I think is minor. In hindsight, in my video, I should have EMPHASIZED more that there is a HUGE difference between HAVING a plan, and actually executing it well.

A competent team would have spotted statistical outliers — like the uninhabited islands — and filtered them out, to focus on real trade threats, like Vietnam or the European Union.

So yes, penguin tariffs are a clear sign of bad execution — but they don’t discredit the quality of the Bessent-Miran MAGA masterplan itself

However, then what about the formula? As economists all over the world rightly noted, it seems extremely, extremely crude to JUST look at trade deficits in goods to determine if a country is manipulating trade with you. For example, Australia is one of the few countries that exports more to China than it imports from them. ….And Australia does NOT manipulate trade with China, it simply has a lot of natural resources that China uses to make goods. This same relationship probably holds true for many countries that have a deficit with the US On top of that, many economists pointed out that the US is a major exporter of services. In fact, big American tech firms dominate certain service exports, like advertisements in Europe. If this was taken into account, the so-called ‘reciprocal’ tariffs with the EU would be far lower.

So, if Bessent and Miran have such a well thought out plan, then why did they come up with this bad formula? .. The answer is… they did NOT. Indeed, Bessent recently said that

“”bessent”I didn’t construct the actual tariff rate, the tariff rates.

, and neither did Miran, who said that it was

“”miran”suggested by by someone else in the administration

This, I think, clearly illustrates my second mistake. I overemphasized the role of Bessent and Miran. Yes, THEY have a coherent plan. But, there are other people, with OTHER plans whispering in the ears of Trump. And, when it comes to the weird reciprocal tariffs formula, Trump clearly ignored Bessent and Miran in favor of other advisors.

So, then does this mean that I was COMPLETELY wrong to present the Bessent Miran plan to you? No, I don’t think so. In fact, Bessent and Miran have recently become MORE prominent in the Trump administration, as Trump increasingly got frustrated by his more aggressive advisors such as Peter Navarro and Howard Lutnick.

But, what this DOES show, is that an update is needed to understand the so-called MAGA masterplan for the global economy. If we want to make sense of Trump’s tariff chaos, I think we should NOT talk about the MAGA masterplan, but rather about

The MAGA masterplanS

So, what are the MAGA masterplanS?, and how do we know which plan Trump is following right now?

To answer these questions, I think we need to return to the work by journalist Tanner Greer, who, based on his interviews with over 30 prominent MAGA thinkers, classified MAGA economists in essentially four categories.

The first category are the so-called ‘industrialists,’ which include people like vice president JD Vance. MAGA industrialists believe that the US needs to broadly re-industrialize by employing the full might of the state, just as China does. Yes, that means using tariffs. But, it may also mean using more industrial policy tools such as subsidies.

Next, we have techno nationalists, such as the folks over at tech defense firms like Palantir and Anduril, who believe broad based reindustrialization is not realistic. To guarantee national security, it is enough to get the upper hand in high tech manufacturing. Tariffs can be used to achieve this, but so may other tools such as the type of state investments the US made during the cold war.

Third there are dynamists, who believe in a small state, and also believe high tech sectors are vital to national security. This faction includes a lot DOGE workers like Vivek Ramaswamy, who suggested tariffs on high tech products are justified but was against the full scale trade war.

Finally, there are trade warriors like commerce secretary Howard Lutnick and trade advisor Peter Navarro. They believe in full scale industrialization AND a limited state. Tariffs are the perfect tool to achieve these two aims because, unlike subsidies, tariffs only need a small government bureaucracy to administer.

Advisors from all of these factions have been — and still are — whispering in Trump’s ear. Some of them, like Bessent and Miran have complicated plans. Others like Navarro and Lutnick have relatively simple plans.

But, on one thing they all seem to agree on is…. Trump ultimately decides.

Trump, a man who has been incredibly consistent on issues like trade, but who is at the same time described as a pragmatist by people close to him. He is well known to like having people with strong personalities under him, fighting for attention. This way he can act as a kingmaker and choose the idea that HE likes.

On top of that, people around him have reported that he likes to purposefully keep people in the dark about what he will do next. To keep them guessing such that it becomes difficult for them to respond to his moves. Essentially confirming these reports he himself told the Wall Street Journal that he likes to make president Xi think that he is crazy and can do anything. A strategy that US president Nixon reportedly used during the cold war.

This gets us, I believe, to a model that can actually help us predict what Trump will do next. The president essentially has a court of people with plans around him. He lets them compete for his attention and HE picks the PARTS OF THE PLANS from those that are CURRENTLY his favorite advisors. Until recently, these were trade warriors warriors like Lutnick and Navarro, who may have suggested the simple reciprocal tariffs formula. **

If, on top of that, we take into account that the Trump administration’s execution can be pretty half baked, I think this model for how Trump selects between MAGA masterplanS can explain almost everything we have seen from Trump so far.

While in his first term, he was still surrounded by mostly dynamists as well as old school neoliberals that love free trade, his current administration consists almost exclusively of hard core trade warriors like Navarro and more sophisticated dynamists like Miran. So, it makes sense that he ended up picking a MIXTURE of their plans in these last few weeks.

However, there is still one thing that does not make sense.. Why did Trump back down from so many tariffs so quickly? Before negotiations really started? Making him look weak? This brings us to the third mistake I made in my previous analysis, which is purely focusing on de-industrialization. You see, on top of viewing de-industrialization as a mortal threat, both trade warriors and dynamists believe that US government debt is unsustainable. So, while Trump no longer seems to care about the stock market, he DOES care about the bond market, which started freaking out after his sky high tariffs.

Or as Trump reportedly said, bond markets were becoming a bit Yippy.

Yippy bond markets meant that the US would need to borrow at an ever increasing interest rate, making government debt unsustainable.

So, THAT is, in my opinion, the new master plan.. Or selection of masterplans.

If we want to predict what Trump will do next, we first need to analyze the plans of ALL of his closest advisors. Right now, his closest advisors are trade-warriors and dynamists. So, we can expect tariffs to stick around in favor of subsidies. Second, we need to make an assessment of which advisor is most likely to convince Trump. Right the balance of power is shifting from trade-warriors like Navarro and Lutnick to Dynamists like Miran and Bessent. If this remains the case, we can expect more negotiations and potentially even some alliances forming. Third, we need to take into account that Trump likes to keep us in the dark because he believes THIS makes him more effective. So, we can never be completely sure. Finally, fourth, we need to closely watch what is happening in the bond markets, and, as we get closer to the election, I think we need to start considering his polling numbers as well.

So, in the end, I think we are then back to the MAGA masterplan presented in the previous video. With Bessent and Miran closer to Trump then ever, their plan is more likely than ever to be adopted. However, Trump is notoriously for firing and hiring advisors. And, even if Trump were completely transparent, it would still be hard to predict how the world reacts to his trade moves — and how he’ll respond in turn.

So, to truly know where the Trump trade war is heading next, I think we need to do a tactical analysis of who has the best cards right now, the US or China. On top of that, we need to get an idea of what the economics of the post-neo-liberal world order will look like. Indeed, these are two upcoming videos. So, subscribe to the channel and hit that notification bell if you want to make sure you don’t miss my next releases.

And, if you want more content before that, I highly recommend you check out the following two articles from our advertising sponsor: the Economist.

First check out this super interesting article about geopolitical schools of thought in the MAGA movement about how ‘restrainers’ are trying to take over from primacists and then this article about how the bond market panic was not all about Trump.

Indeed, if you want to get the best insights into the rapidly changing economic order, then I highly recommend you use the link below to get yourself an annual subscription to the Economist for a 20% discount.

Whether you prefer the digital edition, or you are like me and prefer to catch up on the global economy during the weekend, sitting down with a nice cup of coffee and the paper edition, you’ll always stay on top the latest global developments no matter where you are. So, don’t miss out – click the link in the description or top comment, or head over to economist.com/moneymacro to claim your exclusive 20% discount today.