Critics like me predicted Trump's trade war would tank the economy: Now, in a stunning mea culpa, DAN MCLAUGHLIN reveals why he was so wrong

Daily Mail​

2 days ago

One-hundred and twenty days out from President Donald Trump 's self-declared 'Liberation Day,' you can't blame the administration for wanting to crow, 'I told you so.'
On April 2, Trump rolled out a vast slate of taxes on about sixty countries in the most expansive US tariffs policy in nearly a century, triggering a flood of apocalyptic predictions of everything from an uncontrollable trade war to US recession to global financial doom.
In March, in anticipation of the tariff rollout, Goldman Sachs slashed its forecast for US GDP growth in 2025 from 2.4 percent to 1.7 percent. Two days after Trump's Rose Garden address, JP Morgan predicted a 60 percent chance of recession in 2025.
And even I, your humble Daily Mail contributor, sounded the alarm in April: 'Donald Trump has made a complete hash of economic policy. His tariffs are a bad idea, badly implemented, and badly explained.'
To be honest, I still believe that. But Trump has demonstrated an ability to adjust on the fly that many failed to appreciate. And now – while I won't dismiss the spectre of worldwide cataclysm just yet – things are looking pretty good.
US GDP growth surged between April and June, increasing at an annual rate of three percent, beating estimates.
The US stock markets have notched historic climbs.
Consumer sentiment is rising, as is consumer spending, which grew at 1.4 percent between April and June – despite Trump's tariffs – up from 0.5 percent from January to March.
Unemployment remains in check and recession fears have subsided. JP Morgan now puts the chances of a downturn in 2025 at 40 percent.
A unified front of aggrieved US trading partners hasn't formed to force Trump to back down, nor have they hobbled American influence abroad.
And while the president's position in the polls isn't great, it has stabilized, and more Americans are telling pollsters that they approve of his handling of the economy.
Now, with the administration announcing new trade deals, notably with the European Union, nearly everything appears to be coming up Trump.
On Sunday, EU negotiators agreed to a 15 percent tariff. That's less than Trump's punitive threats, but up significantly from around 5 percent tariffs before Trump took office, and more painful than the 10 percent deal that the United Kingdom inked in May.
The European bloc had to make promises of nearly $2 trillion in new investments in the United States and new purchases of American energy and weapons. Selling American-built weapons is also a better way for the government to create jobs than trying to use tariffs to reinvigorate industries that will never return to the US soil.
But all this doesn't mean the EU deal is flawless.
Higher tariffs are still a cost on American consumers (the US inflation rate, which excludes the cost of tariffs, has been ticking up from 2.3 percent in June) and companies that have been hesitant to pass those added costs to their customers are likelier to do so now that the tariffs are permanent.
Additionally, many of the promises of new EU purchases may not be enforceable, because the EU doesn't have the full powers of a sovereign government to guarantee compliance.
Finally, if the point of Trump's tariffs was to break down import barriers to create greater access for American goods in the European market, Trump left a lot on the table, from digital and carbon levies to GMO restrictions on American agriculture.
But it is clear that Trump got the better of the EU, which swallowed much higher tariffs just to avoid a harsher deal, while doing little to improve its position.
There's an old poker saying: if you can't spot the sucker at the table, you're the sucker.
Well, we've spotted the sucker: it's the EU with its cumbersome multi-national structure, unable to act decisively or resist Trump's overwhelming pressure campaign.
So, are these developments proof that sky-high tariffs work?
No. But it is a tribute to Trump's flexibility.
He believes more strongly in tariffs than in any other idea in politics, but he's still willing to throw them overboard to get what he wants.
When markets and opinion polls were hitting the panic button, Trump didn't dig in; he shifted course and climbed down from his most extreme tariffs.
Trump doesn't plan. He negotiates by feel and gut instinct. And there are plenty of dangers ahead for Trump's trade strategy.
The toughest trade deals, from China to Canada and Mexico, are yet to be inked. And the Federal Reserve again declined to lower interest rates – signaling persistent fears of a return to high inflation.
However, the worst predictions of recessionary ruin were overstated.
Trump is a master of hype, and he's driven his critics to a lot of overhype.
At least, some of us have enough sense to take a step back – and reconsider.