Will America Tariff Itself?
Will America Tariff Itself?
Is “Pearl Harbor” really the most apt metaphor for what happened in Russia yesterday?
If memory serves, the nation that staged the surprise attack on Pearl Harbor ended up… losing the war.
Anyway, we’re not going to spill much digital ink today on Ukraine’s drone attacks inside Russia. There’s too much we don’t yet know to draw firm conclusions. Fog of war and all that. Maybe tomorrow.
But there’s a related matter we’re able to wrap our arms around already: Washington is on the verge of amping up the financial warfare against Russia.
And the consequences could be dire…
“If this bill were to pass, it would cause an economic calamity on a scale never before seen in our country.”
So writes Sen. Rand Paul (R-Kentucky) of a bill in Congress called the Sanctioning Russia Act.
As you’re likely aware if you keep up with these daily missives, Russia is already subject to a vast array of economic sanctions imposed under the Biden administration and still in effect under Trump.
They’ve done nothing to achieve their intended purpose of wrecking the Russian economy or Russian currency.
So in true Washington fashion, a bipartisan group of senators has decided to double down on what’s proven not to work.
The key provision of this bill is a 500% tariff on imports from all countries that buy Russian energy.
That’s a lot of countries.
“Dozens of countries continue to trade with Russia directly and indirectly including key strategic allies and even the United States itself,” Sen. Paul points out.
“In 2024, the United States imported $624 million worth of enriched uranium and plutonium directly from Russia… Are the proponents of this legislation honestly seeking to require the president to enact a 500% tariff on ourselves?”
Even if not, the tariff would hit U.S. allies hard. Europe still can’t wean itself off Russian energy; imports of Russian liquefied natural gas into the European Union grew 19% between 2023–2024. Japan also relies on Russian LNG.
So the bill can’t possibly pass, right? Wrong. Out of 100 senators, the measure has 81 co-sponsors.
Of course, there are the usual suspects. The lead sponsors are none other than warmongering Republican Lindsey Graham and warmongering Democrat Richard Blumenthal. Both of them just happened to pay a call on Ukraine’s president Zelenskyy last week in Kyiv.
But the list of co-sponsors also includes MAGA-adjacent Republicans like Alabama’s Tommy Tuberville, Oklahoma’s Markwayne Mullin and Florida’s Rick Scott.
As independent reporter Michael Tracey points out on X, many of these names “would not necessarily fall in the typical category of GOP Ukraine hawks.” A companion bill in the House is likewise gathering bipartisan support.
The president isn’t tipping his hand about what he’ll do if this bill reaches his desk. Obviously there’s already a veto-proof majority in the Senate.
Then again, assuming the bill becomes law, the rest of the world might simply ignore it.
Recall that a month ago, Trump declared on social media that “any Country or person who buys ANY AMOUNT of OIL or PETROCHEMICALS from Iran… will not be allowed to do business with the United States of America in any way, shape, or form.”
And yet… last week, a new rail line connecting China to Iran started carrying Iranian oil to China — as well as Chinese goods to Iran.
“Railway infrastructure connecting Iran and China allows freight trains to travel from Shanghai to Tehran in 15 days, compared to 30 days via the maritime route,” reports the news site The Cradle.
But for the moment, China continues to “do business with the United States of America.”
So assuming the bill passes, expect one of two outcomes.
“If implemented,” says Sen. Paul, “these tariffs would make U.S. trade with most of the world untenable, raise prices for American consumers and risk further weakening the dollar.”
And if not implemented, no one overseas will take Washington’s threats and bluster seriously anymore, regardless of who’s in the White House.
Trade War: Who’s Violating Whom?
The stock market is starting a new month the way the old month ended — bouncing with every trade war headline.
The market slipped on Friday when Donald Trump declared Beijing “HAS TOTALLY VIOLATED ITS AGREEMENT WITH US” — that is, the 90-day tariff truce that U.S. and Chinese negotiators reached in Switzerland last month.
The market slipped further this morning when China’s Ministry of Commerce declared Washington is the one who “severely violated” the truce.
➢ Trivia: One of the mainstream financial outlets mentioned that the stock market just put in its best month of May since 1990. It neglected to mention the economy tipped into recession that summer and the market took a 16% spill by that fall. No, that’s not a prediction history will rhyme, it’s just context for factoids the media love to entertain us with.
Exactly what got under Trump’s skin last week is a bit murky. Let’s try to get some clarity.
The mainstream narrative is captured in a front-page Wall Street Journal article published Saturday: “Beijing has held up approval of export licenses for rare earths and other elements needed to make cars, chips and other products.”
Few people bothered to read the sentence that followed, which conveyed the real news: “China’s decision to stall on rare earths, according to people familiar with the matter, was in response to the U.S. Commerce Department’s May 13 warning against the use of Huawei Technologies' Ascend artificial-intelligence chips ‘anywhere in the world.’”
Anywhere in the world? Including China?
For its part, the administration says the warning merely reiterated existing policy. But the warning also came only days after U.S. and Chinese negotiators reached that 90-day truce.
Elsewhere, the commodity complex is on a tear — perhaps because of the sudden escalation in the Russia-Ukraine war, or perhaps because of something else.
At last check gold is up $81 to $3,369. And silver has rocketed $1.38 or 4.2% higher to $34.33.
The ceiling on silver is $35, as it’s been for a while now. “I believe that if we surpass $35, to the point where $35 changes its polarity from a resistance level to a support level, we’ll see $50 much sooner than I can imagine,” suggests our recovering investment banker Sean Ring in today’s Rude Awakening.
The HUI index of gold stocks is up 5.6% to 420, the highest since early 2013.
Crude is up $1.77 or nearly 3% to $62.56.
But crypto looks moribund, Bitcoin at $104,432.
DOGE, We Hardly Knew Ye
With apologies to Shakespeare, we come to bury DOGE, not to praise it.
As you’ve likely heard, Elon Musk has formally wrapped up his formal government role — Musk and the president exchanging smiles and handshakes in the Oval Office Friday.
I admit: Even I got sucked in at the beginning. How could I not when Musk and Mr. Small Government himself, Ron Paul, were trading ideas and memes on X.
In fairness to myself, I was already expressing skepticism weeks before Musk dialed back his initial aim of $2 trillion in spending cuts to $1 trillion.
But hope sprang eternal: In February, Trump said in his Super Bowl interview that it was time to unleash DOGE on the Pentagon… and Musk said Paul should lead an audit of the Federal Reserve.
[Voice of narrator: Neither happened.]
By mid-April, the $1 trillion was slashed by 85%. Musk said during a cabinet meeting, “I’m excited to announce that we anticipate savings in ’26 from reduction of waste and fraud by $150 billion.” And as we pointed out at the time, $150 billion was the amount by which Trump wanted to raise the Pentagon budget.
In the end, the actual savings may be as little as $9 billion, or 0.1% of the budget.
“The White House will ask Congress,” Bloomberg reports, “to enact $9 billion of spending cuts into law — a small portion of the $175 billion in savings that Elon Musk’s Department of Government Efficiency claims to have found.”
A few days ago, Musk threw in the proverbial towel, adopting the position of nearly every Republican politician and policy wonk for the last 40-plus years: The only fix for a spiraling national debt is to “grow our way out of it.”
As our favorite political reporter, the aforementioned Michael Tracey, posted a few days ago: “Musk's role was to throw out ‘shiny objects’ for frantic social media consumption and give the vague impression that something momentous was happening, as though ‘streamline federal agencies’ and ‘modernize computer systems’ isn't just a reheated Bill Clinton initiative from 1993.”
The investment implications? As independent newsletter operator Luke Gromen observes on X, the only times GDP has outgrown the debt were during episodes of high inflation (1965–1985, 2020–2023) or an epic asset bubble (1995–1999).
Neither scenario is good for long-term Treasuries. But we’ve been down on T-bonds for a while.
Comic Relief
This is sort of a follow-up to Friday’s edition about your editor’s media consumption…
As it happens, I’m reading a book at the moment called Your Stone Age Brain in the Screen Age, by George Washington University neurologist Richard Cytowic.
So far the biggest takeaway is that I should counteract the 24/7 onslaught of information by taking walks in nature — which I already do!
Speaking of my media consumption…
Media Madness
We have a bulging mailbag. It’s going to take all week to catch up.
“Thanks for your reporting and especially the rundown of your day!” a reader writes after Friday’s edition. “Gives perspective of where you’re coming from.
“I don’t know how many times I’ve read your articles and said, ‘God dammit that guy pisses me off, but he’s right!’ I usually have a belly laugh at myself seeing influences drop.
“Thank You Dave — keep up the good work!”
“Maybe you should try some other conservative outlets,” a reader suggests.
“Although I normally enjoy the daily 5 and get something out of it, lord knows you spew enough leftist drivel. Try The Epoch Times and the Daily Signal. Yes, the latter is a product of the dastardly Heritage Foundation, but you will find a lot of truth in their writings.
“Also, I have found Jeffrey Tucker's writings to provide a very thoughtful perspective.”
Dave responds: Mr. Tucker is a former colleague, one I still lean on now and then — to wit, my five-year retrospective of “COVID 9/11” in March.
Epoch Times is OK as long as one is aware it’s operated by a sect that has a major beef with the mainland Chinese government. And I still want to know why they parted ways with perhaps their best reporter, Ken Silva. (He’s now working at Headline USA.)
“Give these a perusal,” suggests our final correspondent today: Tangle, 1440, The Merge and International Intrigue.
“The last two afford me information on defense contracts and geopolitical news and opinion.
“WAPO, BBC, NYT are all a waste of time unless you just want to see what unverified trash they are peddling.
“However, I will have to credit my local newspaper for a coverage on Page 2 under Briefs.
“There I found a feel-good story about Nvidia’s collaboration with Intel on a supercomputer named after a female scientist who worked on Crispr’s genome program.
“I have all three stocks in my portfolio!
“There’s an old adage which is good to remember. A piece of paper will lay down and let you write ANYTHING on it! Enough said.”
Dave: As it happens, my wife relies on 1440 as a straight-up, down-the-middle news summary that doesn’t drive her insane.
We have much more reader feedback on other topics to get through — starting tomorrow!
Best regards,
Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets
