Boycott America

The Likely Reaction to Trump's Selling Out Ukraine and Starting a Trade War

Photo by Liam Edwards on Unsplash

President Trump and Vice President Vance had quite the day the other day — screaming at Volodymyr Zelensky because he wouldn’t grovel at their feat and, by extension, those of Vladimir Putin. Nor was Zelensky ready to agree to a Trumped-up peace deal without a real U.S. security guarantee. Trump’s claim that the presence of U.S. mining companies in Ukraine would keep Putin at bay was risible.

Zelensky told the duo (Why was Vance there? Did Trump need backup?) the obvious — you can’t bargain with Putin from a position of weakness and Ukraine’s sovereignty was not theirs to sell down the river. After losing so many and so much for so long, Zelensky wasn’t playing ball without understanding the end game.

As Trump became more and more apoplectic, claiming Putin had all the cards (The U.S. has no cards?), and wailing about WWIII, Zelensky got Trump to show his real hand — an end to U.S. support for Ukraine and an end to U.S. participation in NATO. In so doing, Trump killed the fantasy that his actions will differ from his words.

Vance’s nauseating display — ordering Zelensky to thank our country, which he’s already done a zillion times — will, hopefully, end J.D.’s political career. If any thanks were due it was thanks by Trump and Vance to the courageous people of Ukraine for holding back the Russian hoards. We are, as Zelensky pointed out, lucky to have an ocean separating us from Putin. That ocean includes an army of Ukrainians.

How Will European Leaders React?

Macron, Starmer, and other European leaders will stop crossing the pond to kiss our King’s ring and persuade him he’s being played by Putin. As Trump made clear in his Oval meltdown, he’s not persuadable — for a simple reason. He’s either a Russian agent or auditioning perfectly for the job.

The Europeans hold some $300 billion in frozen Russian assets. They’ll likely start using those assets to replace U.S. military aid to Ukraine as Trump withdrawals U.S. support — something he’s about to do. This should give Europe enough time to rearm, including, in the case of the UK and France, expanding their nuclear arsenals.

European leaders will also realize that full-scale trade war with the U.S. is imminent. Again, Trump has shown he’s good to his threats. And his threat is a 25 percent tariff on all European imports. The EU, Trump says, was created “to screw” the U.S. This is utter lunacy, but no matter. Europe will tariff U.S. imports at the same rate. It will also expand trade with China. But this isn’t the worst-case scenario. If Trump starts trading with Russia, as he’s apparently dying to do, Europe will impose sanctions if not a total embargo on U.S. trade.

How Will the European Public React?

Here’s a clue. Tesla’s sales are down 50 percent in Europe. Europeans, leaving aside the neo Nazis, have despised Trump for years. They’ve now come to despise his latest leading stooge — Elon Musk. The combination of the U.S. abandoning Ukraine, the U.S. abandoning NATO, and the U.S. imposing tariffs will surely lead to a spontaneous European boycott of American products. Canadians and Mexicans will boycott U.S. goods as well. So will hundreds of millions of other freedom-loving people across the globe. I’m old enough to have personally witnessed Europeans shouting Americans Go Home during Vietnam. It comes with Don’t buy American, don’t invest in America, don’t visit America, and don’t study in America.

Sure enough, the day after I published the first draft of this column, the NY Times reported that the renowned German violinist, Christian Tetzlaff, had decided to boycott the United States, cancelling 20 concerts. And The Financial Post reported that Canada Airlines was reducing flights to our country. In short, Boycott America is on. Tourism, by the way, accounts for over $2 trillion in U.S. exports. Yes, we are selling goods and services to foreigners while they are visiting our country, rather than sitting at home. But that matters not. How much will our trade deficit rise if, say, tourism drops in half? It will double.

How Will the American Public React?

If Trump’s words and deeds deliver what they should — revulsion for abandoning a courageous underdog attacked by a sociopath, revulsion for siding with Russia over Europe, revulsion for threatening our neighbors and allies, both economically and physically, revulsion for permitting a neo-Nazi to run our government, revulsion over voting against our allies at the UN, and revulsion for the high inflation and recession that a global trade war will produce, Trump’s likes will turn to dislikes. He might bear in mind the fate of Richard Nixon whose landslide victory was quickly followed by massive protest marches.

The Danger in the Vacuum

Without America’s nuclear shield, many European countries, including Ukraine, will seek to obtain nuclear weapons. In the short run, they will form plans to turn Russian nuclear reactors into dirty bombs. What about Taiwan? Watching the U.S. abandon Ukraine will likely lead Taiwan to lease itself, including its massive chip industry, to China. And China? It can help Trump isolate the U.S. by telling all its trading partners they have a choice. They can trade with China or they can trade with the U.S., but not both.

The Art of the Screwup

Trump is supposedly the great dealmaker. He was going to negotiate an end to North Korea’s nukes. How’d that work out? North Korea has more nukes than ever and we’re voting with it and Russia at the UN. As for Ukraine, Trump said he’d settle the conflict in a day. Right. Maybe he should send J.D. for his first visit to Ukraine and gauge the reception. Have him tour every capital in Europe for that matter. It will make great television.

Taking Financial Cover

The stock market hates uncertainty and will likely continue to tank. It fell 53 percent in the Great Recession even though GDP dropped by only 3 percent. It fell 50 percent when the Dot Com bubble burst. It fell by 86 percent in the Great Depression. The message here is that stocks aren’t safe. They aren’t safe long-term and they certainly aren’t safe short-term.

Consumer confidence is one measure of uncertainty. It just fell at its fastest pace in over three years. Inflation is also creeping up and is now expected to run at 6 percent over the next year. A higher mean comes with a higher variance, i.e., more risk.

Personally, my wife and I have moved out of stocks into long-term, inflation-indexed bonds, i.e., TIPS. 30-year TIPS are currently yielding 2.24 percent real. That’s quite high, historically speaking. But TIPS aren’t perfectly safe either. A crazy enough President might opt to default on federal debt.

One hedge against U.S. economic isolation as well as default on the national debt is buying foreign bonds. They obviously don’t bear U.S. default risk and will appreciate if, as I expect, the dollar begins to fall.

I’m also concerned about Musk’s access to our Social Security covered earnings records. Everyone should download their covered earnings histories so they have proof of what they are owed. The just-announced mass firing of 7000 Social Security employees makes doing this even more important.

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