What motivates President Donald Trump’s chaotic, stop-and-go, incoherent tariff moves? On April 9, a few days after his “reciprocal tariffs” had come into force and after worrying cracks appeared in financial markets including the market for Treasurys, he announced a 90-day pause for most “reciprocal tariffs” over 10%. He explained that people were “getting … a little bit afraid.” “I thought that people were jumping a little bit out of line. They were getting yippy.” In the end, he said, the pause “was written from the heart.” (“Why Did Donald Trump Buckle?” Financial Times, April 9, 2025.) Interestingly, Venezuela’s dictator Nicolás Maduro, who has run his country into the ground, said something similar: “I act out of love” (“Nicolás Maduro, Venezuela’s Contested President,” Financial Times, August 2, 2024).
If Trump’s apparent incoherence is not driven by love, is there some grand plan hidden behind it? Financial Times columnist Janan Ganesh argued that there is none: it is irrationality pure and simple. For example, he says, Trump pursues both the Maga goal of containing China and the “Liberation Day” goal of hitting imports from friendly countries (“The Hopeless Search for Trump’s Cunning Plan,” April 9, 2025). Ganesh concludes:
In the end, there are just too many contradictions in the Trump worldview to warrant any talk of a grand plan. … If strategy means anything, it is having a sense of the connectedness of things. There is none of that here.
The problem with this sort of hypothesis, although tempting in this case, is that it can explain everything and its contrary. It is safer—and more natural for an economist—to start with a rational choice framework, even if some qualifications are necessary. Like any individual in the ordinary course of life, Mr. Trump’s first goal is to further his own interest. This motivation is especially strong in politics. Mr. Trump’s preferences and interests incorporate an unusual need for recognition and a devouring lust for power. However, he appears to choose means that are ultimately inconsistent with his goals, that is, his instrumental rationality (as opposed to the logical coherence of transitive preferences) is defective. This is likely due to his deep ignorance of how society and the world work, something difficult to understand without economics. (If he becomes president for life, I will have to review my hypothesis of instrumental-rationality failures, and Gonesh will need to admit that the president did have a cunning grand plan.)
Individuals do make mistakes in their private affairs, but they have strong incentives to correct them. If one reaches the summit of the state, the cost of his mistakes is mainly borne by others, and his incentives to correct them are lower ceteris paribus. The more power he has, the more costly mistakes he can afford—or at least he thinks so.
The grand plans of states are typically nothing but what is in the rulers’ self-interest. A ruler’s self-interest requires that he rewards his more useful supporters, which are typically special interests and electoral contributors. A ruler’s need to satisfy the interests of useful supporters will often give his policies the appearance of incoherence. Moreover, a populist ruler tends to make his decisions “intuitively,” as Trump said he would do before he made exemptions for some electronics (“Trump Excludes Smartphones From Reciprocal Tariffs After Market Rout,” Financial Times, April 12, 2025). After all, the populist leader knows the truth in his guts, which are the guts of “the people” that he embodies. So much for the glorified state’s planning rationality. Yesterday, less than two days after pausing most of his tariffs for 90 days, Mr. Trump announced that the pause may not last that long anyway (“US Tech Tariff Exemption Will Be Temporary, says Trump,” Financial Times, April 13, 2025).
“This is starting to look more like stand-up comedy that ‘tariff policy,’” says Jose Pablo, a businessman and investor who frequently comments on this blog.
The idea that the current president’s trade spasms aim at making “deals” in favor of “his” people illustrates his ignorance of both economics and the minimal ethics required to maintain a free society. Imposing tariffs on another country amounts, in reality, to imposing a tax on one’s fellow citizens. When Trump repeats “What they charge us, we charge them,” he is really saying “What they charge their citizens or subjects, I charge mine.” He seems to intuitively recognize this when he makes exceptions. The moral error resides in the kidnapper’s deal: he kidnaps you and then offers you a deal, a ransom against your freedom. This “art of the deal” has been practiced by unchained Leviathans against their citizens, foreigners, or both.
Why don’t voters see all that or take so much time to discover it? One major explanation proposed by public choice theory lies in voters’ “rational ignorance.” Since the individual voter has no influence on an election result, he has no incentive to spend time and other resources gathering and analyzing political information (see also my Regulation piece “Mencken’s Theory of Democracy”).
The libertarian and classical liberal ideal mainly aims at constraining rulers and preventing them from doing harm. What has saved us for a few hundred years in many Western countries were the many strong institutions (“institutions” in the sense of both sets of rules or “norms,” and powerful countervailing groups) that ensured the decentralization of power. A widespread belief in individual liberty reigned. These factors protected us, even if imperfectly, against the will and whims of the people and its demagogues.
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