Welcome to Home & Away. I will resist commenting on the regime change at the Kennedy Center, the pausing of any enforcement of the Foreign Corrupt Practices Act, the Justice Department’s dropping of charges against New York City’s mayor, the confirmation of Robert F. Kennedy, Jr., and the over-by-the-end-of-the-first-quarter Super Bowl. Instead, I will focus on four other matters that dominated the week: tariffs, the new administration’s efforts to remove checks on the executive branch, Gaza, and Ukraine.
Not-so-Terrific Tariffs
This week saw tariffs of 25% imposed on steel and aluminum imports with no exemptions for allies. History suggests that such tariffs could protect the relatively small number of existing jobs in the steel and aluminum industries and possibly create some new ones over time. But all this will come at a cost that will far outweigh any potential benefits.
Meanwhile, the costs will be of two sorts. First, U.S. businesses that use steel and aluminum will have to pay much more for these materials. Assuming such costs are passed on to would-be consumers, as is most likely, demand will fall. And when demand does fall, businesses that consume steel—such as those in the construction, automobile, and energy sectors—will be forced to lay off workers or close. And by the way, the higher prices caused by the tariffs will also fuel inflation, which may already be gaining momentum.
If this were the end of it, it would be bad enough. But we should expect retaliation as other governments will impose tariffs of their own against American exports. This will of course raise the price of and reduce demand for such exports, which means American companies will sell less abroad. Here, too, many businesses in this country will suffer so that potentially a few can benefit. Don’t take my word for it: this is what the Wall Street Journal editorial board, that well-known bastion of progressive anti-Trump woke-ism, had to say.
Just to be clear, these tariffs are fundamentally different from the kind that were announced against Canada and Mexico only to be quickly paused earlier this month. Those tariffs could best be described as instrumental, put into place to bring about unrelated policy changes related to border security, for example. These new tariffs are meant to replace imports with domestically produced goods (what economists term import substitution), which is classic protectionism. And just to make it even more confusing, there will be what are described as “reciprocal” tariffs. The intention to impose them was announced by the White House yesterday. These will be put into place to match the impediments other countries maintain to protect their economy from goods and services produced elsewhere. It sounds reasonable, except it is at odds with principles that have governed world trade since the end of World War II, a period in which trade flows and wealth in this and other countries have increased dramatically. The new approach will lead to a world of higher prices, less trade, reduced economic growth, and less consumer choice. Much better would be a policy designed to lower tariffs and other barriers to trade both at Home and Away.
Let me make one other point about tariffs. Donald Trump inherited an economy that was pretty much humming along. Growth of the world’s largest economy was near 3 percent. Inflation was also around 3 percent and far down from what it was in the immediate aftermath of the pandemic. Employment was high and unemployment low. In short, of all the issues awaiting the 47th president in his inbox, the economy was close to the bottom in the sense of needing attention. Which is of course what it is now getting.
This raises the question of why? Two things come to mind. First, Trump found it hard to accept that Biden’s handling of the economy, which he railed against during the campaign, turned out to be pretty good by the end. And second, Donald Trump may not believe many things, but one thing he fervently does believe is that trade has been bad for this country and that tariffs are needed to bring back the good old days of a dominant, high-employment American manufacturing sector.
These days are not coming back, though, as technology—more than trade—has permanently eliminated many jobs. And while governments such as China unfairly advantage their exports, it also turns out that the United States is not all that competitive in some areas. And that’s just fine, as David Ricardo can explain. We resist recognizing such realities at the cost of higher prices, higher unemployment, fewer choices, and damaged relationships with governments that thought they were doing business with a friendly country that played by the rules.
Testing Times
One test sure to come from all this will involve the White House and the Fed over interest rates. The president on Wednesday called for lower interest rates in a Truth Social post, but Fed Chair Jerome Powell will likely refuse given that inflation seems to be picking up.
Another test has also emerged, one between the executive branch and the judiciary, between Articles II and III of the Constitution. (Article I, the legislative branch, has become near irrelevant as Democrats are in the minority and Congressional Republicans seem to have forgotten their prerogatives and responsibilities.)
The Trump administration continues to push the outer boundaries of executive power, questioning whether the judiciary can even restrain its actions. For instance, Vice President JD Vance tweeted this weekend that, “Judges aren't allowed to control the executive's legitimate power.” And the White House press secretary called legal challenges to Trump’s executive orders “an abuse of power” just this Wednesday. But on issues ranging from the Trump administration’s attempt to end birthright citizenship and its refusal to spend money authorized and appropriated by Congress and signed into law, the courts have continued to push back. The question is what happens next. The courts have the authority but lack the means to enforce their decisions. This is a matter of norms more than anything else.
To be determined is whether this White House is prepared to accept judicial constraints on what it can do—and, if it is tempted to blow through those limits, whether the Supreme Court is prepared (most likely by a 5-4 decision) to rule against Trump. No less of a question is whether Congressional Republicans will continue to look the other way or side with the judiciary and back the principle of judicial review, which has been a critical element of our democracy with bipartisan backing for over two centuries.
This president likes to mention William McKinley and manifest destiny, and his vice president is fond of Andrew Jackson, who early on in his presidency chose to ignore a Supreme Court decision, famously stating, “John Marshall has made his decision; now let him enforce it.” As for me, I will go with James Madison, the main author of Federalist 51, which, among other things, developed the notion of checks and balances. I would call this our Madisonian moment. A great deal is on the line. Anyone doubting this should read the new article titled “The Path to American Authoritarianism: What Comes After Democratic Breakdown” by Steven Levitsky and Lucan Way in Foreign Affairs. It is nothing less than chilling.
Let me make another observation about the Department of Government Efficiency (DOGE), Elon Musk, and his collaborators’ efforts. Whatever the effort’s mission truly is, it appears to be about a lot more than promoting efficiency. Efficiency entails changing processes to reduce the resources required to produce a given output. To get more for less. And that would be a useful undertaking, as there are many examples in government of waste, and, more rarely, fraud that need to be exposed and fixed. But destroying an agency such as USAID, or freezing and cutting programs at the NIH or anywhere else, over mission or policy is not related to efficiency. That is not and should not be DOGE’s mandate. That is for Congress and the agencies to decide, given their constitutional mandate.
Meanwhile, DOGE is proceeding with its attempts to massively reduce the size of the federal workforce. Some efforts involve across-the-board buyouts. In other instances, individuals are being targeted because of their jobs (inspectors general) or past involvement in activities (January 6 investigations and involvement in DEI initiatives, for example) deemed as hostile to this president and his administration. This is about politicization, not efficiency.
Unreal Estate
The third issue I want to highlight requires turning to the Middle East, something I have done often in this newsletter since October 7, 2023. My focus this week is less on the implementation of the Israel-Hamas accord, although there are any number of reasons to be skeptical that the accord will ever reach, much less conclude, its second phase which would result in an open-ended ceasefire. Indeed, it remains possible that things will break down during the first phase, bringing an end to the uneasy calm that has existed in Gaza for several weeks as well as blocking additional hostage-for-prisoner exchanges.
What I want to do instead is focus on President Trump’s decision to double or even triple down on his proposal that the two million Palestinians who live in Gaza ought to be sent to Egypt and Jordan and that Gaza ought to be handed over to the United States and rebuilt but not for Palestinians. What is more, the president suggested that aid to Jordan and Egypt might be reduced or cut off if they refused to go along with this proposal and accept large numbers of deported Palestinians. He subsequently pulled back from that threat after meeting with Jordan’s King Abdullah II, who, while continuing to vocally oppose wholesale deportations of Palestinians from Gaza, agreed to take in two thousand Palestinian children in need of urgent medical care.
As I discussed on Fareed Zakaria’s show last Sunday, the president seems not to understand that the Palestinian desire for better lives does not in any way diminish their determination to stay in Gaza and build a country of their own. Even casting international law aside, Palestinians cannot be bought off by promises of new houses in neighboring countries. Nationalism remains a force to be reckoned with. I look forward to reading the piece that explains just how this proposal came about and who in particular persuaded the president it was a winner.
We could well end up with the worst of all worlds if the president continues with his attempts to force his plan on the region. We would likely see not just renewed violence in Gaza (which would play into the hands of Hamas and Iran, which is seizing on this opportunity to bolster its ties with regional actors, including U.S. allies, who are opposed to Trump’s proposal) but also increasing clashes in the West Bank, which is edging ever closer to outright conflict between the three million Palestinians there and the more than five hundred thousand Israeli settlers living in the occupied territories, many of whom want to see the Palestinians there also transferred out so that the land can be formally annexed by Israel. No one should ever underestimate the potential for the Middle East to get worse.
It will be interesting to see what Jordan, Egypt, Qatar, Saudi Arabia, and the UAE come up with as an alternative to what Trump has put forward. In particular, I am curious to see if they put forward a plan calling for Palestinian (but not Hamas) control of Gaza, an Arab stabilization force, and Israeli military withdrawal. Such a proposal could also include a Saudi commitment to normalize its relationship with Israel as a carrot. But everything would depend on Israel’s willingness to support a political process that could potentially lead to a Palestinian state down the road if specified conditions were met. If something like this were to be proposed, the ball would be back in Donald Trump’s court, as he would have the opportunity to cast himself as a dealmaker should he decide to put aside his own unrealistic proposal and instead lean on Bibi Netanyahu to sign on to the Arab plan.
Telephone Diplomacy
This week turned out to also be an important one for the U.S. approach to the conflict in Ukraine. Presidents Trump and Putin had a 90-minute call, which signals, among other things, that the United States under Trump will no longer view Putin as a pariah. They also talked at great length about Ukraine, with Trump announcing agreement “to have our respective teams start negotiations immediately.” All this gives the appearance (and possibly reflects the reality) that the great powers are seeking to settle things over the heads of Ukraine. President Zelensky, who was contacted only after the Trump-Putin call, for his part has made clear he wants to be at the table, not served up on it.
Also noteworthy were the new secretary of defense’s comments at NATO headquarters in Brussels. He too emphasized the U.S. interest in an end to the war, was explicit that Ukraine returning to its pre-2014 borders was unrealistic, that the Trump administration did not see either Ukraine entering NATO or a role for the alliance in guaranteeing Ukraine’s security going forward, and that the United States was looking to Europe to arm Ukraine, shoulder the burden of providing troops to enforce a ceasefire, and provide conventional deterrence on the continent. Some of this may have been walked back by Hegseth; what constitutes policy is a tad unclear. Also left unclear was any future U.S. commitment to provide Ukraine with military help, something that would be critical to deter Russia from renewing fighting after a pause. And U.S. preparedness to relax economic sanctions imposed on Russia has yet to be clarified. Ideally some significant sanctions would remain in effect.
The most controversial statement from Hegseth was that Ukraine’s war aim of returning to its pre-2014 borders was “illusionary.” This is true, as Ukraine lacks the ability to make good on this objective. Hegseth’s position on this should be acceptable so long as what is at issue is an interim ceasefire. But Ukraine would likely, and in my view properly, reject a demand that it formally drop its goal of fully regaining its territory. Final status issues should be put off until final status talks. Leverage should not be ceded before those negotiations have begun, even if those talks are unlikely to bear any fruit until after Putin departs the scene.
As always, some links to click on. And feel free to share Home & Away.
Richard Haass in the news
Sunday, February 9: Fareed Zakaria, GPS (Trump's Gaza Strategy 'Probably Plays Into Hamas' Hands')
Tuesday, February 11: University of Richmond Visit (on The Bill of Obligations)
Wednesday, February 12: Amanpour (‘Putin as an American Pariah Seems to be Over,’ Says Former American Diplomat Richard Haass)
Thursday, February 13: José Díaz-Balart (Trump's Proposal for U.S. to 'Take Over' Has 'Changed Political Dynamics' of Negotiations)
Thursday, February 13: India Today (Modi-Trump Meet: Trade Imbalance and Tariffs Key Focus, Says Former American Diplomat Richard Haass)
Check out The Bill of Obligations: The Ten Habits of Good Citizens