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Topic:Tariffs
Donald Trump issued an executive order about water pressure in showerheads, which many people thought was a joke — but it's no laughing matter. (Reuters: Leah Millis)
During the chaos of last week's tariff war-induced market turmoil, Donald Trump issued an executive order headed: "Maintaining Acceptable Water Pressure in Showerheads."
Like a lot of people, I thought this was a joke until I read this piece in Bloomberg by Noah Feldman identifying it as another power grab.
It's not really about showers, wrote Feldman, but an attempt to gut the Administrative Procedure Act (APA) of 1946, which is currently being used by federal courts to block Trump's unlawful actions.
As countries and markets grapple with the ongoing fallout from his tariff policy, some are wondering if Donald Trump has a bigger plan to overhaul global trade and reset America's industrial economy.
The order directs the secretary of energy to reverse a Biden-era regulation defining "showerhead", which was done under the APA "notice and comment" process.
The APA requires that the repeal of a regulation must undergo the same process, but Trump's order states: "Notice and comment is unnecessary because I am ordering the repeal." In other words, because I say so.
Feldman writes that this is a direct, overt violation of the law and contradicts the very reason that the APA exists. If the Supreme Court lets him get away with it, another judicial guardrail against a Trump autocracy will fall away.
Remember, he stacked the Supreme Court in his first term.
And at 2am Friday, the US Senate completed the politicisation of the military when it confirmed Retired Air Force Lieutenant General John Dan "Razin" Caine as chairman of the Joint Chiefs of Staff.
Caine has served in none of the seven previous jobs required by law for this position, but the president can overrule that law "in the national interest", which he has done to install a loyalist as the most senior ranking officer in the US armed forces.
Leading up to his third election, Trump told Americans repeatedly what he was going to do, but he always did it in a way that seemed too theatrical to be real, or scary.
It's usually said that Trump's grandiose pronouncements should be taken seriously, but not literally, that it's just the extravagant rhetoric of a showman who can't help himself.
But what if he should be taken literally?
Here's a reminded of some of the things he has said:
"We pledge to you that we will root out the Communists, Marxists, fascists, and the radical-left thugs that live like vermin within the confines of our country, that lie and steal and cheat on elections … The threat from outside forces is far less sinister, dangerous, and grave than the threat from within. Our threat is from within."
"I am your warrior. I am your justice. And for those who have been wronged and betrayed, I am your retribution."
"The United States is an occupied country."
"I think it should be very easily handled by, if necessary, by the National Guard, or if really necessary, by the military."
"I am the only one who can save this nation."
"I felt then and believe even more so now that my life was saved for a reason: I was saved by God to make America great again."
Remember that to impose the tariffs on April 2, Trump declared an emergency under the International Emergency Economic Powers Act of 1977, which gives him the power to bypass Congress for an emergency "originating outside the United States".
The "emergency" that allowed him to up-end the global trading system and end 80 years of US-led stability is merely the existence of trade deficits, which his executive order says indicates "a lack of reciprocity in our bilateral trade relationships, disparate tariff rates and non-tariff barriers, and US trading partners' economic policies that suppress domestic wages and consumption".
If that's an emergency, anything is.
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For emergencies that originate within the US, the National Emergencies Act of 1976 gives the US president extraordinary powers. If he declares a national emergency, it gives him control over communications and information, including seizure or control of communications infrastructure, radio, wire services, and probably the internet itself.
He could also control transportation and infrastructure for national defence purposes and tap into funds set aside for disaster relief or military construction.
He could restrict civil liberties, such as movement or gatherings and call up the national guard or military reserves, use the military within America in support roles (but constrained by the Posse Comitatus Act, which requires congressional authorisation).
There are 136 distinct power delegated by Congress in the event of an emergency; only 13 require a declaration by Congress at the time.
It seems only a matter of time before Trump uses a crisis and the National Emergencies Act to bring about a revolution in the United States.
As for the trade war crisis he has manufactured, it was always about China, not the 58 other recipients of reciprocal tariffs like Liechtenstein or Lesotho.
Now they're going at it: America's 145 per cent tariff plays China's 125 per cent, but trade between the two countries was going to evaporate once the tariffs went above 50 per cent.
If the tariffs persist, trade between them will cease and the US will enter a severe recession. The implications of this for Australia can't be overstated.
Both our largest trading partner and our most important ally are about to experience a major economic shock that will require the sort of fiscal and monetary stimulus that had to be brought out in the pandemic and the GFC.
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But both countries are now deep in debt and constrained by the prospect of losing the confidence of financial markets — especially the US, where it is already happening.
Last week, the US dollar fell at the same time as long-term market interest rates were rising, which is what happens to a country when capital is fleeing it out of concern for safety. That this was happening to the United States, the ultimate safe haven and owner of the world's reserve currency, is astonishing, and earth-shattering.
Nevertheless, I'm not sure that's what forced Donald Trump to "blink" and pause the tariffs on countries other than China, which has been common narrative — that it was the 'bond vigilantes'
The vigilantes are bond traders who respond to bad government policy by pushing up market interest rates and forcing a change. In October 2022, they famously did for UK PM Liz Truss, after her disastrous mini budget that caused a spike in the UK 10-year bond yield from 1.8 to 4.3 per cent.
But the US 10-year bond rate only rose half a per cent, from 4 to 4.5 per cent, which wouldn't have been enough even if he was watching, which he wouldn't have been, and it was already declining when the pause was announced.
A much more likely explanation is that those tariffs were never intended to last — they were always going to be used to extort trade deals out of smaller countries. ("Nice little export industry you have there, pity if something were to happen to it.")
Threatening those tariffs wouldn't have worked because no one would have believed it. Calculating a reciprocal tariff purely according to the size of a trade deficit? It was ridiculous, mocked by economists and serious people around the world.
A policy fight over cost-of-living relief has emerged with a federal election looming.
So he had to actually do it, to prove that he would, and then pause them while deals are forced on panicking exporters.
Announcements will be scattered over the next three months to glorify the Godfather, Mr Trump. The United States has become a gangster state.
Australia should rethink its relationship with American because alliance is becoming obeisance.
Alan Kohler is finance presenter on ABC News and also writes for Intelligent Investor.
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Another guardrail against Trump autocracy lost. Will he get away with it? – Australian Broadcasting Corporation
