That might turn out to be true, but it’s important to understand that there is a clear and carefully prepared plan that may, indeed, spiral into chaos, but Trump supporters say they are right on track.
Remember that the base aims of the plan are to restore the American industrial base; substantially reduce the cost of government and reduce migration. At the same time, Trump demands that defence “freeloaders” like Europe and Australia pay more for their defence.
Australia is now firmly among the “freeloaders” so for the last two days I have been showing how the Prime Minister’s total misunderstanding of what is taking place has put the ANZUS defence treaty at risk.
Trump, Elon Musk, and Trump’s key corporate advisers believe that lower interest rates will be essential in the re-establishment of the US industrial base. But the essential mechanism required to re-establish US industry is tariffs, and they will create inflation and push up interest rates.
A pillar in the pre-election Trump plan was that the only way to achieve a substantial reduction in the cost of government was massive quick action to avoid the legal traps that, in his first term of office, frustrated the program.
The only way to cut government costs was massive early action driven by Musk. That action combined with the massive government employee uncertainty and loss of jobs would hit US consumer demand, and the speedy attack on migration would compound that consumer impact.
So what we are seeing is a substantial fall in US consumer demand.
Whether that will lead to a US recession is a question of definition, but it is impacting numerous American companies in a way they had not anticipated.
But it has also slashed the US bond rate, and the accompanying fall in the share market puts enormous pressure on Federal Reserve chair Jerome Powell to lower interest rates.
Indeed, on a number of occasions, Powell has shown to be interest rate responsive when the stock market falls sharply.
That fall in US consumer demand will make it very hard for China and other overseas suppliers to the US market to pass on the rise in tariffs, But to the extent that the tariff rises do increase costs, lower US energy prices help offset that rise.
This will of course hit Australia’s natural gas revenue.
In a breakthrough for Peter Dutton and Australian energy costs the massive US search engine owner Alphabet (Google) is devoting it technology abilities to further develop low cost small nuclear plants realising these will be essential to provide the power necessary for massive investments in cloud storage and artificial intelligence.
The big rise in US government revenues as a result of the tariffs and the cuts in spending are planned to be used to stimulate investment by American companies in the industrial base.
But in the last few days Trump and Musk put on the table a variation to the original plan – a DOGE bonus whereby part of the rewards from the reduction in the cost of government would see a lump sum sent to American consumers.
That all sounds very orderly, but of course it’s not. Trump is also using tariffs to pursue agendas against the main suppliers to the US -Mexico, Canada and China. Trump is a dealmaker and is using tariffs as a negotiating tool, and he moves them up and down. The policy seems to be changing all the time. For Trump that’s just normal, but for markets it looks like chaos.
In Ukraine, Trump has a very clear plan – give Russia key ground; keep massive rare earth deposits in Ukraine outside Russian control but developed by Americans.
Because Europe has been freeloading on America in defence, the Europeans couldn’t move in to replace the US in Ukraine’s defence and Europe will lose vital rare earths.
In the case of Israel, there is a clear policy Hamas must be removed from Gaza so one way or another Gaza can be rebuilt. Trump has now freed Netanyahu to take the necessary steps, but it will be a very controversial set of actions, again leading to market nervousness.
Fascinatingly, the European stock market has performed better than the American market, partly because they realised that Europe must rebuild its own industrial base via defence spending. That’s exactly what America expected it to do.
The US is giving the same message to Australia, but we are not listening and indeed we have not even started to discuss it. Australia’s defence “freeloading” will not dominate the next election, but it should.
The Trump supporters are telling us that what we are seeing now is a central part of the plan because the re industrialisation can’t take place with interest rates high.
At this stage, I give them the benefit of the doubt, but strategy changes from Trump do create great market nervousness.
Meanwhile, our dollar falls, partly because of the tariff impact on China, but also because neither of our major political parties appear to understand the real game and the obvious things that we must do.
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The greatest fear in US and global stock markets is that Donald Trump has created a chaotic situation that is spiralling out of control.