the 1930s
The modern science of economics developed from attempts to understand the causes of the devastating Great Depression of the 1930s–so that it would never happen again. A principal lesson is that tariffs generally make things worse, and maybe a lot worse, not better. The soybean tariffs of first the Trump administration, from which domestic farmers are yet to recover, were a gentle reminder of this. Oddly, that didn’t deter Trump from repeating the same blunder on an epic scale. Nor did it deter farmers from voting for him again.
the 1970s
I’m not sure exactly when it began, but by the 1970s it was conventional wisdom that the US operated on a four-year business cycle. The main reason for this is that in every presidential election year, the sitting president would arm-twist the Federal Reserve into loosening money policy. This was sort of like filling up the punch bowl again just as the party was getting a little rowdy–not the best idea. But it made everyone feel good as the election was approaching. In the lore back then, it was extra insurance that the incumbent, or at least his party, would be reelected. In theory, also, but less in practice, the Fed would offset the loosening in the first year of the new term. This is the economic (if that’s the right word) basis for the traditional idea of the four-year business cycle.
Highly principled Gerald Ford refused to do this–and lost, underscoring the efficacy of the ploy.
By the time Jimmy Carter was in office, however, the inflation that the cumulative years of extra-loose money policy had engendered was beginning to spiral out of control. Carter appointed Paul Volcker to clean up the mess, and advanced the idea of the independence of the Federal Reserve. Ronald Reagan doubled down on the concept.
Nevertheless, it took about a decade of economic suffering, with interest rates substantially above 20% for an extended period and an enormous amount of overall economic pain before the Fed got inflation under control again and established itself as free from partisan interference.
It’s surprising to hear a president who lived and worked through this period of suffering calling for the country to give up all that progress and return to the bad old days before Carter and Reagan. Yes, triggering rampant inflation would doubtless make it more difficult to distinguish between economic losses due to tariffs and those due to terrible monetary policy. And as investors in the US financial markets, we’d also have to figure out how much of the loss would come through currency weakness and how much through a cratering bond market, and their negative implications for stocks. But investors of all stripes might also have to come to grips with the possibility of the kind of capital flight from the US that is typically the signature indicator of badly run emerging economies.