The Hits Keep Coming

How much chaos can the economy take?

Here’s the good news: The U.S. economy has proved remarkably resilient since the chaos monkeys, aka Donald Trump and company, took over the zoo.

There has been shock after shock: A trade war against everyone; a shooting war against Iran in which the vaunted U.S. military performed very poorly; loss of trust on the part of all our erstwhile allies; the degradation of U.S. government capacity and competence, on the civilian side by Elon Musk, on the military side by Pete Hegseth; mass deportations; a surge in long-term interest rates to levels not seen in decades. Yet the economy keeps plodding along.

It’s true that nobody besides the Trump sycophants thinks we’re in a Golden Age. Public views of the economy, and of Trump’s management thereof, are incredibly negative. Yet normal indicators like GDP growth and the unemployment rate aren’t flashing red.

Here’s the bad news: The shocks just keep coming.

To an important extent the economy’s resilience has depended on the widespread belief by investors and businesses that the Trump shocks are one-time events. Businesses can live with 10 or 15 percent tariffs, if that’s the new normal. The world economy can even manage in the face of significantly reduced flows of oil from the Persian Gulf. But it’s much harder to deal with a trade war in which Trump keeps finding new enemies — with a spiraling conflict with Canada, of all places, a nation whose auto industry, in particular, is so integrated with U.S. manufacturing that separating them is almost impossible to manage. The Iran War has been a disaster, but markets were beginning to believe that the worst was over — until Trump began bombing Iran again with no clear objective beyond the visceral desire to reach out and hurt someone, doing so despite overwhelming evidence that the U.S. military is desperately short of munitions and that Hegseth has pushed out many of its competent leaders.

Now we’re facing trade conflict that poses an existential threat to the U.S. auto industry. Crude oil prices are surging again, but even more important, prices of refined products — what we actually burn — rising even more than crude. Wholesale diesel prices have just hit their highest level ever.

And if the U.S, military performed badly against Iran six months ago, how will it do now that it has largely run out of sophisticated munitions and Hegseth has fired many of the officers who seemed to know what they were doing?

The question of why interest rates are up so much is complex. But the eruption of new rounds of chaos on so many fronts is surely part of what is driving rates ever higher. And the rate rise is yet another shock.

Maybe the economy can cope with the ever-growing chaos. But the fact that it has muddled through so far is no guarantee that it can deal equally well with the hits that just keep coming.

And that’s all for today, because I just flew across the Atlantic and am deeply jet-lagged.