The Outsider Perspective Issue 437 | The Beltway Outsiders

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Good Friday Morning! Except to a YouTuber who decided to make contact with a remote tribe. Mykhailo Viktorovych Polyakov is something of a shock jock on YouTube. He’s even posed with the Taliban and their weapons.

But in the present story, he visited North Sentinel Island, where a lethal remote tribe lives. His big plan? He would leave them a coconut cake and a coke. At some point, he also claimed to represent the United States.

He was arrested. Good job, kid.

This week, I’m going to investigate Trump’s tariff announcements and examine what he’s aiming for with them—links to follow.

Quick Hits:

Musk Leaving the White House. Politico made a big show of a report they got that Musk is leaving the White House. However, Ben Domenech noted that Musk said as much in an interview with Bret Baier, which Baier reposted, pointing out it was one of his first questions. In other words, this wasn’t really a breaking news story – it was journalists revealing they didn’t pay attention to interviews.

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Where you can find me this week

Please subscribe, rate, and review The Horse Race on YouTube — the reviews help listeners, and readers like you find me. Make sure to sign up for the Conservative Institute’s daily newsletter and The American Almanac.

Americans Need Trump To Tackle Inflation – Conservative Institute

The Joe Biden Coverup Finally Gets Exposed – Conservative Institute

Biden Weaponized The FBI To Protect His Family – Conservative Institute

Trump’s Tariff Gambit

Obviously, Trump’s tariffs are the big story this week. I was trying to organize my thoughts on this, and then someone else tweeted what I found to be the correct framework for what’s happening. We’ll get to that shortly.

The mainstream is attacking tariffs as economically bad. I agree with them on purely those grounds. Tariffs are the equivalent of a tax, introducing inefficiencies into trade that drive up costs and more.

Do you know what else does that? Sanctions. The people who freak out about tariffs have less concern if you call it a sanction. For instance, we’ve attempted to cripple Russia through methods that are far worse than tariffs. And there’s a reason: while everyone says they hate these tariffs, they typically make an exception for China.

The final question you have to ask is: What are the policy goals of tariffs, and how do we measure success? The problem with most commentary is that they’re building answers to those questions around how they define the question. And few of them define who the key players are.

The critical people in these decisions are Donald Trump, Scott Bessent in the Treasury, and Jerome Powell in the Federal Reserve. Trump and Bessent are aligned on what’s happening, and Powell is being pushed in their direction.

First, Bessent needs to do one thing: refinance U.S. debt after Janet Yellen’s misadventures. The U.S. has $9.2 trillion debt maturing this year, more than a fourth of its overall debt. We’re not cutting a check and wiping that away. Bessent wants to refinance that with 1) lower rates and 2) longer-term bonds.

He needs the Federal Reserve to lower interest rates. The Fed can’t do that because inflation is still a problem. However, all the tariff threats are killing growth prospects. All the talk of tariffs increasing costs misses the part where consumer spending and GDP growth targets are collapsing. Here’s the situation for the Fed:

In that scenario, the U.S. economy could see growth stall this year and turn negative in the first half of next year, meeting the technical definition of a recession. The unemployment rate, at 4.1% in February, could hit around 5.5% next year.

That combination of weaker or stagnant growth and higher prices would put the Fed in a very tricky spot, especially since the U.S. economy has come off of a period of elevated inflation. Officials would have to decide whether to focus more on the risk of higher inflation, which would call for tighter policy, or of rising unemployment, which would call for looser policy.

UBS and most other banks believe the Fed will drop its inflation concerns and cut rates sharply. Remember, the Fed stated it was cutting rates in 2024 because there was a hint of labor market softness. If unemployment jumps, Powell will follow.

That gives Trump and Bessent what they need: lower rates to tackle the debt. Bessent has a short time horizon to deal with these issues, so the thing to watch is the 10-year treasury note. As it falls, Bessent will be in a better position to handle the debt part of this.

Next is the geopolitical angle to the tariffs. As I’ve written, Trump is bringing back a version of the Monroe Doctrine. The broad tariffs represent Trump resetting the global order on these lines. Velina Tchakarova, a geopolitical thinker I respect, framed it like this:

If your geopolitical analysis still operates through the lens of the pre-pandemic, pre-Ukraine war, pre-DragonBear era, you are missing the plot.

The world has shifted – dramatically. And if you’re still clinging to outdated paradigms, it’s no wonder you’re struggling to understand what Trump (or this U.S. establishment more broadly) is trying to do.

Let’s be clear: This is not about nostalgia. This is strategic geoeconomic recalibration.

Amid the bifurcation of the global system, the U.S. is trying to bring production, supply chains, and trade networks back into its own orbit.

– Canada and Mexico are locked into the U.S. geoeconomic sphere.

– The Monroe Doctrine is quietly returning in Latin America.

– Nearshoring is accelerating.

– Liquidity will be flowing.

– U.S. military presence will be expanding from the Arctic to the Indo-Pacific.

This is not isolationism – it is systemic preparation for Cold War 2 with the China-Russia axis (the DragonBear).

Partners are being asked to pick a side.

Equidistance is no longer an option.

Europe still dreams of strategic ambiguity – but the old trilemma of Russian energy–Chinese markets–American security is gone.

It will be replaced by a new one:

American energy. American markets. American security umbrella.

Meanwhile, the ongoing war in Ukraine represents the most dangerous systemic risk since the global financial crisis and the pandemic – and yet many still act as if business as usual is an option.

Here’s the bottom line for Europe:

You either align with the U.S.,

You fall into the DragonBear orbit,

Or you step up and build a credible geopolitical counterweight – with real military capabilities and power projection, credible alignment, and real skin in the game.

The world is entering a binary era once again – but there may still be space for a third center of power, forged with like-minded countries across the Global South.

The time for fence-sitting is over.

Cold War 2 has begun.

Will Europe face it?

Trump is shaking the world in the same manner that he’s shaken Europe, North America, and South America.

This brings me back to how to judge success: how does the White House define success, and are they meeting those goals? The debt is the first hurdle. If Trump can’t fix that, everything will fall apart at the seams before the end of the year.

Next, can Trump trigger a recession that kills inflation drivers and then reverse the damage? This is where lower interest rates and tax cuts come into play.

Finally, can Trump reconfigure the world and build an economic coalition that strengthens the United States while weakening China? This will take more time to measure. The Panama Canal is a critical example: that move was more about kicking Chinese interests out of this hemisphere. The other tariffs are a means to do that, too.

I’m not saying this is 4D dimensional chess by the White House. But I do know that the Bessent side of this in the Treasury is real, and he has also talked about a realignment in the international sphere. Measuring success on standard tariff grounds doesn’t give you an accurate view.

I’ve seen libertarian economists say in return that diplomacy, trade deals, and similar tools are better tools to accomplish this. That’s great, but I’d note that’s not an economic theory in play. That’s political analysis masquerading as economics.

In truth, Trump and the United States are responding to a trade war started by China. China has attempted to manipulate markets to gain strangleholds on critical industries. The Saudis and OPEC did this in the past with oil. In contrast, China has done it with rare earth, semiconductors, green energy, and many other things.

Trump’s success will depend on his ability to reorder the world. If he fails and just creates a mess, he’ll go down as a failure. If he manages to score deals to lower trade barriers for the United States and push the world away from China, it’ll be better for Americans.

It’s hard to read at the outset, though.

Links of the week

Trump fires some of his national security staff in Signal message aftermath – The Sun

Democratic Delusions Aren’t Going Away Anytime Soon – The Liberal Patriot

Supreme Court looks ready to allow Americans to sue Palestinian Authority. – SCOTUSBlog

Judge threatens to hold Trump officials in contempt over deportation flights – Politico

’60 Minutes’ host Leslie Stahl slammed for questioning Hamas hostage tale of being starved – Daily Mail

Army planners discuss reducing active force side of military. Military.com

The Foundation That’s Bankrolling Radical Activists in Higher Ed – City Journal

Man claims seven confiscated tigers are his emotional support animals – UPI

X/Twitter Thread(s) of the week

Bill Ackman tells foreign leaders to reach out to Trump.