For Once, Musk May Be Doing Us All A Service

They are leading in this direction because the budget (which Trump calls his“big, beautiful bill”), passed by the House of Representatives and now being examined by the Senate, will make America's already gigantic federal public debt – which stands at nearly 130% of GDP – even higher.

It also includes provisions to give the Treasury the power to impose taxes on foreign investors, making that debt potentially harder to finance. At the same time, Trump's import tariffs are adding to inflation while discouraging both household consumption and business investment.

Higher borrowing costs, as lenders worry about the size of the debt; a weaker, perhaps slumping economy, which makes it harder to pay the interest-burden on the debt – this is indeed a recipe for MAPA.

Some comfort can be drawn from another slogan, one which Trump hates: TACO, which stands for“Trump Always Chickens Out” – in other words, the idea that this bully always retreats after making wild and aggressive threats.

The President's two less theatrical encounters last week, his meeting in the Oval Office with Friedrich Merz, Germany's Chancellor, and his phone call with China's President Xi Jinping, both suggest that the outcome on tariffs may be better than we feared when he made his dramatic announcement on his“Liberation Day” April 2^.

The negotiations with the European Union and China still lie ahead, as they also do with Japan, so we cannot be sure. But a pattern seems to be emerging of a less severe tariff regime being agreed if it is accompanied by some multi-billion dollar promises of investment in the United States and of purchases of US liquefied natural gas, defense equipment or soybeans. Those promises give Trump political wins, perhaps reducing the economic losses.

What the EU can hope to achieve in its talks is a 10% import tariff, matching the tariff already agreed with the United Kingdom, while China is likelier to end up with something more like 40-50%, with higher figures for some sensitive products.

China has flexed its muscles by showing its willingness to cut off supplies of critical minerals needed by US manufacturers, and its resilience by continuing to make progress on high-tech products despite US export controls, so it will probably be content with 40-50%.

If this is the sort of outcome that emerges during negotiations this summer, it will not be a good one for the world economy, nor for America itself, but it will be less bad than it might have been.

The most important hope is that whatever emerges will at least be stable, allowing businesses to make long-term plans based on predictable regulations and tariff levels. The trouble is that Trump always loves uncertainty and loves to use whatever instruments he can to display his power, so it is hard to be sure that even after the negotiations the tariff volatility will come to an end.

That, however, is why Congress is so important. Tariffs, like all other federal taxes, are supposed to be set by Congressional legislation, not executive fiat. Trump has broken with that rule by claiming that there is a“national emergency” under which he has the power to set tariffs, and that for specific products such as steel and aluminium he can do so on grounds of national security.

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On May 28, the US Court of International Trade, supported soon afterward by another federal court, ruled that Trump's claim of an“emergency” is invalid, making his tariff decisions illegal too. The White House has lodged an appeal, but if it loses then the power to set most tariffs will revert to Congress. If so, this will be good news, both for avoiding MAPA and for restoring some rationality to trade policy and thus to international relations.

Elon Musk is just as capricious and egotistical as Donald Trump, so we would also be foolish to depend on him being consistent either in his opinions or on his apparent divorce from Trump. He is always driven by the interests of his businesses and his billions, so let us not get starry-eyed about him. But let us nonetheless, for the time being, enjoy this moment by taking it at its face value.

If Musk's schism with Trump encourages even a few senators to rediscover their spines, if it helps to restore Congress's role as the ultimate controller of spending, taxes and tariffs, and if it thereby hinders the White House's tendency to attack Europe and other allies on spurious grounds, it will have done America, and the world, a service.

Other billionaire backers of Trump should take note: backing economically destructive policies that also lose global allies cannot be in their, or America's, interests.

Formerly editor-in-chief of The Economist, Bill Emmott is currently chairman of the Japan Society of the UK , the International Institute for Strategic Studies and the International Trade Institute .

First published on Bill Emmott's Global View, this is the English original of an article published on June 7 in Italian by La Stampa. It is republished here with kind permission.

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