| I’m Justin Fox and this is Bloomberg Opinion Today, a high-credibility package of Bloomberg Opinion’s opinions. Sign up here. How to Regain International Credibility | The best argument for the massive tariffs imposed by President Donald Trump on “Liberation Day” has always been that they were the beginning of a negotiation. “Escalate to de-escalate,” as Treasury Secretary Scott Bessent is fond of saying. The administration’s subsequent unilateral moves to temporarily exempt tech imports and pause tariffs against countries other than China have sent a clear signal that it is in fact willing to de-escalate. But they might also be an acknowledgment that its negotiating position is weak, making its threats much less credible. Consider where the US stands vis-a-vis China, the No. 1 target of the tariffs. Yes, China is more dependent on foreign trade than the US, but it may also be less vulnerable to financial pressure. For one thing, Shuli Ren points out, China owns $760 billion in US Treasury securities. With some well-timed and not-all-that-big sales, it can easily pressure Bessent and Trump by increasing the cost of financing the yawning US budget deficit. The sharp devaluation of the dollar so far this year is an indication of how vulnerable the US is on this score, writes Jonathan Levin. And no, explains Paul J. Davies, US banks are unlikely to ride to the rescue by buying more Treasuries. Then there are the differences in the two governments’ ability to withstand political heat, which John Authers sums up like this: Trump owes his election in large part to popular anger over inflation that peaked at less than 10%. In China, the Communist Party killed millions during the Cultural Revolution; set tanks on peaceful protesters in Tiananmen Square; and only three years ago imposed Covid lockdowns far more draconian than anyone else, which by then were clearly excessive. China’s leadership evidently has a far higher threshold for the pain it will inflict on the population before conceding.
What can the Trump administration do to bolster its credibility? One smart move, argues Clive Crook, would be for the president to return to his stated aim of pursuing tariffs that are “reciprocal. That means they do it to us, and we do it it to them.” The tariffs imposed on April 2 were instead calculated based on the “idiotic” (Clive’s word) principle that all bilateral trade imbalances are evidence of cheating. Tariffs calibrated to ensure genuine reciprocity would be both less economically disruptive and more defensible — if also a lot more work to calculate and negotiate. Another priority for Trump’s team, suggests Christine Harper, should be learning from the example set by Paul Volcker, who was undersecretary of the Treasury for monetary affairs when a US president last unleashed such a global market shock. That was President Richard Nixon’s 1971 decision to take the US off the gold standard and break apart the Bretton Woods agreement that had governed the global monetary system since World War II (if you want to learn more, Ina Garten’s husband has a pretty good recent book about this). In 1971, Volcker was responsible for reassuring foreign governments and trying to keep global financial markets from unraveling, an effort which met with mixed success as the 1970s became a lost decade of high inflation, terrible stock-market performance and declining real wages in the US. Then, at the end of the decade, Volcker was appointed chairman of the Federal Reserve, where he presided over an extremely painful but ultimately successful effort to stamp out inflation and restore US monetary credibility. This “reassurance that the US had competent economic managers who would do what was needed,” Christine writes, has helped underwrite the country’s economic success ever since. More reassurances now, please. Bonus tariff reading Elon Musk’s Skills Are Not Easily Transferable | It has become popular in certain circles lately to call Elon Musk stupid. That seems, well, stupid, given how successful he has been at manufacturing cutting-edge cars and rockets for others and an online echo chamber for himself. But it’s also getting to be pretty clear that Musk’s business skills don’t transfer well to the political realm, where he has become an albatross for the candidates he supports and a seeming failure at cutting government spending. Gautam Mukunda thinks Musk’s political struggles shouldn’t have surprised anybody. Success is quite context-dependent, and those able to transfer extreme success from one context to another the exception far more than the rule. Yet the myth of what Gautam calls “omnigenius” persists, the product of a cognitive bias known as the “halo effect.” Maybe the obviously non-angelic Elon Musk can help cure us of it. The market for luxury goods tends to follow in tracks laid down by the market for art. With global art and antiques sales down 12% last year, that could mean tough times ahead for the purveyors of high-end watches, purses and clothing. But Andrea Felsted sees a bright spot. The market for artworks under $5,000 grew 7% last year, and some luxury goods brands are experimenting with providing more entry-level offerings. At $60 a barrel, oil is cheap right now. Could it get cheaper? Sure, writes Javier Blas. Early in the Covid-19 pandemic it fell all the way to $35, and a tariff-war-induced global recession could conceivably send prices that low again. Still, Javier doubts they’ll stay below $50 for long. A turnaround may be in the offing. RFK Jr. has some explaining to do. — Bloomberg Editorial Board Zuckerberg’s flattery is getting him nowhere with the Trump administration. — Dave Lee Nvidia’s Mar-a-Lago deal could harm US competitiveness. — Parmy Olson Cozying up to Reform is a bad move for the Tories. — Rosa Prince Tariffs or not, Taiwan is under siege. — Karishma Vaswani Katy Perry and friends go to space and back. Big-bank stock traders have their best quarter ever. Harvard rejects deal with Trump administration. Andrew Cuomo used ChatGPT to write his housing plan. Who needs European travel when there’s New Jersey? Computer chips are getting taller. Notes: Please send easily transferable skills and feedback to Justin Fox at justinfox@bloomberg.net | 
