Trump Tariffs Are Like The Pandemic
He's created a Black Swan
Black Swan events are significant events that come out of the blue. No one sees them coming. They’re also very improbable. A sudden change to the global trading system, like the recent tariffs, qualifies.
“I’m particularly interested in black swan events: unprecedented surprises that destroy the conventional wisdom about how the world works.” Paolo Bacigalupi
Swans are usually white. A black one is rare and unpredictable. When a Black Swan event occurs in the financial world, it usually has a huge impact.
Recent tariffs will have a huge impact on world trade. It reminds me of what happened during the pandemic.
Nassim Nicholas Taleb discusses this in The Black Swan: The Impact of the Highly Improbable.
He explains how these rare events aren’t predictable. We tend to hold onto our biases that blind us to their effects.
Taleb recommends building robustness into systems to protect us. He identifies principles to help us cope. (His words in quotes.)
If it’s going to break, let it. Then fix it. Don’t wait until it’s too big to fail. “Nothing should ever be too big to fail”.
Losses should be dealt with at the National level, rather than leaving them to individuals to solve. “Whatever needs to be bailed out should be nationalized”.
If people don’t know how to take care of things, don’t put them in charge. (duh) “The economics establishment should be ignored [forever]”.
Never trust people to manage your risk if they’re getting paid to hide them. (duh) “Odds are they will cut corners to show ‘profit’ in order to gain the bonus”.
Keep it simple. “Complexity is a form of leverage”. Avoid it.
Again, keep it simple. “Ban complex financial procedures that nobody understands”.
More debt isn’t the answer to too much debt. (again, duh) “Using leverage to cure excess leverage is pure denial. The debt crisis is not temporary, it is structural and requires rehab”.
If the system is broken, fix it. “Remake the system before it remakes itself (through crisis).”
The President of the US imposing widespread tariffs in an attempt to destroy the world economy is a huge Black Swan event.
The tariffs were sudden, unexpected, and they’re about to change our way of life.
Many environmental disasters are considered black swan events as well. The environment is fragile, and we are seeing more unexpected extreme weather events around the globe.
Forest fires and flooding are more prevalent and larger than we have experienced. They are no longer once-in-a-lifetime events. They’re more severe and more frequent.
In many ways, the tariffs and environmental extremes are the same.
Environmental events aren’t as rare as they used to be. They are somewhat expected now. Heat records, size of hurricanes, the number of wildfires, and the number and severity of floods are all increasing.
Global warming is a real thing. There is a consensus among most scientists.
“Our most basic common link is that we all inhabit this planet. We all breathe the same air. We all cherish our children’s future. And we are all mortal.” John F. Kennedy
It’s easier to ignore an event if it isn’t happening near you. Smoke from forest fires affects surrounding countries, but when the fires are extinguished, life goes on.
We have short memories and we are in denial.
The pandemic prepared us for the coming environmental collapse in ways we are just beginning to realise.
Our thinking has shifted.
Some existing institutions are well-positioned to pivot with circumstances as required. Many stores will not.
This is an uneasy time for everyone in the world. We have to prepare by creating ways to work together on solutions.
Our response to the Pandemic was a training run for the Tariff war.
It’s now clear that the world isn’t as safe as we thought. We aren’t in control. The last Black Swan event was a warning, and many of us are starting to pay attention.
The effect of the pandemic was felt in every country and required everyone to change their day-to-day behavior. It’s the same for the Black Swan Tariffs.
These events aren’t localized. They happen to everyone, all around the world.
Businesses and employees alike have to find ways to pivot. The pandemic changed the face of how we exist in the world. The actions of the US president are changing our stable global financial system.
Tariffs won’t be the end of it. There’s more to come. It’s going to happen again. Be prepared.
Going forward, we need remain flexible and prepared to adapt to changes quickly and provide solutions to a changing environment.
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Cool concept. Too bad it's associated with a swan, because they are lovely creatures. It should have been a Black Toad Event. 🙄 Cheers Tree