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In August 1988 an inquisitive young Chinese political scientist named Wang Huning came to America for a six-month visit. He admired the Gateway Arch in St Louis, Missouri, and analysed the town government of Belmont, Massachusetts, watched a football game at the Naval Academy in Annapolis, Maryland, and toured a detergent factory in Iowa City, Iowa. He was shocked by the many people begging in the streets and amazed by the softness of the waterbeds in the furniture stores. One question preoccupied him: how had such a young country raced so far ahead of his homeland, with its history of more than 2,000 years? He found a lot to respect in the dynamism of America, but he also identified contradictions that could tear it apart.
China-watchers debate the extent to which Mr Wang’s American sojourn influenced the course of China’s modernisation. What is known is that he left academia just a few years later, cutting off his torrent of published work, to help define the Communist Party’s message and maybe its policies for three successive presidents. Now Xi Jinping’s chief of ideology and propaganda, he is one of seven members of the Communist Party’s ruling body.
Americans should have learned from him, too. They still can. His book about his inquiry, “America against America”, is a time capsule from back before the cold war ended and the internet smashed a virtual world into the real one, back when a Chinese visitor might marvel that Americans could sharpen pencils with electric gizmos and order pizza over the phone. Mr Wang’s book reminds the American reader that in those days, too, Americans were anxious about big problems, from racism to homelessness.
America was an alien land to Mr Wang, and he saw important, enduring patterns in what the natives might overlook as the wallpaper of their lives. He spotted subtle controls everywhere. The police did not have to mandate identity cards because the government persuaded each citizen to volunteer to have one by calling it a driver’s licence and issuing it through a motor-vehicle agency. Big corporations such as Coca-Cola relieved the government of management over the lives of millions.
Because just about everything could be denominated in dollars, the voluntary pursuit of financial wherewithal, rather than any ideology or political system of coercion, was the ultimate source of stability. “People manage money, and at the same time they use money to manage people,” he wrote. Technological superiority had become the source of Americans’ sense of national superiority: “If you want to overwhelm the Americans, you must do one thing: surpass them in science and technology.”
Mr Wang was astonished by the public libraries. Ancient Chinese thought was unique, he argued, but failed to influence the world because of a lack of means to share it. By contrast American libraries gave everyone access to the knowledge of generations. “The purpose of building a reservoir is not to store water, but to irrigate,” he wrote. Knowledge was the source of social progress, but also social conflict. How to get the former without the latter?
Visiting Plymouth plantation and the Liberty Bell, Mr Wang admired how Americans put their thin history to work inculcating a shared political tradition. In light of recent events, his book’s most poignant passage describes the inauguration of President George H.W. Bush. Mr Wang was impressed by the pageantry, by the creation of a tradition strong enough to guarantee the transfer of authority. The important result, he wrote, “is not that the new president has power, but that the old president thus loses power”.
But Mr Wang did not think America’s unifying forces and traditions could withstand its centrifugal forces. He has been called the Chinese Tocqueville, but he disdained one of Tocqueville’s key conclusions. Mr Wang wrote that only someone such as Tocqueville, from an even more unequal society, could look at America and perceive a country achieving equality of conditions. Americans might claim to value both liberty and equality, but these values inevitably conflicted, and Americans prioritised freedom. They resented paying taxes that might yield greater equality, and the result was a destabilising divide between rich and poor.
Americans also claimed to treat the family as the basic unit of society, “but in spirit, the family is being hollowed out” because Americans actually emphasised the individual. Mr Wang was unsettled that parents put children younger than one to bed in separate rooms and encouraged their children to leave home starting at 18, to enter society “like entering a battlefield”. These children would have no time to take care of their parents as they aged, and yet because of the resistance to taxes the government would not be able to care for them, either, or for others left behind.
Who lost America?
Mr Wang was taken with Allan Bloom’s “The Closing of the American Mind”, published in 1987, which lamented a shift to cultural relativism in higher education. Mr Wang believed an abandonment of shared values was precipitating an American “spiritual crisis”. He thought the American system—“based on individualism, hedonism and democracy”—was losing out to the Japanese system “of collectivism, self-forgetfulness and authoritarianism”.
Mr Wang got that one wrong. And the Chinese model does not look so hot these days, either. But many Americans have come to share a version of his conclusion, that America’s contradictions are creating “an unstoppable undercurrent of crisis”. A record low of 28% say they are satisfied with “the way democracy is working in this country”, according to a recent Gallup poll. Sensible Americans still think that if only supporters of Donald Trump would wake up to the threat he represents to American institutions, they would reject him. The chilling reality is that that is what they like about him. Mr Wang may not have anticipated Mr Trump, but he did identify the corrosion of civic virtue that is letting the once and possibly future president tear so much to pieces. ■
U.S. President Donald Trump holds a chart next to U.S. Secretary of Commerce Howard Lutnick as Trump delivers remarks on tariffs in the Rose Garden at the White House in Washington, D.C., on April 2, 2025.
Carlos Barria | Reuters
The tariff policy outlined by President Donald Trump on Wednesday appears set to raise the level of U.S. import duties to the highest in more than 100 years.
The U.S. introduced a baseline 10% tariff on imports, but also steep country-by-country rates on some major trading partners, including China. The country-by-country rates appear to be related to the trade deficit the U.S. has with each trading partner.
Sarah Bianchi, Evercore ISI chief strategist of international political affairs and public policy, said in a note to clients late Wednesday that the new policies put the effective tariff rate above the level of around 20% set by 1930’s Smoot-Hawley Tariff Act, which is often cited by economists as a contributing factor to the Great Depression.
“A very tough and more bearish announcement that pushes the overall U.S. weighted average tariff rate to 24%, the highest in over 100 years – and likely headed to as high as 27% once anticipated 232s are complete,” Bianchi wrote. The “232s” is a reference to some sector-specific tariffs that could be added soon.
JPMorgan’s chief U.S. economist Michael Feroli came up with similar results when his team crunched the numbers.
“By our calculations this takes the average effective tariff rate from what had been prior to today’s announcement around 10% to just over 23%. … A White House official mentioned that other section 232 tariffs (e.g. chips, pharma, critical minerals) are still in the works, so the average effective rate could go even higher. Moreover, the executive order states that retaliation by US trading partners could result in even higher US tariffs,” Feroli said in a note to clients.
An estimate from Fitch Ratings was in the same range, with a report saying the tariff rate would hit its highest level since 1909.
Trump referenced the Smoot-Hawley Act in his Rose Garden remarks on Wednesday. The president said the issue was not the tariffs imposed in 1930 but the previous decision to remove the higher tariffs that existed earlier in the 20th century.
“It would have never happened if they had stayed with the tariff policy. It would have been a much different story. They tried to bring back tariffs to save our country, but it was gone. It was gone. It was too late,” Trump said.
The full economic impact of the new tariffs will likely depend on how long they are in place and if other countries retaliate. Trump and Treasury Secretary Scott Bessent have indicated that the country-by-country tariffs could come down if those trade partners change their policies.
U.S. Federal Reserve Chair Jerome Powell and U.S. President Donald Trump.
Craig Hudson | Evelyn Hockstein | Reuters
Now that President Donald Trump has set out his landmark tariff plans, the Federal Reserve finds itself in a potential policy box to choose between fighting inflation, boosting growth — or simply avoiding the fray and letting events take their course without intervention.
Should the president hold fast to his tougher-than-expected trade policy, there’s a material risk of at least near-term costs, namely the potential for higher prices and a slowdown in growth that could turn into a recession.
For the Fed, that presents a potential no-win situation.
The central bank is tasked with using its policy levers to ensure full employment and low prices, the so-called dual mandate of which policymakers speak. If tariffs present challenges to both, choosing whether to ease to support growth or tighten to fight inflation won’t be easy, as each courts its own peril.
“The problem for the Fed is that they’re going to have to be very reactive,” said Jonathan Pingle, chief U.S. economist at UBS. “They’re going to be watching prices rise, which might make them hesitant to respond to any growth weakness that materializes. I think it’s certainly going to make it very hard for them to be preemptive.”
Under normal conditions, the Fed likes to get ahead of things.
If it sees leading gauges of unemployment perk up, the Fed will cut interest rates to ease financial conditions and give companies more incentive to hire. If it sniffs out a coming rise in inflation, it can raise rates to dampen demand and bring down prices.
So what happens when both things occur at the same time?
Risks to waiting
The Fed hasn’t had to answer that question since the early 1980s, when then-Chair Paul Volcker, faced with such stagflation, chose to uphold the inflation side of the mandate and hike rates dramatically, tilting the economy into a recession.
In the current case, the choice will be tough, particularly coming on the heels of how the Jerome Powell-led central bank was flat-footed when prices started rising in 2021 and he and his colleagues dismissed the move as “transitory.” The word has been resurrected to describe the Fed’s general view on tariff-induced price increases.
“They do risk getting caught offsides with the potential magnitude of this kind of price increase, not unlike what happened in 2022 where, they might might feel the need to respond,” Pingle said. “In order for them to respond to weakening growth, they’re really going to have to wait until the growth does weaken and makes the case for them to move.”
To be sure, the Trump administration sees the tariffs as pro-growth and anti-inflation, though officials have acknowledged the potential for some bumpiness ahead.
“It’s time to change the rules and make the rules be stacked fairly with the United States of America,” Commerce Secretary Howard Lutnick told CNBC in a Thursday interview. ” We need to stop supporting the rest of the world and start supporting American workers.”
However, that could take some time as even Lutnick acknowledged that the administration is seeking a “re-ordering” of the global economic landscape.
Like many other Wall Street economists, Pingle spent the time since Trump announced the new tariffs Wednesday adapting forecasts for the potential impact.
Bracing for inflation and flat growth
The general consensus is that unless the duties are negotiated lower, they will take prospects for economic growth down to near-zero or perhaps even into recession, while putting core inflation in 2025 north of 3% and, according to some forecasts, as high as 5%. With the Fed targeting inflation at 2%, that’s a wide miss for its own policy objective.
“With price stability still not fully achieved, and tariffs threatening to push prices higher, policymakers may not be able to provide as much monetary support as the growth picture requires, and could even bind them from cutting rates at all,” wrote Seema Shah, chief global strategist at Principal Asset Management.
Traders, however, ramped up their bets that the Fed will act to boost growth rather than fight inflation.
As is often the reaction during a market wipeout like Thursday’s, the market raised the implied odds that the Fed will cut aggressively this year, going so far as to put the equivalent of four quarter-percentage-point reductions in play, according to the CME Group’s FedWatch tracker of futures pricing.
Shah, however, noted that “the path to easing has become narrower and more uncertain.”
Fed officials certainly haven’t provided any fodder for the notion of rate cuts anytime soon.
In a speech Thursday, Vice Chair Philip Jefferson stuck to the Fed’s recent script, insisting “there is no need to be in a hurry to make further policy rate adjustments. The current policy stance is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate.”
Taking the cautious tone a step further, Governor Adriana Kugler said Wednesday afternoon — at the same time Trump was delivering his tariff presentation in the Rose Garden — that she expects the Fed to stay put until things clear up.
“I will support maintaining the current policy rate for as long as these upside risks to inflation continue, while economic activity and employment remain stable,” Kugler said, adding she “strongly supported” the decision in March to keep the Fed’s benchmark rate unchanged.
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Employees of the Department of Health and Human Services (HHS) hug each other as they queue outside the Mary E. Switzer Memorial Building, after it was reported that the Trump administration fired staff at the Centers for Disease Control and Prevention and at the Food and Drug Administration, as it embarked on its plan to cut 10,000 jobs at HHS, in Washington, D.C., U.S., April 1, 2025.
Kevin Lamarque | Reuters
A surge in federal government job cuts contributed to a near record-setting pace for announced layoffs in March, exceeded only by when the country shut down in 2020 for the Covid pandemic, according to a report Thursday from job placement firm Challenger, Gray & Christmas.
Furloughs in the federal government totaled 216,215 for the month, part of a total 275,240 reductions overall in the labor force. Some 280,253 layoffs across 27 agencies in the past two months have been linked to the Elon Musk-led Department of Government Efficiency and its efforts to pare down the federal workforce.
The monthly total was surpassed only by April and May of 2020 in the early days of the pandemic when employers announced combined reductions of more than 1 million, according to Challenger records going back to 1989.
“Job cut announcements were dominated last month by Department of Government Efficiency [DOGE] plans to eliminate positions in the federal government,” said Andrew Challenger, senior vice president and workplace expert at the firm. “It would have otherwise been a fairly quiet month for layoffs.”
However, DOGE has continued to cut aggressively across the government.
Various reports have indicated that the Veterans Affairs department could lose 80,000 jobs, the IRS is in line for some 18,000 reductions and Treasury is expected to drop a “substantial” level of workers as well, according to a court filing.
The year to date tally for federal government announced layoffs represents a 672% increase from the same period in 2024, according to Challenger.
To be sure, the outsized layoff plans haven’t made their way into other jobs data.
Weekly unemployment claims have held in a fairly tight range since President Donald Trump took office. Payroll growth has slowed a bit from its pace in 2024 but is still positive, while job openings have receded but only to around their pre-pandemic levels.
However, the Washington, D.C. area has been hit particularly hard by the announced layoffs, which have totaled 278,711 year to date for the city, according to the report.
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