Suppose Trump had crashed the stock market by sharply raising the corporate tax rate. In a certain sense, "wealth" would have been destroyed, but our actual prosperity would not be impaired. 1/

It would have been a purely distributional change, stockholders would have gotten poorer but the "pie" we share would have been unchanged. 2/

Highly disruptive tariff moves are not like that. The stock market is declining because long-term economic plans, on the production side as well as the sales side, have been upended. Firms that would have been productive will disappear. 3/

We will in aggregate be poorer. The change is not merely distributional. 4/

In the long-term, of course, if the policy environment stabilizes, um, somewhere, new production arrangements will be planned, and it's possible we find a new equilibrium more prosperous than the one we left, short-term pain for long-term gain. We have no evidence this is likely, but sure. 5/

But even if so, there was no need to so sharply destroy in-pipeline production. We could have telegraphed and gradually imposed over five years a more autarkic trade policy, if that's what we want. 6/

We'd have achieved the same putative long-term gain without throwing much of the existing pipeline and several years of aggregate prosperity, in the US and around the world, into the wood chipper. /fin