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"Modern life is so thin and shallow and fake. I look forward to when developers go bankrupt, Japan gets poorer, and wild grasses take over."

— Hayao Miyazaki

Friday Ghiblified charts

Let’s recap:

On Monday, President Trump invented the concept of "secondary tariffs," threatening to impose an additional 25% levy on imports from any country that buys oil from Venezuela.

On Wednesday, the president imposed a 25% tariff on imported autos (including those from Canada that he previously suggested would be exempt), possibly in addition to whatever tariffs are announced next week (it’s hard to tell).

Even more confusingly, we learned as well that the president has warned US automakers against raising prices to offset the rising costs of imports — a Soviet-style instruction that can only lead to Soviet-quality cars (good luck exporting any of those).

Also this week, the president said he’s considering new taxes on imported copper (because what America really needs now is more giant holes in the ground leaking megatons of toxins, I guess).

All that is before we get to next week’s Liberation Day, when the president says he will announce reciprocal tariffs on everything.

But he might also "give a lot of countries breaks on tariffs," which is not at all what "reciprocal" means.

Most amusingly, the president floated the idea of giving China a break on tariffs in return for it cutting him a deal on TikTok — another innovation in both tariff policy and presidential power.

And perhaps most tellingly, he pardoned the serial financial fraudster Trevor Milton of his well-documented crimes — a signal, I guess, that even fake trucks are welcome as long as they’re made in the USA.

There’s probably much more of these kinds of things to come.

Charlie McElligot calls the president a "gamma agent" (i.e., someone who induces volatility);  Kayla Scanlon coined the term "FAFOnomics" to describe the president’s "chaos as strategy"; and Bob Elliott characterizes the president’s economic policies a "wrecking ball" that’s creating "the most toxic policy environment for US assets and the economy."

And yet, the S&P 500 is still only down less than 5% on the year.

That might be because we were too busy Ghiblifying the internet to keep up with events this week — after OpenAI rolled out its improved image generation, we spent three days remaking seemingly every photo in the style of Studio Ghibli.

It was only this morning when OpenAI changed its content policy to stop the Ghiblifying that we seemed to get back to worrying about markets and the economy — almost all of the stock markets losses were incurred today.

There might be a lesson in this.

The Studio Ghibli craze was a three-day experiment in Jevons paradox and the result was clear: Give us more AI and we will make disproportionately more use of it.

We used so much of it this week that Sam Altman said that OpenAIs GPUs were "melting."

Ghiblifying every photo on the internet is maybe not the most productive use of AI, of course — and the creator of Studio Ghibli, Hayao Miyazaki, certainly would not approve.

Miyazaki once called AI-generated art "an insult to life itself."

But the three-day experiment might support the optimistic outlook that AI will give humans more things to do, not less. 

People remain worried that AI will take all our jobs but Tina He eloquently describes a "labor rebound effect" in which "productivity doesn't eliminate work; it transforms it, multiplies it, elevates its complexity." 

This, she says, amounts to "a psychological version of Jevons paradox" that’s "reshaping our relationship with time itself. When every hour holds tenfold possibility, rest feels like surrender."

Miyazaki would prefer that we go sit in a tree with friends instead of trying to tenfold our productivity.

But he’d approve of Tina He’s prediction that AI will allow people to "relentlessly, unapologetically" be themselves.

If the trade wars escalate after Liberation Day next week, we may have a lot of time to be ourselves — and Miyazaki might even get the wild grasses he's hoping for.

Let’s check the charts.

GDP, Ghiblified:

The Atlanta Fed’s new "alternative model" forecast, which adjusts for imports and exports of gold, sees US GDP contracting 0.5% in Q1. Before it became clear that President Trump is a true believer in tariffs, the market would have expected this to change his behavior. Alas, the Trump put is no more.

This will just make him mad:

The US trade deficit has ballooned to record levels as importers frontrun tariffs by pre-buying as much as they can fit in their warehouses. (The headline number in blue is inflated by gold imports.)

What to horde:

Data from UN Comtrade suggests cars, car parts, phones, computers and, if you have space, barrels of oil. But those are just the big-ticket items: Maple syrup and avocados seem like obvious things to stock up on.

Europe is most at risk:

Europe’s exports to the US have been booming while its exports to China have been falling.

It’s always a bull market in something:

Used car prices seem destined to return to their pandemic highs. One report suggests prices of used cars rose as much as $2,000 yesterday. Yikes.

It might be a bear market in a lot of things:

Airline bookings suggest there might be 70% fewer Canadians visiting the US this summer. Summer rentals at Myrtle Beach will be a little more available this year.

US equities might be more available, too:

A record 18% of US equities are owned by foreign investors — many of whom will be thinking about investing at home, instead.

A measure of the downside:

The US share of global market cap has risen much faster than its share of earnings over the past 15 years. A trade war could make both these lines go down.

It’s mostly just Big Tech, so far:

The equal-weighted S&P 500 is down less than 2% year to date, vs. the Magnificent 7 down over 15%.

There’s no Fed put this time:

The Fed isn’t likely to rescue markets while inflation expectations look like this. David Beckworth says this makes it a "bad time to roll the dice with negative supply shocks (i.e. tariffs)."

But it was clearer than ever this week that President Trump is going to roll them, whatever the consequences.

Let’s hope the wild grasses don’t immediately take over.

Have a great weekend, Ghiblified readers.

— Byron Gilliam

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