America’s Faustian Trade Bargain

By Kenneth Jacobs – Project Syndicate

On a recent trip to Germany – where I gave a talk on the state of the mergers-and-acquisitions markets and what it implies about business confidence – I stumbled upon the house of Johann Wolfgang von Goethe, the towering writer who produced the most influential interpretation of the legend of Faust. It was a serendipitous development. In that story, a magician and alchemist bargains away his eternal soul to the devil for short-term power and riches. Last week’s tariff announcements could be viewed as America’s Faustian bargain.

Among CEOs and board directors on both sides of the Atlantic, confidence was already shaky. M&A markets are a good barometer for business’ appetite for long-term investment, and in the first two months of this year announcements were the lowest they have been in the past 20 years.

It is not difficult to see why. Confidence is inseparable from predictability.