Re - Trump's Tarrifs

[Cornelius Hamelberg]

https://www.facebook.com/nathan.hamelberg

Nathan Hamelberg

21h  · 

Ok, said I would try to think about Trumps strategy. This is temporary, economics is my worst subject next to ornithology (because of my disgust for many birds) so bear with me. But I'm thinking like this:

Some are reacting to Trump's trade thefts as if the administration is insane and willingly wants to bring down the US empire. I don't think it is that way, even though the regime has done something almost daily that causes stock prices to shake or even crash. In the short term, it will not push forward extensive investments. The outplay is the opposite of the type of measures that create predictability that provide a lucrative investment climate.

So what's the point of the customs in that case? They are an affix to push forward political concessions: concessions that will create new economic conditions. I feel like people don’t look at simple addition when trying to calculate the outcome. One of the Trump administration's first actions that created outrage was to slaughter USAID. When it comes to customs, almost all the focus has been on the other G7 countries (Canada, the United Kingdom, France, Germany, Japan and Italy). But the ones who will be primarily affected by the customs are the developing countries. There's an enormous amount of US-American capital in those countries today, and when the conditions for their exports to the United States change fundamentally, customs will create a reflux of that capital in a way never before seen before - that's the hope anyway. Tariff levels were calculated on the basis of US trade deficit. That means that the developing countries that depend most on exports to the United States for their economies will be put under enormous pressure to survive. The United States will be able to dictate new terms on... that's the way an empire dictates to its subjects.

Some on the left, on the basis of some seemingly anti-imperialism, has looked at Trump's policy as some kind of war with Europe, and with a little grim perspective, Russia's war with Ukraine, which has also distracted missed the elephant in the room: that the US trade policy under Trump is an attack on developing countries and a attempt to strengthen the United States empire among poor countries. Or otherwise put, roll over the US crisis on them.

In 2024 the debts of developing countries reached 99% of their annual GDP.

An example from The Guardian of how the White House set the tariffs. They took the trade deficit in goods, divided it by the combined value of imports, and because Trump is “nice,” he offered a discount, and split that quota in two. The example of China:

Commodity deficit: $291.9 billion

Total imports: $438.9 billion

Deficit divided by imports: 0.67/67%

Halved: 34%

Today, the U.S. national debt amounts to $36219 billion, or 122 percent of U.S. GDP. That is, as a share of its own economy, it is larger than it is in the countries the United States is trying to dictate new economic relations to the draconian trade thefts. A horror vision that unites both Republicans and Democrats, before Trump's entry into the political arena, is the idea that the dollar ceases to be the currency of international trade. Today the dollar is overvalued precisely because it is a global currency. If the world started trading in the yuan, the US national debt would become a headache that actually needed to be resolved. The fact that the dollar is the primary currency of world trade is what keeps the U.S. national debt at stake.

Since developing countries' debt ($11,400,000,000,000 last year) is mostly in dollars, the U.S. will be able to use customs as leverage to force itself into massive concessions from all countries that cannot otherwise resolve their debts. In some cases, China may come to the rescue, while it is probably the exception of most EU countries, but regardless of who steps forward, the United States will extort money from them through customs. The rich world can answer with its own customs — that's what is happening, and it will lead to an escalated trade war — but the poor part of the world doesn't have the privilege of being able to pull that card. Stopping payments from the countries would mean that they are basically a step away from bankruptcy. Trying to solve it through the world bank where the United States holds most of the capital... is not learning to walk. Some advanced market adjustment so that debts are paid through other means requires what you might call the policy equivalent of a burgenary, that other states cover and protect countries from United States terms, but those states would clearly require their own terms. The debts and customs are a hammer and cleaning that the United States will use to force other relationships, trade conditions and more. It is extremely clumsy, the states that may try to escape into the arms of other countries (China, India) but to some extent it will work. The question is whether it will taste more than it costs to the United States.

In relation to that, some needs to be said about capital destruction. I'll come back about it but in short: capital destruction - which is happening now to the US economy when its own imports and exports slow down - is a bit like a forest fire. Mass destruction for some (a number of companies will go bankrupt or refuel properly) but some will rise from the ashes and stand stronger in the market. Most of the US competitors will take a similar blow (due to the US dominant position on the world market, the economy will slow in a similar way in other countries that today depend on exports to and imports from the United States, and there will not be easy alternatives - trade is not dictated from the outside hopes for alternatives so easily, no less than draconian measures from other countries.

It's a stormy strategy that Trump is wholeheartedly working on. It's completely unclear if it will achieve its goals - for me, it's thought of how Germany forced the Dawes Plan and new conditions for war damages payments by pushing more ground in 1923, albeit from an almost opposite location. (The Dawes Plan postponed the problems, the capital that the United States pumped into Germany to speed up the economy pushed out with the Wall Street crash of 1929). The fact that the U.S. economy will be damaged in the short and medium-term will also lead to real wage cuts and constant capital decreases, but it also frees up capital. This is not a US retreat, it's an assault. Although not Trump, or we, know who will emerge victorious in the long run.

Visual Interpretation: graph from UNCTAD (United Nations Conference on Trade and Development) on the development of debts of developing countries 2004-2023.

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