Trump 2.0: Between the slip and the fall

From Quantum Bird

Most people have witnessed someone slip and fall while trying to go down a slippery, wet slope. The person’s actions in the short moments between the initial slip and the inevitable fall are crucial to the final severity of the episode. Logically, it would be better to avoid going down such a slope, but if this is impossible, the appropriate attitude would be to go down slowly and cautiously, considering that a slip, followed by a fall, is very likely. In any case, once equilibrium and contact with the ground has been lost, desperately trying to avoid falling with a succession of disorganized movements tends to cause disproportionately serious injuries. This is the case in the USA at the moment.

On April 2, 2024, delayed by one day – April 1, which is International April Fool’s Day, would be a more appropriate date – the US announced its package of tariffs on imports. Using national emergency powers, Trump announced tariffs of 10% on all imports to the United States and even higher tariffs on products from around 60 countries or trading blocs that have a high trade deficit with the US. The date has been dubbed “Liberation Day” by the administration and constitutes an effective declaration of trade war against the rest of the world. According to Trump, additional tariff adjustments will be discussed bilaterally.

The rhetoric of Trump and his team to justify the tariff package is a historic exercise in demagoguery, ignorance and deception. And also desperation. The main declared objectives of the measure are to promote re-industrialization and to free the US from the “exploitation” by the countries targeted by US import tariffs. The first objective is unattainable in the short two years before Trump becomes a lame duck in the presidency due to the mid-term congressional elections, and the second is a blatant distortion of the world’s recent economic history.

In fact, reading the list of “penalized” countries, and even considering that it is not clear how the alleged trade deficit was calculated, two characteristics stand out. Firstly, all the countries listed are priority targets for US geopolitical, military and economic pressure, which means that tariffs are an additional instrument for leveraging US interests in these places.

Sidebar: There is a lot of confusion in the news between sanctions and tariffs. The differences are significant and cover many aspects. We will deal with this in a separate article. Here it is important to note that while sanctions imply a ban on trade relations, the sizure of goods, and often restrictions on diplomatic relations that make it impossible for individuals, legal entities and entire countries to access essential resources and participate in multilateral entities, customs tariffs are a legitimate and sovereign trade policy instrument. Furthermore, according to the UN Charter, sanctions established outside the UN system are illegal.

The second characteristic, which is full of nuances, becomes clear when we observe that the overwhelming majority of the countries on the list are infested with US multinationals. These industries were massively and deliberately transferred from the US – promoting their accelerated deindustrialization – over the last 25 years of the last century to promote an economic architecture popularly known as globalization, which aimed the exploitation of cheap labor in developing countries, the use of military force and the abuse of the dollar as an international reserve currency to transform the US into a hub to which all the wealth generated globally would converge. Whether due to the contradictions inherent in the scheme itself – overwhelming financialization, loss of government control over the economy, long and unstable supply chains, degradation of the local labour markets, trivialization of unilateral economic sanctions, etc -, the rise of China and Russia as peer, or near-peer, economic competitors, and finally, the flourishing of multipolarity as a paradigm for geopolitical and economic interaction between the countries of the Global South, the globalization scheme hasn’t worked out very well. US Vice President J.D. Vance summed up the US elites’ conclusions about the problems with globalization in the following terms himself :

The first is to assume that we can separate the manufacture of things from the design of things. The idea of globalization was that rich countries would move higher up the value chain, while poor countries would make things simpler.

[…]

Now, we assumed that other nations would always follow us up the value chain, but it turns out that as they improved at the bottom end of the value chain, they also started to develop at the top end. We were squeezed from both ends. Now, that was the first concept of globalization.

In other words, the Trump administration is fully aware of the inexorable decline of the US empire. In fact, the US elites are desperate at the prospect of its fall. And it is this desperation, coupled with an unprecedented display of economic and geopolitical illiteracy, that lies at the heart of Liberation Day. Every president since G.W. Bush have been elected promising to bring back the industries, none of them have been able to do it. Neither will Trump. The re-industrialization of the US, like that of any other country, requires long-term strategic planning that no empire in decline can execute. A declining empire has stronger short-term priorities. This is the systemic component of the equation.

The circumstantial component has to do with the unpredictability and geopolitical and economic illiteracy of Trump and his team. Relocating industries is a complex, long-term and extremely expensive task that requires massive investments of private and public capital to train the workforce, build infrastructure and reshape supply chains. None of this falls from the sky overnight and the US has serious problems in all these respects. So how can investors relocate their industries to the US, to avoid losing competitiveness in the US market, if there is no long-term plan and the president himself has stated that the tariffs established on Liberation Day will be subject to bilateral review and negotiation?

Furthermore, retaliation will be inevitable. And with devastating consequences, because we are no longer in 1950, immediately after the WW II, when the rest of the world was in ruins and the US was the only industrial superpower operating. At that time, countries needed to export to the US in order to acquire dollars to import manufactured goods. But that reality changed long ago. The US is no longer the largest trading partner for most of the world’s countries. China is taking over. As for the US, the result will be out-of-control inflation at home and an accelerating loss of competitiveness of its remaining domestic industry in global markets.

Now, consider for a moment a different perspective, that perhaps Trump’s Liberation Day has nothing to do with “Making America Great Again” (MAGA), but is part of a broader development consisting of the final plundering of the empire’s remaining wealth before its ultimate collapse. That seems to make more sense. Remember inauguration day, all those billionaires in the front row? Well, Trump is in fact managing the retreat and decline of the US in such a way as to ensure the final plundering of the empire’s wealth by these oligarchs, and the transfer of the burden to the US population, and if possible, the rest of the world as well. For example, the mass layoffs of federal employees and cancellation of government programs promoted by Elon Musk, the richest man in the world, in order to promote “efficiency”, have saved the federal government a figure equivalent to, at most, a third of Musk’s personal fortune. Taxing him at 40% or 50% would probably not change his position as the richest man on earth, so why put thousands of people out of their jobs? And we’re only talking about one of such oligarchs. On the other hand, what about the massive reduction in taxes levied on their great fortunes?

And finally, back to the demagogic rhetoric surrounding these developments. Regarding Trump’s declarations that his economic measures are aimed at freeing the US from the oppression exercised by the rest of the world, imagine this: a plantation and slaves owner who, after throwing his slaves out onto the street without any resources to survive, probably live under an apartheid regime, declares that he has freed himself from the enormous burden of enslaving them.

Available in portuguese at Saker Latinoamérica: https://sakerlatam.blog/trump-2-0-entre-o-escorregao-e-a-queda/