AT PENPOINT
At one level, US President Donald Trump is only doing what he was elected to do. That raises a further question, of whether all those affected had the vote. This is entirely separate from the
question of whether what he is doing, will achieve what he says it will.
He has announced ‘pause’, as if he had frightened himself, but it should not be forgotten that he had earlier paused the first set of tariffs he had imposed, on Canada and Mexico, but then implemented them. He probably mens business this time too.
The nearest that Trump has come to an endorsement from theoretical economists for what he has done is the acknowledgement that the imposition of across-the-board tariffs on almost all countries have challenged the foundations of economic theory. There is a rising crescendo of opinion from academia around the world that the imposition of tariffs will lead to a shrinking of growth, a round of inflation, that will lead to a worldwide depression.
The few theoretical economists who support what he is doing believe that his steps will lead to US firms taking advantage of the tariff wall he has erected, expand, and thus employ more Americans. The analogy most often used is of the tariffs as a necessary medicine.
This is taking place at the same time as anti-immigration measures are shrinking the work force, and depriving it of the kind of worker that will be most in demand in the type of expansion that will be taking place. Another problem with American labour is that it is over-paid and problematic, compared to the work forces of the countries Trump is tariffing. US companies did not send abroad operations because the companies wanted to stop America becoming great again, but because it was cheaper. Also, US companies have imported goods produced in the sweatshops of Asia because they have been quoting lower prices than US companies could.
As Pakistan is one of those sweatshops, it should be remembered that the movement here was preceded by an earlier shift, within the USA, from North to South. The original sweatshops, in the garments industry, were set up in the East Coast, mainly around New York, and were staffed by immigrant and Black American labour. Indeed, the availability of those jobs was the reason for the Great Migration, where Black Americans migrated from the South, after slavery was abolished, to the North, where they still form large enough majorities in several cities to consistently elect Mayors from their community.
The problem with Black Americans is that they demanded rights, and with immigrants is that their next generations became too Americanized to tolerate the sweatshops. The garments industry then shifted South, which was still relatively impoverished. When even that became too gentrified, the textiles industry shifted abroad.
The US market has seen an increasing influx of what is called ‘fast fashion’, where clothes are not meant to last, but be in fashion, but to be discarded after being worn a few times. That gives a certain incentive to lower-quality products, which are left to the Third World.
There is certainly an intersection between politics and economics, but probably not at the place Trump thinks it is. In his first term, his attempt to use economic means to achieve political ends, such as re-imposing sanctions on Iran to further twist its arm on its nuclear programme, failed. Being a reserve currency is an area of impingement. The BRICS countries are talking about a new currency, and Trump has already forbidden them from doing so.
Again, this will be a primarily economic decision. One of the advantages the USA has from its currency being the global reserve is that to import, it does not have to earn through exports, it merely has to print more dollars. One effect has been the development of large holdings of US Treasury securities abroad. It is a paradox that Japan and China, tariffed by the USA at 24 percent and 104 percent respectively, are the largest holders of US Treasury paper in the world. Japan has about $1 trillion of the total $28.6 trillion outstanding, and China about $750 billion.
These two countries, as well as other holders of US Treasuries, have a vested interest in the USA doing well, and growing sufficiently.
The problem Trump is trying to solve is that of globalization, specifically the place within it of the nation-state. Economic theory dictates that countries should engage in activities where they have a comparative advantage. The USA and the US labourer have once enjoyed an advantage, and no longer do. Is Trump an ordinary conservative, merely trying to slow down change, or is he trying to reverse it?
Pakistan is preparing to negotiate. With the EU, it managed to use the sympathy card to get GSP Plus status, to which it is clinging stubbornly despite all Indian efforts to end it. The problem is that there is unlikely to be sympathy for Pakistan’s being hit by climate change when the US President thinks it is a Chinese conspiracy. Besides, if the world falls into a depression, slight changes in the tariff will not help much. The last depression only ended when the world rearmed for war. Is that what Trump wants?
This is where Trump’s nationalism (and perhaps his age,78) shows itself. Nationalism is not a useful concept under globalization, and the country does not matter as much as the corporation, and neither matters as much as the bottom line. Trump is trying to use the tools forged by US prosperity, and trying to use them to buttress that prosperity, like the state and the military (which is after all the armed manifestation of the state).
The state and the military are not a necessity. One need only look at former world powers in Europe to realize that has-been status is not that bad. Even if Trump manages to trigger off a worldwide depression, who is going to be worse off: someone in Belgium or in India? It should be remembered that the USA is the oldest ex-colony, and has done its share of posturing before the world.
Trump is smarting from the knowledge that China is overtaking the USA in cutting-edge technologies, that it is moving up the value chain. So long as it was producing low-tech goods like sneakers, Trump (and the rest of the USA) was only too happy to give it paper in exchange. However, as the DeepSeek example proved, China is now likely to move ahead in key areas of technology.
The economy is not the only sphere where the USA fears falling behind, but it will be the first. It still has tremendously powerful tools, one prime example being the language these words are written in. English has become the world’s lingua franca. Chinese, because of its script among other things, is nowhere near an international language, though being the native language of more than a billion people will certainly help.
It is difficult to see any circumstances under which the USA is not a world power. It is too big, and it is immensely wealthy. However, it may cede place to China as the world’s policeman. Other possible competitors, such as Brazil, Russia or India, may develop as powers, but are unlikely to dominate the world. That might happen after China has had its turn, but that is so far in the future that it is useless even to think about.
More immediately, the USA is still so strong that Trump can threaten the world. It is symptomatic of both him and capitalism more generally, that the tariffs are not taken as final. Countries, including Pakistan, are lining up to negotiate with the USA. Indeed, the structuring of the announcement was such that almost as soon as they were announced, the USA made it clear that the tariffs were negotiable. Indeed, the pause was made on this excuse, that so many nations wanted to negotiate.
Pakistan is preparing to negotiate. With the EU, it managed to use the sympathy card to get GSP Plus status, to which it is clinging stubbornly despite all Indian efforts to end it. The problem is that there is unlikely to be sympathy for Pakistan’s being hit by climate change when the US President thinks it is a Chinese conspiracy. Besides, if the world falls into a depression, slight changes in the tariff will not help much. The last depression only ended when the world rearmed for war. Is that what Trump wants?
