Trump was sworn in as the disruptor-in-chief when he became the President of the US. With both houses of Congress in his control he could unleash what he failed to do in his first term. Upending what has for the last six decades formed the arteries of progress for the larger world though is not without its safety valves.
Briefly, there is method to this madness in which he is being guided by some exquisitely trained economists from Harvard in pursuit of America’s strategic ends through other means. Through tariffs he plans to regulate, manipulate, arbitrate and excoriate those he perceives stand in the way of America to retain her singular position of dominating greatness. More succinctly, he wishes to marginalise others from any possibility of matching America’s exclusivity.
America remains unique even today — she is the largest economy and is likely to remain so for another decade at least, and much longer if Trump’s plan to disrupt the world succeeds. The structure of American economy: eighty per cent of it is just services — the rub that the largely white mid-west holds against coastal America where lie its foundries of knowledge and innovation, the basis of the new economy.
It is being loudly feared in the US that Trump and his cohorts have the dream to return the country back to the 1920s America which paved the path to unmatched industrialisation and job market. The agriculturist was already by then the foundation on which the American society sustained.
But then came the base of knowledge and education laying foundations of an economy and society around information and innovation. Over time America exported its industrial base to the rest of the world where labour was cheap, and the cost of production low, yet it could keep its domestic market supplied. This kept consumption high and grew the size of the economy adding to its strength and resilience.
With additional resource America could now focus on research and innovation, the two pillars of modern society while most of the rest of the world still grappled with industrial and agricultural products and commodities. If it meant giving up America’s exclusivity and patent hold over industrial technology, she couldn’t be bothered. America had already graduated to the next level of economy.
With such transfer of technology those that had lagged excessively behind the US — China and India — got greatly more efficient overwhelming supply chains with increased production. The world saw a level of GDP growth in decades unmatched by centuries. Except that China too grew economically and militarily. This has been and is America’s biggest concern. The aim is to somehow slow down China’s rate of progress and hence its capacity to grow further and challenge America’s exclusivity.
The first strategy to redirect China’s earned capacity into military expenditure – as was done with the Soviet Union which ultimately brought USSR down economically and socially resulting in its fragmentation — was by raising the bogey of Taiwan in its strategic estimates and upgrading it as the number one flashpoint for imminent conflict.
The famous pivot to the east followed. Except that, China had already amassed enough to prioritise its spending for both the society and the military at an even keel. The disruption that such manipulation of the sociopolitical drivers that the US and Europe intended returned a blank. This then necessitated direct intervention through fiscal and economic strategy to dampen China’s economic potential and its capacity to grow further. Tariffs and eventuating trade war are the means to the end.
This is how it is planned to play out. For minor players, which is all the rest, tariffs give the US the leverage to extract maximum favour compatible with the capacity of a trading partner. Pakistan can do little else than source its absolute needs of cotton, soyabean and perhaps some crude from the US in return for keeping its place in the huge American market for its textiles. Most others will similarly settle to keep their exports in place in the largest consumer market in the world. With China is where this entire exercise is aimed, though.
America’s biggest rub is how China keeps its renminbi valued lower vis a vis the USD boosting its exports. For long now the US has been asking China to appreciate its currency to its real value. The advantage to the US is only implicit. With an appreciated yuan, Chinese exports will cost more and accrue less favour to China lowering its capacity.
It probably will not add to American growth, rather turn products expensive to its consumers, forcing some to stop producing in China and instead revert production back to the US. It may be simplistic and naïve considering how hugely China has expanded trade with the rest of the world – of over three trillion USD of annual exports China only exports to the US around 500 billion. China holds over one trillion USD worth of US debt. Were the dollar to depreciate China’s gain will correspondingly reduce.
So rather than war with China of which the results are uncertain given rapid strides that China has made in the field of defence a safer bet is to disrupt the global supply chain for America’s principal adversary to suffer and take the biggest hit. Under such a garb of confrontation American exports of knowledge through university research opportunities and software innovation in microprocessors can be denied to China slowing its productivity which was threatening to displace American prominence in technology-based products. Electrical vehicles are a case in point. China has responded with banning exports of rare earth metals to the US of which over ninety percent are controlled by China globally.
Trump and the US though retains its exit option if the strategy seems to be turning sour in face of domestic reaction or forces a threat of a recession if persisted without remedy or a hope that it will self-repair. Next elections are only two years away and Trump will be loath to lose the control of the two houses and end up being a lame-duck President. If he does not see some remedy within the first year chances are he will reverse his plan, work with his ‘great’ friend President Xi to settle back into how the good world has known to exist. Just Apple, Nvidia and Elon Musk are enough to prove to Trump the futility of what has become the default composition of global economy.
Interdependence is the biggest truth of modern global existence. By fighting it one can opt out while the rest will only keep going the way they have learnt to sustain and survive. The US is only fifteen per cent of the global GDP – it may not be able to force the remaining eighty-five per cent to bend to its wish. The biggest weapon in the US armory is the dollar that it is wrongly after to demean and devalue. Especially with crypto looming large.
#Trumps #war #trade
Leave a Reply