December 30, 2017

There is much President Trump does not understand about the outside world.  High up on the list is the crucial importance of US trade policy in creating and sustaining the American Empire.

The key to the post-World War II US imperium was granting other nations commercial access to the huge, vibrant American domestic market.  This, as much as the highly successful Marshall Plan in Europe, was responsible for stabilizing the world economy and extending US geopolitical power across much of the globe.

I vividly recall when war-ravaged Japan produced only junk and cheap toys.  A small town in Japan called ‘Usa’ produced fake Zippo cigarette lighters stamped ‘made in USA.’  Five years later, I was amazed to discover the quality and capability of new transistor radios from an electric company later known as ‘Toshiba.’

Japan’s hard work and determination played a key role in rebuilding that war-ravaged nation, half of whose cities and industries had been fire-bombed into ruins.

But industrial Japan would not have risen from the ashes without access to the American market which consumed an ever-larger share of Japan’s high quality exports.

South Korea and then China followed the same growth curve, responding to America’s insatiable demand for lower cost products. In both cases, the boom in exports sparked rising economic activity in domestic industries and commerce.

Today, large parts of the world economy depend on access to the US market, its primary engine of growth.  Canada and Mexico are prime examples.  Almost 80% of Canada’s exports go to the US.  As a result, Washington treats Canada like a dependency, though most Canadians don’t seem to care.

A major trade war between the US and Canada looms, centered on efforts by Washington to break into Canada’s heavily protected dairy, poultry and swine markets.  Amid all the heated exchanges between Ottawa and Washington, there is hardly any mention of improving the cruel treatment and lessening the terrible suffering of farm animals.

What President Trump and his advisors don’t seem to get is that China’s access to Wal-Mart shelves deeply affects its behavior.  Profits from China’s exports have been plowed into $1.2 trillion of US treasury instruments, making the Communist People’s Republic America’s leading creditor.

It’s an old canard that nations that trade don’t go to war.  Untrue.  Just look at Britain and Germany in 1914 or Germany and the Soviet Union in 1941.  War, as the bellicose Trump threatens, is quite possible even between major trading partners like the US and China.

Risks of a Sino-US military confrontation over the disputed South China Sea or North Korea remain dangerously elevated. The dangers of war to major industrial powers Japan and China also remain elevated, posing another systemic risk to the world economy.

Trump’s campaign to return manufacturing to America and repatriate profits held overseas makes good business sense.  The ravaging of America’s once mighty industrial base to boost corporate profits was a crime against the nation by unscrupulous Wall Street bankers and short-sighted, greedy CEO’s.

The basis of industrial power is the ability to make products people use.  Shockingly, US manufacturing has shrunk to only 14% of GDP.  Today, America’s primary business has become finance, the largely non-productive act of paper-passing that only benefits a tiny big city parasitic elite.

Trumpism is a natural reaction to the self-destruction of America’s industrial base.   But the president’s mania to wreck international trade agreements and impose tariff barriers will result in diminishing America’s economic and political influence around the globe.

Access to America’s markets is in certain ways a more powerful political tool than deployment of US forces around the globe.  Lessening access to the US markets will inevitably have negative repercussions on US exports.

Trump has been on a rampage to undo almost every positive initiative undertaken by the Obama administration, even though many earned the US applause and respect around the civilized world.  The president has made trade agreements a prime target.  He has targeted trade pacts involving Mexico, Canada, the EU, Japan, China and a host of other nations by claiming they are unfair to American workers. However, a degree of wage unfairness is the price Washington must pay for bringing lower-cost nations into America’s economic orbit.

This month, the Trump administration threatened new restrictions against 120 US trade partners who may now face much higher tariffs on their exports to the US.

Trump is in a hurry because he fears he may not be re-elected.  He is trying to eradicate all vestiges of the Obama presidency with the ruthlessness and ferocity of Stalinist officials eradicating every trace of liquidated commissars, even from official photos.   America now faces its own era of purges as an uneasy world watches.

Copyright   Eric S. Margolis 2017


This post is in: Canada, China, Japan, USA


  1. “Brazil of the Northern Hemisphere”; this is the Trump’s economic vision for America;
    Trump’s Economic Nationalism or Trade Wars may help to repatriate some old manufacturing jobs back to the U.S. but it turns America to a highly polarized society with a strong manufacturing base, something like a Brazil of the northern hemisphere.

    The reality is that, Americans are living way above their means; their high standard of living is heavily subsidized by the U.S. trading partners through their support for the U.S Dollars which is essentially a FIAT money – America’s trading partners aim to give the highest purchasing powers to their American customers through subtle but steady currency manipulations; Trump’s economic nationalism will put an end to that but it also ends the high standard of living in the USA.

    Trump aims at a significant devaluation of the US $ dollar; Trump understands too well that a strong Dollar is a double-edged sword for the US economy, specially, when the county’s national debt is nearing at 100% of its GDP, so, a devaluation of the US dollar may serve Trump’s objectives in the short term by returning some low-value-added manufacturing sector and therefore more low paying jobs back into the U.S. but it also means lower purchasing power, hence, a significant decline in the standard of living in America – without the high purchasing power, the U.S. will resemble at best to Russia or worse to something like Brazil or South Africa,

    Trump’s vision for America is for it to become like “Brazil of the Northern Hemisphere”; the U.S. will have a strong manufacturing base but in the low-value-added sectors; so, the American workers will not be earning enough to maintain their high standard of living — so, there goes the American dream for those of us who missed the boat of the prosperity in the hay days of America. Trump’s economic nationalism will end the high standard of living in the USA.

  2. DukeNukem says:

    Japan’s fear of a unified Korea is not without merit. To a lesser degree China, which enjoys having a divided Korea, also fears unification.

  3. From the Washington Examiner, “President Trump informed North Korea that he too has a “nuclear button,” riffing off North Korean leader Kim Jong Un’s claim Monday that the U.S. should know he has such a device readily available on his desk.
    “North Korean Leader Kim Jong Un just stated that the ‘Nuclear Button is on his desk at all times,’” Trump tweeted Tuesday evening. “Will someone from his depleted and food starved regime please inform him that I too have a Nuclear Button, but it is a much bigger & more powerful one than his, and my Button works!””
    Like two kids…

  4. Mike Smith says:

    Will the DNC pull its head out of its backside and field a real candidate ?
    Will Trump even run again ? He could easily blame the entrenched ‘ Deep State ” for obstructing anything he tried to accomplish and walk away leaving the US government with even less credibility than it has now.
    A Third party would have a hell of a uphill fight even if they managed to win a general election… How much of a push would it take to see a revolution / civil war in the US?

  5. “Today, America’s primary business has become finance, the largely non-productive act of paper-passing that only benefits a tiny big city parasitic elite.” Great comment.

    The finance industry is now merely a mechanism for transferring wealth from productive people to people who acquire rather than create wealth.

    The fact that Bitcoin is being traded on the Chicago exchange and listed on the Globe and Mail’s ticker shows how totally disconnected the finance industry from the real wealth creation sector. The Globe would get more credibility by listing winning lottery ticket numbers.

    At some point the USA has to achieve a balanced level of trade rather than racking up more debt. This has to take priority over whatever impacts on foreign policy trade balance might have.

    John Meyer

  6. Some ramblings:
    I recall the anecdote, and I don’t know if there is any truth to it, about the Swiss providing the Japanese with a needle and informing them that when they can produce this level of quality that they could consider themselves as a manufacturing concern. Shortly after, the Japanese returned the gift, and, provided the Swiss with a needle that they had manufactured. In addition, the shaft was drilled with a small diameter hole and a copper wire was threaded through it.
    It was the American concern that Japan would be a manufacturing contender that prompted them to place a blockade on Japan for materials and oil, essentially ‘starving’ them, that led to the Japanese attack on Pearl Harbor and eventually the development of nuclear weapons by the Americans.
    The Americans through the UN is using this same ‘play book’ on North Korea, but, for different reasons. The Kim threatens American dominance in South East Asia and he is unconcerned about their ‘bluster’.
    As Eric notes, the Americans have dispensed with real manufacturing, to improve the ‘bottom line’ and to line the pockets of investors playing the global finance game. This gives rise to offshore tax avoidance accounts that should be prohibited. Little is done because the players are actively donating to the political parties that would be introducing any new legislation.
    This is short sighted. Profits should be local and taxed to improve the quality of life for the citizens. If you think of the economy as a ‘giant cookie jar’ and anyone that takes a disproportionate number of cookies leaves fewer cookies for the rest of the people that are actually doing the work. It’s sad to note that the infant mortality rate in the US is higher that that in Cuba.
    Unless there’s a big shake up, this will not change. Let’s hope that the recent senatorial election, where the poor mobilised and voted, may be a harbinger of change. The American government system has to be removed from the hands of the ultra wealthy. A third political party has to form to make this change.
    North Korea has shown itself to be extremely resourceful and has accomplished much given the limited or restricted resources. I suspect many in South Korea are envious of their accomplishments, the Koreans in general being a very nationalistic race. The US does not need another country that is fiercely independent and that can produce manufactured items in further competition with American made commodities.
    The American economy is sustaining itself on ever increasing credit and in a very precarious manner. It’s only the huge juggernaut forward momentum that sustains it; if it stops, there may be a day of reckoning in the near future. Any bad judgment that could interfere with current status quo may have really undesirable effects. This could precipitate WWIII.
    I suspect the New Year will be more interesting (in a Chinese sense) than the one that just passed. In any event, a Happy and Prosperous New Year to all, and, I hope everyone had a wonderful Christmas (or whatever).

    • Just another thought:
      From the Japan Times, “Tokyo has so far frozen the assets of organizations and individuals associated with Pyongyang’s nuclear and missile development projects, exports of coal and other minerals, and the dispatch of North Korean laborers to other countries.
      The sanctions are designed to deal an economic blow to North Korea by restricting the movement of people, materials and money to and from the country.”
      I’m surprised, that from Japan’s earlier experience with embargos that they would undertake this approach.

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