Of course, Donald Trump has threatened a much broader trade war against China, claiming he would impose 100% tariffs on Chinese goods. A firm promise.
Certainly his senior advisers and those close to him, but others who are more obviously connected and connected to big business, have been emphasizing that Trump intends to make a big threat today, not tomorrow, but as the first move in negotiations. I will be re-employed in January.
capitalism
China treated Trump’s announcement with a degree of public concern, highlighting precisely the costs to American consumers. But China’s ambassador in Washington, for example, wanted to emphasize that he was well aware of Trump’s intentions. Negotiate final tariff position.
The broader strategy here is President Trump’s choice, laid out by Treasury Secretary Scott Besant in a speech last summer. In other words, if the international economic order is being reshaped, the United States will have to use whatever levers it can to bend it. This is reorganized for one’s own benefit.
Leveraging the sheer size of the U.S. economy, with some 350 million consumers and their dollar purchasing power, is one obvious strategy. How does it work?
for example, President Trump promised to impose an additional 10% tariff on all Chinese products if China does not supply fentanyl to the United States. – China says it has nothing to do with China, but here we can see how the threat of tariffs can achieve other policy goals.
Much of what the Trump administration does is likely to be fundamentally reactive. In other words, in the name of “America First,” the Trump administration will respond to a world perceived as increasingly hostile to the interests of American capitalism.
central planning
The most important of these is military power and, associated with this, technological superiority in key areas. China has moved at impressive speed to at least threaten America’s dominance. So it started with the first Trump administration, extended into the Biden presidency, and now is very likely to intensify in Trump’s second term, and we’re seeing increasingly aggressive trade moves. This is to prevent China from gaining an advantage.
If we step back, the overall impact contains a great deal of historical irony. China has a much more tightly organized form of capitalism around central economic planning that includes a deliberate, long-term focus on supporting high-tech industries.
In response to the results of this plan, first through reverse tariffs and then through investment and industrial strategies, the US government is introducing its own forms of planning and intervention.
The process of competition between capitalist countries is reproducing planning within capitalism. Planning gives rise to planning through the process of capitalist competition.
Bessant himself believes the Biden administration has introduced too much “central planning” into the system, but as long as the U.S. government is responsive to China, the ratchet effect will work. China’s central planning will increasingly dictate its American central planning response.
competitive
This is one of the key drivers currently moving the world away from neoliberalism and towards more state-led capitalism (usually with greater authoritarianism).
These tariffs may not work as intended. Evidence so far suggests that China has responded by pouring more resources into domestic industry, which means Huawei, a high-tech supplier subject to heavy tariffs, can now make phones without using domestically produced semiconductors. . It’s far from the cutting edge of what Taiwan’s TSMC is working on.
Restrictions and tariffs have created a hotbed of Chinese innovation. In other words, it’s not at all what was intended. The U.S. government is actually undermining the supposed benefits by asserting itself so strongly. But this actually tends to strengthen Washington’s case for further tariff restrictions.
Obviously this isn’t particularly reasonable. In theory, there is a route through this. That is, if the United States is concerned that Chinese trade is undermining its own manufacturing concerns, it could use the threat of tariffs (for example) to take a more favorable stance against China. A devaluation of the dollar would make U.S. exports more competitive globally, a claim made by Vice President-in-waiting J.D. Vance.
The so-called ‘Plaza Agreement’ signed between the United States and Japan in 1985 was an agreement in which Japan would revalue the yen and support its own exports due to the threat of increased tariffs on Japanese exports. There will be less competition, but this will ease the pressure on the United States.
readjust
This will ultimately allow the United States to regain control and rebalance the global economy. It will crack the ratchet towards central planning like Scott Bessant. Who announced the second Plaza Agreement?Thank you.
Sahin Vallee, writing in the Financial Times, argues that the United States under President Trump could strike the same deal under similar circumstances with China. Vallee believes that the macroeconomic entanglement of China and the United States will reaffirm a kind of economic rationality.
Both sides will recognize that there is mutual interest in withdrawing the dispute. A fall in the value of the dollar is acceptable if the United States is prepared, as it was in 1985, to use its capabilities to threaten wisely and strike a “grand bargain” with China. China allowed the value of the yen to rise and also lifted tariff restrictions.
I think this is too optimistic. One problem is that Vallee calls for spending cuts in the United States. This is necessary to prevent his global realignment from requiring America to borrow increasingly effectively from the rest of the world.
Saber rattling
The first Trump administration was very careful not to touch the welfare benefits of most Americans, and Trump himself was associated with considerable generosity (for the United States) during the COVID-19 crisis.
Whatever the current talk about shrinking the “administrative state” and Elon Musk’s arrogant attitude, it will be incredibly difficult to actually get politically unpopular spending cuts through this President and this Congress.
But the main difference between the 1985 agreement and the present is that Japan was politically and militarily dependent on the United States, while China was not.
So while Japan ended up giving in relatively easily and accepting a deal that wasn’t particularly good for its economy, China had absolutely no reason to do so.
So even though some secondary deals may be concluded around some consumer goods, dual-use components such as military or advanced semiconductors, for example, will follow a different logic. Economic helplessness, real war.
This author
Dr. James Meadway is an economist and former political advisor. This article is based on an episode of Meadway’s podcast. large capacity.
