The current American economic behavior despite the difficulty in separating politics and economics. The author raises the question of whether Trump will achieve his goals in shifting the United States from being the country with the highest trade deficit and public debt to achieving a surplus or balance through his current approach.
The article highlights two main factors contributing to the trade deficit: the imbalance between savings and investment levels, and the widening gap between government spending and tax revenues. The United States has reached a deficit level of approximately 5.4% of its GDP, which can be used to build pessimistic scenarios unless preventive measures are taken.
To achieve balance, the author suggests that the first step should be to control domestic government spending. However, this may lead to public and economic sector backlash. Trump’s commitment to tax cuts, as he stated, will worsen the financial imbalance as tax revenues will decrease in the face of government spending levels.
Regarding tariffs, particularly against major countries like China, their success depends on several factors:
- The reaction of other countries to the tariffs imposed on American goods, which may make these goods less attractive due to price increases.
- The ability to compensate in other markets, as imposing tariffs on American goods in most global markets will increase their prices, while Chinese goods will maintain or even increase their competitiveness in countries where the tariffs remain the same.
- China’s strategy of relocating industries targeted by the United States to other countries and exporting them to the United States under the guise of those countries, benefiting both the host country and China.
- China’s response of devaluing its currency, making Chinese goods cheaper and more attractive to buyers.
- China’s increase in tariffs on American goods, which will make them more expensive in global markets due to higher wages in the United States.
- The significant difference in military spending between the United States and China, which brings to mind Paul Kennedy’s prediction of overstretch and its economic burdens.
- The emergence of global value chains since the mid-1990s, where production stages are distributed across multiple countries. Trump’s tariff policy must reconcile this interconnectedness with his focus on stages within the United States only, as any attempt to bring back the entire supply chain to the United States would increase consumer prices and make American goods uncompetitive globally.
- The industrial sector in the United States employs around 12.8 million workers. Even if Trump achieves his goal of increasing production by 10-12% through his tariff policies, resulting in an additional $900 billion in industrial production, it would only create about 1.5 million new jobs, which is less than 1% of the total American workforce.
The article concludes that Trump prioritizes purely economic policies over political, social, and international legal considerations. While this may seem possible in the short term, the economic, political, security, and social interconnectedness established by globalization will force Trump or his successors to respect its direction, regardless of his narcissistic belief that he can reshape the world and restore American greatness as he claims.
