by Ivan Lizan
[REGNUM] US President Donald Trump has imposed import tariffs on products from virtually every country in the world, triggering a global trade war. The rates are tied to the US trade deficit with each individual country and are adjusted for political factors.
Everyone without exception was affected, the only question is the duty rate: the minimum is 10%, the maximum is 49%.
The countries with which the United States has small volumes of mutual trade and does not have a pronounced trade deficit are subject to minimal duties.
For example, 10% tariffs would apply to Russia, Belarus, Iran, and North Korea — the United States has no trade relations with them, but there are a number of diplomatic issues that need to be resolved. Introducing tariffs against these countries would not give the United States any advantages, but would create additional problems.
The totality of duties is intended to prevent circumvention of restrictions through other countries. This explains the exorbitant duties for Cambodia and Vietnam - 49% and 46% respectively. These countries were used by Chinese businesses to circumvent the restrictions.
And the duties on penguins from uninhabited islands, which have caused widespread discussion and ridicule, were introduced to prevent Australian businesses from registering in these territories.
NEW AMERICAN RULES
The introduction of restrictions is justified both at the ideological level and at the economic level.
At the ideological level, the tariffs are positioned as an act of economic liberation for the United States and the restoration of justice. The logic of the Washington administration is simple: the United States created the modern system of world trade, and all other countries should be grateful to them for this.
But instead of gratitude, they “abuse” the export of their goods to America and do not want to buy American goods.
The fact that such changes in world trade are absolutely normal, and that the United States itself became a superpower at the expense of weakening other states, such as the British Empire, is ignored.
At the economic level, there is also a solid rationale: the US's sky-high trade deficit and record levels of external debt no longer allow it to pursue the policies that many still consider the norm.
The United States urgently needs to solve four problems. The first is to correct the trade balance, reducing its deficit, and ideally, to ensure a surplus in foreign trade.
The second is to reduce the cost of servicing the government debt, as well as attracting new borrowing.
The third is to ensure an influx of investment into the country for its subsequent reindustrialization.
The fourth is to inflict economic damage on your economic and geopolitical opponents.
In theory, Trump's trade war allows achieving these goals. Tariffs will cut off some imports from the American market, making them uncompetitive or too expensive. Against the background of the adjustment of the trade balance, the cost of servicing the American debt will decrease.
The reduction in imports, together with budgetary savings measures, will lead to a reduction in the size of the federal budget deficit, and therefore reduce the need for borrowing.
The strong dependence of many countries and corporations on the American market will force them to accept Trump's conditions or resign themselves to the transfer of production to the United States, that is, they will contribute to the reindustrialization of America.
Countries unfriendly to the United States, such as China, will be denied access to the American market, which will contribute to their economic weakening.
But in exchange for this you will have to sacrifice something.
SIDE EFFECTS
First, the US will cease to be the only superpower. In fact, they are no longer one, since they have ceased to influence many countries and processes in the world.
If Trump succeeds in implementing his reforms, the United States will remain only a major regional power with its own sphere of political and economic influence, under which countries dependent on it will fall.
Secondly, the dollar as a global currency will have to be sacrificed – after all, what good is the dollar if the US is reducing trade volumes with 185 countries and also betting on weakening its currency to stimulate import substitution and exports? In such conditions, a weak dollar will be a competitive advantage for American goods.
Third, it will be necessary to sacrifice membership in international institutions and stop observing the rules of decency in relation to small countries. The US blocked the work of the WTO at the end of Trump's first term, and Joe Biden has done nothing to restart participation in this organization.
The States will pump money out of their recent partners, who will now become donors. And here a striking example is the transformation of Ukraine from a partner, which was financed free of charge, into a hopeless debtor. But it will be possible to take Greenland by force.
But what is far more dangerous for Trump at the moment is that public support will have to be sacrificed.
The stock market will deflate: the capitalization of many corporations, around which stock market bubbles have been inflated for years, will be greatly reduced; the stock market will be dominated by bears, not bulls.
The trade war with the rest of the world will cause inflation in the US to rise sharply, as the dependence on imports is stronger than it seems, and supply chains are usually longer and more intertwined than officials assume.
At the same time, the awareness will grow that import duties are not the same as exemption from imports: import substitution does not occur automatically when imported goods become more expensive; it is a delayed consequence of investments by the state and business, stimulated by sound tax policy and government support measures.
It is much more difficult to prescribe these measures and create such a tax policy than to introduce import duties. It is even more difficult to launch such a mechanism, while simultaneously solving a host of infrastructure, technological and personnel problems.
In any case, it will be the American consumer who pays for American import substitution, and the corporations who get rich from it.
And if the rate of American consumer spending exceeds the rate of growth of his income from the creation of new jobs, then Trump will face a drop in approval ratings and a decrease in the level of social support.
In that case, the American oligarchy will betray him at any favorable offer from its opponents. And the Democrats who return to power will partially roll back Trump's reforms.
Therefore, the current administration will try to make the reforms irreversible and is already combining them with a comprehensive attack on the Democrats.
The Trumpists are cutting budget expenditures that fed the Democrats, reforming the electoral system, trying to take control of the courts, protecting their officials from media attacks and engaging in them themselves, conquering the information space.
Overall, Trump's plan can be described as risky but rational.
EUROPE IS IN DESPAIR
Naturally, the leadership of other countries will not sit silently and watch what is happening.
In trade wars, countries with a trade deficit have the advantage - the trade war between the US and China, which has been going on since 2018, is proof of this.
It will be more difficult for the affected countries to reduce their imports of American goods - they are often very specific, like the same civilian aircraft, software and hardware. And not all goods, such as food and energy, can be replaced.
Weak countries and those who were given 10% will not respond - either they have nothing to respond with, or there is no need, since there is an opportunity to replace someone else’s reduced share of the American market.
Large countries and blocs will certainly respond, since they cannot demonstrate weakness.
The trade war with China will reach a qualitatively new level, but the US is no stranger to it. Nor is China, for that matter.
Beijing will try to compensate for the loss of the American market by redirecting exports to other countries, including not the richest, but promising ones - the same African states. But it is worth noting that China is already suffering - there is deflation in the country.
Relations with the EU will continue to rapidly deteriorate. In the EU countries affected by the tariffs, industrial production will decrease, GDP will shrink, unemployment and social discontent will increase.
But it will be aimed more at the US and Trump personally, and it will definitely not bring the right to power. The EU has learned to fight them with both legal and illegal means, while ignoring the moralizing of Trump and J.D. Vance.
However, Europe's margin of safety is very small: relations with Russia have been damaged, its sales markets and energy resources have been lost, as has the previous harmony in relations with China, which has become a strong competitor for European companies.
Therefore, the EU will be the most affected party in this war, which will face capital flight to the US and the transfer of production there.
Left out of this story is a group of rogue states and Russia.
Globally, Trump is doing through tariffs what was done to Russia through sanctions: cutting it off from global trade. But they wanted to punish Russia, forcing it into submission, while for the US these measures are positioned as a benefit — different places in the global trade system are having an effect.
At first glance, Trump's trade war does not affect Russia: big deal, 10% duties with minimal trade volumes and an exorbitant number of sanctions imposed. But there is a nuance.
Firstly, Trump is chaos, and you can expect anything from him. The attention of the domestic bureaucracy is not unlimited, and its forces are limited. In this regard, Biden was much more predictable, since he would continue the inertial policy and would not break world trade through his knee.
Secondly, Trump risks plunging the global economy into recession. And this will result in a reduction in demand for many raw materials and energy products, and at the same time provoke an increase in the number of various restrictions. There is no longer any room to move on the global market: production exceeds demand, and countries are closing their markets one after another.
The only thing that gives hope is the Trumpists' awareness of the fact that America is not all-powerful, which means that other countries have the right to their spheres of influence. But will it be possible to bite out such a sphere from the US?
And the number of people wishing to return to the Russian market will also increase, but will we be happy to see all those who return?
The number of countries claiming sovereignty will also grow: some will find it more profitable to grow up and separate from the US than to be endlessly dependent on the antics of Trump, who is turning from a kind patron into an evil racketeer.
In any case, if after 2014 world trade was disrupted and was not free in relation to sovereign countries, then now it can safely be buried for the rest of the world.
Globalization is officially over.