Last night, I was live on Al Jazeera’s evening news to give an “EU perspective” on Trump’s sweeping tariffs on the EU and have a bit of a debate with Hon. Robert Arlett, Sussex County Council, Delaware, USA – a MAGA supporter. I was happy to do so.
I think I made several decent points of criticism about how the entire premise for “retaliation” against the EU on trade was “made up” under an “arbitrary” formula that “makes no sense.” I allowed that, as is often the case with Trump, much of this, the “retaliatory” portion, might be a pressure tactic for some other, still-to-be-revealed concession Trump is aiming for from Europe.
Of course, this is the geo-economic side to Trump’s geostrategic undermining of a unified USA-EU approach to facing Russia over its invasion of Ukraine. (However exactly how that new geostrategic relationship with Europe and NATO might all fit into Trump’s larger, global security strategy is still mostly up in the air, a matter still taking shape.)
However, as for these massive tariffs on Europe and Asian allies, these are a systematic attempt to dismantle globalization as we have known it and instead to focus on the subordination of European and Asian allies to a system where hegemon is unwilling to pay certain costs of maintaining its allies within its system.
Trump envisions a system where the USA makes no sacrifices or pays no communal costs, but must profit at every step from each and every ally. Indeed, the USA has powerful tools afforded it from its geo-economic dominance, tools which Trump seeks to exploit to unilaterally shape international economic and geopolitical relations, while forcing its allies to pay for the privilege and advantages of belonging to the USA-hegemon-maintained system.
This is a sort of tribute system, where the tributes are trade tariffs and significant, uniform contributions to the collective military burden. Spheres of influence or empires organized on a purely tribute basis, since ancient times, tend to be less stable than the more “enlightened” ones where the hegemon is willing to pay various costs to maintain a system – such as the USA had done with the globalized free trade and NATO military systems – that its own domestic economy can most sustantiallt profit from.
I explained how how protective tariffs are not so likely to build up USA manufacturing, but rather allow them to stagnate innovation and raise domestic USA prices. I gave an example of how Ronald Reagan learned this with his auto tariffs on Japan that the USA automobile industry exploited in the 1980s.
So too, I explained that, if indeed the federal government collects trillions of dollars on tariffs as Trump promises, these will be paid by USA consumers being taxed to buy any imported product. The USA taxpayers will pay this bill.
I also clarified, by examples from the USA auto industry, where I worked in the 1970-80s, of how it has always been primarily automation and robotization that has reduced these key USA manufacturing jobs, with foreign outsourcing of production a lesser cause. In fact, Nord America has continued to take a larger and larger percentage of total automobile sales since ca. 2017, actually increasing its share, while both China and Europe’s shares have fallen (European Central Bank data). So, Trump’s grand scheme to increase USA manufacturing jobs seems based on shaky, slip-shod populist tropes. The aim of increasing USA production of real things, of industrial production indeed has merit, especially since China now has fully one-third of all global manufacturing capacities. This is not only a geo-economic risk for the USA and its allies but a geostrategic one as well. However, Donald Trump’s approach, with blanket tariffs on allies and China alike, is dubious and appears more of a revenue grab from tariffs (a grab from US citizens and residents, and businesses, who will actually pay these tariffs).
I explained that Trump arbitrarily ignored the huge amount of USA service-sector exports to the EU when considering the size of the trade imbalance. In fact, if he includes the value of exports by the mighty USA service industries — from USA IT firms, financial services, cultural and media products, etc. — most of the trade imbalance he finds in purely manufactured goods then disappears. I pointed out that it was the USA that decided to focus on services as vs manufacturing, during the Information Revolution, which it led and still leads worldwide, not the Europeans.
Lastly, I discussed some of the retaliatory measures the EU will now be forced to take. I also said that the EU states have many significant and deep competitiveness problems. In fact, Germany and some other regions are facing real deindustrialization as a result of very poor economic policy decisions over the last two or more decades. In fact many EU member states have huge tasks in this regard, but the arbitrary Trump tariffs will, it appears, only spur them on to more seriously address these problems.
Please watch the video and let me know any thoughts. These are always short commentaries and the focus is not always up to the people being interviewed. You can reply privately as well, via twod(at)umich.edu.
Thanks! Tom O’D.
The Global Barrel 