Yves here. I feel as if I am overdue in opining on the Trump win, but there is a tsunami of commentary on it and I aspire to writing something that isn’t more or less a rehash of widely held views. So please be patient.
In the meantime, the post below is a useful high level treatment on Trump’s plans to increase and extend the scope of tariffs and how that is likely to affect the US and its trade partners.
Oddly, few commentators mention is that one reason Trump likes tariffs is that Presidents can impose them without Congressional approval….provided they can be characterized as addressing a threat to national security. Will anyone see fit to challenge Trump’s authority if he starts imposing them on a widespread basis?
However, the author also stresses that higher tariffs have become a bipartisan affair, and that Harris was likely to have increased them too. So Trump may simply wind up being louder and faster about adding to them than Team Dem might have been.
Note this piece does not address another looming economic issue, that the Biden Administration ran very large budget deficits, and if Trump wants to have a more balanced budget as he professes, he will need to cut spending, which will slow the economy and also reduce imports from trade partners in addition to the impact of tariffs. Mind you, Trump may well follow Reagan, by cutting tax revenues without then reducing spending as loudly promised.
Mind you, we don’t think deficit spending is a bad thing if done with an understanding of real economy constraints and how Federal initiatives can boost economic capacity, making the spending pay for itself by increasing output. None other than the diehard neoliberal Larry Summers found that infrastructure spending would generate as much as $3 in GDP growth for every dollar spent. Given the shoddy state of US infrastructure (including our way behind global standards for broadband), there would seem to plenty to do if one were so inclined.
By Renaud Foucart, Senior Lecturer in Economics, Lancaster University Management School, Lancaster University. Originally published at The Conversation
Donald Trump’s victory in the 2024 election – and his threat to impose tariffs on all imports to the United States – highlights an important problem for the global economy.
The US is a technological powerhouse, spending more than any other country on research and development and winning more Nobel prizes in the last five years than every other country combined. Its inventions and economic successes are the envy of the globe. But the rest of the world needs to do everything in its power to avoid being too dependent on it.
And this situation would not have been much different had Harris won.
The “America first” approach of Donald Trump has actually been a bipartisan policy. At least since previous president Barack Obama’s policy of energy independence, the US has been on a mostly inward-looking quest of maintaining technological supremacy while ending the offshoring of industrial jobs.
One of the major choices Trump made in his first term was to accept higher prices for US consumers in order to protect national producers by slapping high tariffs on almost every trading partner.
For instance, Trump’s 2018 tariffs on washing machines from all over the world mean US consumers have been paying 12% more for these products.
President Joe Biden – in certainly a more polite way – then increased some of the Trump tariffs: up to 100% on electric vehicles, 50% on solar cells and 25% on batteries from China.
At a time of climate emergency, this was a clear choice to slow down the energy transition in order to protect US manufacturing.
While Biden signed a truce with Europe on tariffs, it started a perhaps even more damaging battle by launching a subsidy race.
The US Inflation Reduction Act for instance contains US$369 billion (£286 billion) of subsidies in areas such as electric vehicles or renewable energy. And the Chips Act committed US$52 billion to subsidise the production of semiconductors and computer chips.
China, Europe and the Rest of the World
This US industrial policy might have been inward-looking, but it has clear consequences for the rest of the world. China, after decades of mostly export-based growth, must now deal with massive problems of industrial overcapacity.
The country is now trying to encourage more domestic consumption and to diversify its trading partners.
Europe, despite a very tight budget constraint, spends a lot of money in the subsidy race. Germany, a country facing sluggish growth and big doubts on its industrial model, is committed to matching US subsidies, offering for instance €900 million (£750 million) to Swedish battery makers Northvolt to continue producing in the country.
All those subsidies are hurting the world economy and could have easily financed urgent needs such as the electrification of the entire African continent with solar panels and batteries. Meanwhile, China has replaced the US and Europe as the largest investor in Africa, following its own interest for natural resources.
The incoming Trump mandate might be a chance to fix ideas.
One might, for instance, argue that the full-scale invasion of Ukraine, and the thousands of deaths and the energy crisis that followed, could have been avoided had the Biden administration been clearer to Russian president Vladimir Putin about the consequences of an invasion, and provided modern weapons to Kyiv before the war.
But the blame is mostly on Europe. Credit where it’s due, the strategic problem of becoming too dependent on Russian gas is something Trump had clearly warned Germany about during his first mandate.
There is a clear path forward: Europe could help China fix its overcapacity problems by negotiating an end to its own tariff war on Chinese technology such as solar panels and electric cars.
In exchange, Europe would regain some sovereignty by producing more of its own clean energy instead of importing record amounts of liquid gas from the US. It could also learn a few things from producing with Chinese companies, and China could use its immense leverage on Russia to end the invasion of Ukraine.
The European Union could also work harder on what it does best: signing trade deals, and using them as a way to reduce carbon emissions around the world.
This is not only about Europe and China. After decades of continuous improvement on all major dimensions of human life, the world is moving backwards.
The number of people facing hunger is increasing, taking us back to the levels of 2008-9. War is raging in Gaza, Sudan, Myanmar, Syria, and now Lebanon. The world had not seen as many civilian casualties since 2010.
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The world is alone, and America will not come to save it.
We do not know what will happen to the US. Maybe the return of Trump will mostly be a continuation of the last ten years. Maybe prohibitive tariffs or destroying the institutions that made the US such an economic powerhouse will make the US economy less relevant. But this is something Americans have chosen, and something the rest of the world simply has to live with.
In the meantime, the only thing the world can do is learn how to better work together, without becoming too dependent on each other.
Houthi and Hamas post-election announcements reflect lowering of tensions in the Middle East. That will have beneficial effects throughout the region and should reduce perceived risks in various markets. Such incremental steps would help stabilize politics and economics impacts to allow for somewhat proactive instead of reactive discussions and eventual policies.
Yeah, Putin would have caved on Ukraine if only Biden had been tougher and installed those missiles pointed at Moscow early on. Plus a huge NATO-trained military.
Kind of impeaches the smarts of the author.
And the only option offered is to ‘learn to work together better, without becoming too dependent on each other.’ How’s that going to happen, again? Trump and the Establishment being all in with the US as the “indispensable nation,” where a plurality of the economic actors are post-national hypercorporations pursuing selfish interests?
Hoping I’m wrong.
Yes, JT! The author of the article may understand ‘Economics’ but lacks perspective on Geopolitics. He does not understand the power of Russia to end all economics on the planet with it’s Dead Hand nuclear policy.
The author also does not recognize the dementia in both Biden and US diplomacy.
Thanks again, for keeping us all focused on what matters ;).
Good points. The author lacks historical perspective as well, and appears to have digested the unified narrative of the state dept. and the mass media sycophants. A couple of centuries of Russo-phobia is deeply embedded in the ‘western’ mindset. The implicit assumption is that the US has the right to dominate the world and dictate events on Russia’s border.
These arm-chair “tough guys” are the worst. He could always go join the Avoz boys and shoot Ukrainian deserters if we wants to put his money where his keyboard is
Also, the author takes a cavalier attitude to “getting tough” with Russia: He is obviously ignorant of the recklessness of provoking a country with a history of dealing with invasions and meddling from ‘the west’. and one that has advanced hyper-sonic missile systems and nuclear weapons. Is the author lamenting the fact that the Biden regime did not attack Russia directly?
Funny that people keep giving Trump credit for the thing where he was obviously wrong. It turned out Russia was, or in fact still is, most dependable partner imaginable, since all the sanctions were created by US/EU and yet Putin keeps pumping as much oil/gas to EU as it wants, going to great lengths to help EU politicians to keep faces and route around their own sanctions like the gas-for-rubles scheme.
I wonder how Trump will treat Europe now that EU forced itself to import large chunks of gas from US, I guess we will learn soon.
And a great example of the DoubleThink contradictions of the mass media. As the link shows, DT was against Germany buying cheap and reliable gas from Russia. He, despite the BS, increased sanctions on Russia, bombed Russian ally, Syria, tried to provoke a war with Iran (Russia ally), supported Israeli attacks on Syria, Iran etc. With “friends” like him, who needs enemies?
The mass media fooled most people, but like him or not, Vladimir Putin was not fooled.
“The US is a technological powerhouse, spending more than any other country on research and development and winning more Nobel prizes in the last five years than every other country combined. Its inventions and economic successes are the envy of the globe. But the rest of the world needs to do everything in its power to avoid being too dependent on it.”
— Renaud Foucart
An important claim but, I would argue, incorrect. The latest manufacturing productivity data was released today and America has experienced declining manufacturing productivity for twelve and three quarters now. The long term decline in American manufacturing productivity is unprecedented.
Also, America spends relatively less on research and development than most of the wealthiest nations. America for the last 24 years, as a share of GDP, has been spending less than half as much as China on research and development. The result is that Chinese institutions are now producing far more “high quality” science publications.
Think what it means that the Nature.com Index of high-quality science research publishing for the latest 12 months shows 4 of the top 5 publishing institutions are Chinese, 7 of the top 10 institutions are Chinese, and 11 of the top 15.
Harvard is at number 2. German institutions are at numbers 7 and 13. A French institution is number 10.
This is what stood out most to me too. Most economists in particular seem to be especially bad at understanding technology, I think partly because their whole worldview is predicated on believing “the map is the territory”.
His reference to Nobel prizes is a perfectly good example of that. Even if you want to base an argument from Nobel prizes, it’s more a proxy for the selectivity and resources of a few elite institutions, and a lagging indicator at that.
Meanwhile, among those of us that have worked in engineering (at least outside Silicon Valley) and seen some how the sausage is made, I don’t know many optimists.
American manufacturing productivity stopped growing and began to slowly decline in 2011.
https://fred.stlouisfed.org/graph/?g=m2mB
January 30, 2018
Manufacturing Productivity, * 1988-2024
* Output per hour of all persons
(Indexed to 1988)
https://www.nature.com/nature-index/institution-outputs/generate/all/global/all
The Nature Index
1 August 2023 – 31 July 2024 *
Rank Institution ( Count) ( Share)
1 Chinese Academy of Sciences ( 8542) ( 2567)
2 Harvard University ( 3660) ( 1109)
3 University of Science and Technology of China ( 2232) ( 753)
4 Peking University ( 2763) ( 729)
5 University of Chinese Academy of Sciences ( 3603) ( 723)
6 Zhejiang University ( 1852) ( 711)
7 Max Planck Society ( 2675) ( 700)
8 Nanjing University ( 1678) ( 681)
9 Tsinghua University ( 2239) ( 662)
10 Shanghai Jiao Tong University ( 1728) ( 616)
11 French National Centre for Scientific Research ( 4460) ( 614)
12 Sun Yat-sen University ( 1507) ( 602)
13 Fudan University ( 1595) ( 572)
14 Helmholtz Association of German Research Centres ( 2881) ( 567)
15 Sichuan University ( 946) ( 488)
* Tables highlight the most prolific institutions and countries in high-quality research publishing for the year
At least the author correctly points out the bipartisan nature of the anti-China policies and Biden regime tariffs. As usual, there will be little substantive differences in the new DT regime.
“…Note this piece does not address another looming economic issue, that the Biden Administration ran very large budget deficits, and if Trump wants to have a more balanced budget as he professes…”
But our brilliant leader says that’s no problem, a little magical thinking and some crypto and poof! No more deficit. That’s wonderful news eh!
That way they can increase MICIMATT budgets in typical bipartisan fashion and have more for Genocide. It’s a win-win
https://finance.yahoo.com/news/trumps-bold-plan-bitcoin-wipe-180039234.html
‘…“Maybe we’ll pay off our $35 trillion dollars, hand them a little crypto check, right? We’ll hand them a little bitcoin and wipe out our $35 trillion,” Trump said in an interview with Fox Business…’
New boss, same as the old: geriatric, cognitively-challenged nut jobs.
Elon The Oligarch wants to cut a couple trillion from the budget. Let me guess: more subsidies and tax breaks for him, more for MICIMATT , more his beloved coups and regime changes, more for Genocide. And Congress will back this with bipartisan gusto!
Housing, infrastructure, health care, environmental issues.. nah, not important.
Conflict of interest? No. (that’s not in the NewSpeak dictionary). Institutional corruption? No such thing.
As predicted: oligarchy, kleptocracy, genocide and the Washington Consensus always prevail.