Michael Hudson: Trump’s Tariffs Could Cause Huge Global Crisis

Yves here. Even though Trump has put a pause on tariffs against Mexico and Canada, his tariff increase against China is still on. And more generally, Trump has repeatedly described his intent to use tariffs to create what he depicts as a new golden age. So he’s likely to keep trying to deploy tariffs as a preferred tool, both due to his undue fondness for threat display, and to advance his long-term economic vision.

Michael Hudson and Ben Norton discussed Trump’s economic plans, particularly tariffs, focusing on their internal contradictions and the potential to create an international debt crisis.

By Ben Norton. Originally published at Global Political Economy

(Introduction)

BEN NORTON: Donald Trump is threatening to impose tariffs on countries all around the world, including the top three trading partners of the United States: Canada, Mexico, and China.

DONALD TRUMP: The word “tariff” is the most beautiful word in the dictionary — more beautiful than “love”, more beautiful than “respect”. No, less beautiful than “religion”, no. Right? I don’t want to get into that argument. But the word “tariff” is the most beautiful word in the dictionary, remember that. It’s going to make our country, it’s going to make our country rich.

BEN NORTON: Now, Trump says he’s doing this because he wants to reduce the trade deficit that the US has with the rest of the world.

However, there’s a major contradiction in Donald Trump’s economic policy, because he also wants to maintain the US dollar as the global reserve currency.

And Trump has threatened other countries, especially countries in BRICS, that are trying to de-dollarize. Trump has said that if countries de-dollarize, he will put 100% tariffs on them.

DONALD TRUMP: We will keep the US dollar as the world’s reserve currency. And it is currently under major siege. Many countries are leaving the dollar.

They’re not going to leave the dollar with me. I’ll say, “You leave the dollar, you’re not doing business with the United States, because we’re going to put 100% tariff on your goods”.

…

I’m very much a traditionalist. I like staying with the dollar. You know that from when I was there. Make the dollar the choice. I hate when countries go off the dollar. I would not allow countries to go off the dollar.

BEN NORTON: So what Trump’s trying to do is have his cake and eat it too, because this is a contradictory policy. Trump wants to reduce the US trade deficit, but he also wants to maintain the US dollar as the global reserve currency.

The problem is that if Trump wants other countries to continue using the US dollar in international trade and finance, the US has to run a deficit, so other countries can get access to those dollars. If Trump wants to use tariffs to reduce the US trade deficit, it means that other countries will not be able to get the dollars that they need in order to use the dollar in international trade and finance.

So these very contradictory policies that Trump is trying to maintain could have severe repercussions on the global economy. And today, I had the pleasure of speaking with the award-winning economist Michael Hudson, who has warned that if Trump imposes high tariffs on countries like, for instance, Canada and Mexico, their currencies will fall significantly against the US dollar, which will mean that they will not be able to pay off the debt that these countries have denominated in US dollars.

This could cause a global debt crisis, as countries around the world can’t get the dollars they need to pay off their debts.

Here are a few highlights from my discussion with the economist Michael Hudson. And after I will go straight to the interview.

MICHAEL HUDSON: To Trump, a win-win is a loss, because a win-win means some other country also wins, not only you, the United States. And if some other country also wins, that means the United States has not grabbed everything there is to grab, and Trump wants to grab everything that is available, the entire economic surplus.

…

Here, again, you have one of the features that makes the United States an exceptional country. And Trump is making use of that exceptional characteristic of the United States.

The United States can do what no other country does. It can it can threaten to hurt other countries if they don’t do what the United States wants. It can bomb them. It can engage in regime change, through the National Endowment for Democracy Democracy and USAID.

It can hurt other countries. Other countries don’t have a foreign policy anything like that.

…

What Trump realizes is normally you don’t need military force to subjugate and colonize another economy. You can use financial warfare, and you can use trade warfare, and that’s “peaceful”.

You don’t need, to mobilize American troops to invade a country. Vietnam showed you can’t do that anymore.

You can simply use trade and financial sanctions. That’s what he’s trying to do.

…

That’s America’s strong point. It’s not that it’s going to use the hydrogen bomb. It can wreck world trade, wreck world finance, and try to force the kind of economic relationship that Trump and the deep state wants.

And Trump has made it clear that America has to be the winner in any kind of trade agreement that it makes with any other country.

…

If American companies are unable to export to China, then their profits will be down, and they will lack the money to engage in the research and development they need to keep up with the technology that the rest of the world is doing.

And so the result is that Trump’s policy is deliciously self-defeating for US policy. It will mean inflation. It won’t mean more industrialization.

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(Full interview)

BEN NORTON: Michael, it’s a real pleasure having you today. Thanks for joining us.

I wanted to ask you about an article that you recently published warning about the impact that Trump’s tariffs could have on the global economy.

The basic point you make is that the US designed the global financial system in a way in which the US dollar is at the center, and other countries need to get access to dollars to pay off their dollar-denominated debt, and to pay for imports.

Yet, in order for this system to work, the US has to run a deficit with the rest of the world, a current account deficit, so other countries can get those dollars.

But Trump wants to disrupt this. He says he wants to tariff other countries to reduce the US trade deficit, which means that other countries won’t be able to get the dollars they need to pay off their debt and to pay for imports.

Now, this could be good news, if you actually wanted to end the US dollar’s role as the global reserve currency. But then Trump also is threatening countries that de-dollarize, threatening 100% tariffs on BRICS countries.

As you put it in your article, he has two completely contradictory ideas in his head.

At the same time, you warn that this could cause a financial crisis. So can you explain your argument and why you’re concerned?

MICHAEL HUDSON: Well, people usually think of the dollar as being used for international trade, but the vast use of dollars is on capital account, for financial transactions. And the great majority of international debts, owned by governments to other governments and to bondholders, is denominated in US dollars. That’s quite different from using the dollars.

By denominating them in dollars, that means that you have to use your domestic currency to buy dollars. And if the dollar goes up in price relative to other currencies, if it appreciates, then you use much more of your domestic currency to spend. And that requires governments to essentially cut back their spending on [things] other than debt service.

For instance, the Canadian dollar is gone way down against the US dollar. So Canadians have to spend much more money in their currency to pay their dollar debts.

The Federal Reserve in the United States has been raising interest rates here, and that has attracted investors into the dollar, pushing up the exchange rates, especially against Global South currencies.

And this means that the Global South, in addition to having problems of earning the money to pay their dollar debts, have to pay more and more of their own currency to pay the dollar debts.

The result is that their currency goes down, and that increases the price of their imports, increasing their domestic price inflation.

This is what occurred in Germany in the 1920s on a massive scale, when no matter how much Germany tried to depreciate the mark (its currency), it wasn’t able to raise the money to pay its debts, because it would throw the marks on the foreign exchange.

Well the reparations were set around 1921. And as soon as the mark began to go down, the American Congress said, “Well, German exporters are competing with American industrialists”. So they passed a law, the law against trade with countries with depreciating currencies. And that meant that whatever price advantage Germany got from a lower exchange rate, the tariff rate went up accordingly.

So the United States prevented Germany from obtaining the dollars and hard currencies to pay the Allies, for them to turn around and pay the inter-Ally war debts to the United States, for arms that the United States had sold to England, France, and other Allies before the United States entered the war.

Well, by 1927 and 1928, there was a great argument among economists: should the debts be written down, or not?

It was obvious that the debts couldn’t be paid without creating economic austerity and a disaster, not only in Germany, but France also had a hyperinflation trying to pay its central debts.

So John Maynard Keynes made the point that there is an implicit morality underlying the international credit system, that a creditor nation has an obligation to accept the exports of countries that are paying the debts, to enable them to pay the debts.

Well, this argument went all the way back to 1809 and 1810, when David Ricardo was the bank lobbyist in England for credit. And David Ricardo, came out with the exact same junk economics idea that guides the International Monetary Fund today.

Ricardo said that you didn’t need any government interference, any government money, for debtor countries, because, when a debtor country paid its debts, its currency would go down, and that would drain its money. The drain of money, according to the quantity theory of money, would lower the prices, and its exporters would have a price advantage. And the price advantage would end up competing with the exports of the creditor nation, and automatically this depreciation of prices would continue until there was balance restored, automatically, without any government interference in international debt.

Well, this was, of course, nonsense. Take the case of Haiti, for instance. Haiti was exporting basically sugar and coffee to France. The lower price didn’t make France buy more Haitian plantation crops, because it was already buying everything they could do.

Same thing with the Global South countries. The International Monetary Fund says if a country is unable to pay its debts, all it has to do is break up its labor unions, get rid of the political leaders that want to increase wages, lower wages, and austerity is going to lower the prices, and these countries will have the money to pay the debts.

Well, the reality is that austerity never helped any country pay the debts. Austerity means that there’s unemployment. Austerity means that industrialists, of capitalists, or whatever investors, don’t have enough money to invest in new means of production.

And austerity means that labor is not able to increase its living standards and productivity. And the government is not able to spend on domestic social spending like education, healthcare, and other basic social needs that are necessary to make an economy work.

So the whole idea of automatic adjustment mechanisms was fallacious. But underlying Ricardo’s attempt to sort of provide an apologetics for debt service is this the recognition that if a country is owed money, it has to enable the debtor country to pay.

That’s not happening. And, right now, you already have countries owing so much foreign debt as a result of the bad loans, even the bad loans made by the International Monetary Fund and bondholders, without any capacity to evaluate what are the abilities of countries to actually pay.

The Global South is already strapped, and is then prevented from spending money and investing in public infrastructure, and domestic private investment, and government investment to actually grow.

So the problem is how do these Global South countries, and actually the BRICS in general, other countries, how do they get the money to be able to grow? And that would include Canada, Mexico, and even Europe.

Well, Trump has this myth of tariffs. He says, “We’re going to raise tariffs because, back 130 years ago, under President McKinley, America became strong by imposing protective tariffs”. That was what created a price barrier, so that American industrialists were able to gain the money to invest in steel, manufacturing, and other production.

America got rich by protectionism, just like England first got its economic advantage in industry by mercantilist protectionist policies. Germany and France also built up their industrial supremacy in the late 19th century, early 20th century, by protectionist government [policies].

But after World War One, the United States and others stopped protectionism. They had already gained their economic advantage over other countries, and they wanted to pull up the ladder, and prevent other countries from doing what it had done — public investment, raising living standards, the economy of high wages to increase labor productivity.

They wanted to prevent other countries from imposing their own tariffs, to protect their agriculture, especially.

And as a result, the Global South and many BRICS countries are running chronic balance of payments deficits.

How are they going to get the money to pay the debts that are denominated in dollars? Well, the only way is to increase their exports, but the international free trade laws that the United States and Europe created in 1944 and 1945, have prevented other countries from following the government policies to increase their exports.

So they’re sort of crippled already in their ability to develop their economies by enough to pay their foreign debts.

Well, here comes Donald Trump, to answer your question. And he said, “We’re going to impose tariffs on you, to promote American industry, and to force you to follow the policies that we’re telling you to do”.

And here, again, you have one of the features that makes the United States an exceptional country. And Trump is making use of that exceptional characteristic of the United States.

The United States can do what no other country does. It can it can threaten to hurt other countries if they don’t do what the United States wants. It can bomb them. It can engage in regime change, through the National Endowment for Democracy and USAID. It can hurt other countries.

Other countries don’t have a foreign policy anything like that.

So Trump is going to use this ability to hurt other countries, to force them to, for instance, in the case of Europe, he said, Europeans should increase their NATO spending from 2% to 5% of their GDP. That means they have to buy more arms from the United States.

The United States dollar will go up. The euro will go down.

Trump also says that, Europe should buy more of its, [liquefied natural gas], its energy, its gas from the United States, LNG, through American tankers, not from Russia or from elsewhere.

Again, Europe is paying more of its currency to the United States for dollars. That’s why the euro is going down in value.

So the result of Trump’s policy with Europe is saying, “If you don’t do these things, we will impose 25% tariffs on you”.

Well, if that is the case, it will make European exports even less competitive than they are now, and the euro will go down.

Well the American, financial class, behind Trump, is all in favor of that, because you’ve had in the recent few months, American investors have been going to Europe and say, “This is great. The euro is going down. That makes it cheaper for us Americans to buy their industrial companies. We can just pick them off”.

Germany is going into a depression. Its companies are going out of business. They’re laying off labor. There’s shrinkage. Profits are down. That means that their stocks are down. And the price of buying their stocks in dollars is going down even more.

So you’re having an American takeover of European industry, such as hasn’t been seen in quite a while. So Trump is able to exploit Europe, to that extent.

The problem is that the dollar is going up against the Global South currencies. And the Americans already have pretty much what they wanted to buy in the form of foreign raw materials, natural resources, public monopolies that have been privatized.

And the result is that Trump’s actions, of trying to hurt other countries, will prevent them from paying their dollar debts.

I’ve used Mexico as a particular example in all of this, because Mexico has a higher proportion of its balance of payments, receipts coming from immigrants’ remittances than any other country. Immigrants’ remittances are a key supporter of the peso’s exchange rate.

And these are remittances from Mexican seasonal labor that goes to California to pick crops, and also from the many Mexicans that have left for the United States to earn dollars by working in the construction industry, or food services, or retail industry, other sectors, so that they can send the dollars they earn back to their families.

And many Latin American countries also have sent their children to the United States to earn dollars. And what little they can make over the minimum wage that they’re paid is sent back to their families in their home countries.

That has helped Latin American countries support the exchange rate of their peso or other currency, enabling them to pay their foreign debts, and to afford the more expensive oil, gas, and raw materials that have been rising as a result of US policy, and the sanctions that it’s imposed on Russia, China, and other countries.

Well, all of this will be disrupted. And the question is, what are other countries to do if all of a sudden their ability to export to the United States, to earn the money to pay their foreign debts, is blocked by the United States?

They have two choices: One is to sacrifice their economy, to impose absolute austerity, to follow the International Monetary Fund’s direction, to fire and lay off their labor, to begin selling more of their property at distressed prices to US vulture buyers, and basically give up their hopes to develop a balanced economy.

The alternative is to say, “We’re sovereign countries under international law. We can decide to put our interests before that of foreign countries. After all, voters elect us to represent domestic interests, not foreign interests. So we are suspending our debt service, so that we can afford to break even and continue the economic balance that has characterized our economy, and to enable us to provide basic needs for the economy”.

And the basic needs include expanding investment, becoming more self-sufficient.

Now, of course, if they do this, the United States is going to impose all sorts of sanctions against them.

The US response will be to treat countries that don’t pay their foreign debts like the United States treated Argentina: you try to grab whatever foreign holdings they have; grab their gold stocks that they hold in New York, or in the Bank of England. If they have not taken back their gold stocks, it’ll be grabbed.

They will lose whatever foreign assets they have. If they have ships, naval ships, that go abroad, those can be grabbed, as the creditors, bondholders, of Argentina tried to grab its foreign ships. I’ve described all this in my book Killing the Host.

So it’s very difficult for one country to say, “We’re going to have to suspend our debt”. Even if that country is as strong as Mexico.

In fact, if Mexico were to say that, for all we know, the United States, Trump would send an army in and grab its oil fields, and say, “Well, you can’t pay your debts. We’re going to grab your oil resources. Just like we’ve grabbed the oil resources in Syria. Nothing wrong with that. We grabbed Syrian oil, we can grab your oil”.

So, this this essentially is an escalation of US control.

Trump has campaigned as a “president of peace”. Unlike Biden, unlike the deep state, he is trying to clean out the neocons from the US government. That’s good. He’s trying to close down much of the CIA, and much of the FBI. That’s good.

What Trump realizes is normally you don’t need military force to subjugate and colonize another economy. You can use financial warfare, and you can use trade warfare. And that’s “peaceful”.

You don’t need to mobilize American troops to invade a country. Vietnam showed you can’t do that anymore.

You can simply use trade and financial sanctions. That’s what he’s trying to do.

But Trump tends to think, and American foreign policy tends to think, in very segregated, partial equilibrium approaches, it’s called in economics: you assume that whatever you do in trade, is not going to have ramifications in the financial sector, the diplomatic sector, even the monetary sector, such as it’s having now.

So the problem if Mexico, Colombia, or other countries are faced with a blockade of their exports, and they decide, “We’re not going to pay the foreign debts, because you’ve prevented us from paying the foreign debts; that makes these debts odious debts”, they have to do it as a group, by getting together and saying, “We Latin American countries, African countries, and many Asian countries, along with Canada and Europe, are all in the same boat. We’ve got to suspend debt service”.

And we know that that is going to bring down the international financial system, but that’s going to hurt primarily the United States and its English and European satellites.

That’s what their strong point is. They can call Trump’s bluff, and they can call the bluff that any American tries to make, by saying, “Yes, you can wreck the trade system; we can wipe out the financial system. And by doing that, we’re reestablishing, we’re actually helping our balance of payments”.

What Trump has done against Colombia, trying to force it to repatriate deportees in a very degrading way, on military transports, shackled — this is not all that extraordinary, that’s been happening under the Biden administration right along.

But the fact that Trump is trying to make a showdown with Colombia by doing this shows what it can do as its modus operandi against other Latin American countries, and Global South countries, and Asian countries, and Canada, and so forth.

So I think this, in a way, it serves as a wake up call to the rest of the world to decide, “How are we going to cope with the policies that America is trying to do?” It’s a new American aggression policy, and you don’t know how far this can go until other countries begin to press back.

Every time they knuckle under, as, Colombia basically did, then it encourages Trump to go on, and on, and on.

That’s essentially what he’s doing, and even extending it into the military policy, when he says, “We need raw materials. Just as we grabbed Syria’s oil, we can grab Greenland because we need raw materials. And we also need military bases so that we can fight against Russia or China planning an international transport system through the Arctic Ocean. We want to control the Arctic Ocean so we have the power to wreck the world trade”.

That’s America’s strong point. It’s not that it’s going to use the hydrogen bomb. It can wreck world trade, wreck world finance, and try to force the kind of economic relationship that Trump and the deep state wants.

And Trump has made it clear that America has to be the winner in any kind of trade agreement that it makes with any other country, from European countries to Russia and China

This is another characteristic that makes America the exceptional country. Other countries usually follow what President XI of China does. He’s trying to do a win-win situation.

China is not trying to militarily invade other countries. He’s trying to say, “We can invest money in developing your ports, and your railroads, for internal trade, so that you don’t have to rely on export trade to achieve financing, to support your government spending. You can trade with your neighboring countries all together, in basically a Eurasian economic unit, so that you will not be dependent on the United States. It’s a win-win”.

Well, to Trump, a win-win is a loss, because a win-win means some other country also wins, not only you, the United States. And if some other country also wins, that means the United States has not grabbed everything there is to grab. And Trump wants to grab everything that is available, the entire economic surplus.

So that is the confrontational characteristic of US diplomacy, in the United States today.

BEN NORTON: Well, you raised a lot of great points there. There’s so much to respond to, Michael.

I’ll start with this question: in your article, you mentioned that Trump has this uncanny ability to have completely contradictory thoughts in his head at the same time. There are a few examples of that you mentioned.

For instance, he says he’s going to fight the neocons, and then he selects the king of the neocons, Marco Rubio, to be his secretary of state. And his national security advisor, Mike Waltz, is also a neocon. So there’s that.

Trump said he’s going to be a “peace president”, he’s going to be against war, but he’s threatening to colonize Panama, the Panama Canal, Greenland, even Canada, threatening Mexico.

MICHAEL HUDSON: But he’s doing that for peace. “Peace” is when the United States controls everything and no other country has any ability to fight back. That’s “peace”!

BEN NORTON: Yeah, great point. That’s the Orwellian US empire’s view of peace: war is peace.

But another example this is what we talked about earlier, that Trump wants the US dollar to remain the global reserve currency. He has threatening countries that de-dollarize with tariffs. He threatened 100% tariffs on BRICS countries, which now represent 55% of the world population.

Yet at the same time, he says that he wants to re-industrialize. But in order to re industrialize the US, the dollar has to come down. It’s extremely expensive. Even some some major US banks are saying that the US dollar is extremely overvalued.

You talked about how the Federal Reserve has significantly raised interest rates in recent years, which has caused many other currencies to depreciate against the dollar.

So if Trump wants to re-industrialize, he has to tackle this issue, unless he wants iPhones to cost $5,000 to produce.

He says he wants to produce this stuff locally, but it’s so expensive, he’s not even going to be able to export it, because it’s going to be so uncompetitive internationally, because of the very expensive dollar.

So to me this seems to be another major contradiction that Trump, he wants to punish countries that de-dollarize, and he says he wants to re-industrialize. Yet he also is engaging in these policies like tariffs that only push the dollar further up.

So it seems like something has to break at some point. Do you think that it’s possible for this strategy to work, for the US to re-industrialize with such an expensive dollar, while threatening other countries that de-dollarize, and putting on tariffs that keep driving up the dollar?

And I’ll add one other part of this question: he also has chosen the billionaire hedge fund manager Scott Bessent to be his Treasury secretary.

There are 13 billionaires in the Trump administration. These are people who are not going to want to bring down the dollar, because that would hurt Wall Street, because the stronger the dollar gets, the better, the richer they get with all of their US financial assets.

So I mean, what’s going to break, what’s going to happen here?

MICHAEL HUDSON: Well, there are a number of things you have said. To begin with, there’s a great misunderstanding, and that’s because money and debt are blind spots in the economic education that people get in the United States.

Trump follows a sort of neoliberal blind spot in not looking at industrialization and international finance as an interrelated economic system.

In theory, the idea is that if only you will lower the dollar’s exchange rate, that will make American exports more competitive, with European exports and China’s exports. That’s crazy! What American exports? America has de-industrialized.

Let it devalue the currency by 90%, 90%! It will take 10 or 15 years to recreate the industry that America has outsourced to foreign countries.

America doesn’t have the production to lower its prices on. It has control of the world oil industry, as a center of American diplomacy; it has American agriculture; but it doesn’t have industrial exports, like cars.

Its idea of industry is information technology. Well, we just saw that go poof, with DeepSeek, the Chinese information technology.

The problem is that what has de-industrialized the United States, and makes it impossible to industrialize, is the United States is no longer in an era of industrial capitalism; it’s finance capitalism.

And the aim of the financial companies, whether they’re steel companies, or auto companies, or computer companies, is to increase the price of their stocks.

Most of the financial fortunes in the United States and Europe are not made by earning profits on production; they’re made by capital gains in their stock prices. And the capital gains are financed mainly by debt leveraging, from banks at low interest rates to buy one stock. Or if you do make profits, you pay them out as dividends, to increase your stock prices.

I think I’ve said on your show before that 92% of the of the Standard and Poor’s 500 (S&P 500) cash flow, profits, are paid out as dividends and stock buybacks, not as industrialization [investment].

You can see an example in what has happened with Intel, in the United States. The United States wanted to prevent China from getting computer chips, imagining that, if the United States blocks computer chips from China, China will say, “Oh, we give up, we don’t know how to produce computer chips”.

Well, obviously China has gone way ahead. But Intel has been blocked from selling computer chips to China.

And Intel’s stock has been plunging, because its CEO has said, “Well, wait a minute, our biggest single market is China. Now that we’ve lost the Chinese market, our profits are way down. And if we don’t make profits, how are we going to get the money to finance research and development? We’ve got to support our stock by using the few profits that are left for us to make on stock buybacks and paying out as dividends to support our shareholders”.

So, essentially, the United States has been cutting its own throat, its industrial throat, with financialization, and the fact that the whole objective of American corporate industry isn’t industrial anymore; it’s financial.

If you have created a way of making America’s comparative advantage in finance, then you’ve lost your advantage in industry.

Can America, can any economy, that does not produce industrial exports, does not produce exports or products that other countries want, except maybe liquefied natural gas and farm products, can that really dominate the world?

If you’ve outsourced all of your industry, all of your research and development, if you’ve stopped your infrastructure spending in order to cut taxes on the wealthiest financial classes so that they can make more money, instead of the economy rebuilding its bridges and infrastructure, and developing like it used to do, then you’re going to have the United States becoming a failed industrial economy. And that’s what has happened.

So in that sense, lowering the dollar’s exchange rate isn’t going to help. But if you raise the dollar’s exchange rate, that’s going to make it easier for US financial institutions and corporations to buy out European and other foreign industries, as we talked about a few minutes ago.

So I think that really is the problem. I don’t think the financial sector really wants to depreciate the dollar, because if you depreciate the dollar, relative to foreign currencies, and you have de-industrialized and rely on China, Asia, India, other countries for your imports, that means that, is that if the dollar goes down 20%, the price of your imports will go up by 20% — an equivalent amount.

And if the prices for imports go up, that will create a price umbrella that will mean American inflation will largely accelerate.

So, if you look at this economic dynamic at work — it’s so simple that you have to be an economic PhD not to recognize it, to get distracted from it — then I think the outlook is for a very rapid acceleration in the US inflation, precisely what Trump wanted to bring down, without industrializing, without having any good effect on American industry.

And in fact, as long as Trump uses his adversarial economic war diplomacy, focusing on China, and Asia, if American companies are unable to export to China, then their profits will be down, and they will lack the money to engage in the research and development they need to keep up with the technology that the rest of the world is doing.

So the result is that Trump’s policy is deliciously self-defeating, for US policy. It will mean inflation. It won’t mean more industrialization. It will mean corporate layoffs. And it means probably that, at a certain point, stocks will go down.

And the rest of the world will find its political and diplomatic interests in reorienting its foreign trade and finance among itself. So what Trump is doing is speeding the foreign guest.

The neocons and the neoliberals assume that other countries will not respond to US actions. They think, “We’re going to do this. What can they do? We have all the power”.

They don’t take into account blowback, and they don’t take into account the fact that what the Biden administration has been doing, and what Trump is simply accelerating, is forcing the parting guest to leave, and to look as rapidly as they can for an alternative.

BEN NORTON: Yeah, Michael, very well said.

You raised in your article, Michael, you quoted a speech that Trump gave at the World Economic Forum in Davos, and he said, I’ll play a clip of this:

DONALD TRUMP: My message to every business in the world is very simple: come make your product in America, and we will give you among the lowest taxes of any nation on Earth. We’re bringing them down very substantially, even from the original Trump tax cuts.

But if you don’t make your product in America, which is your prerogative, then, very simply, you will have to pay a tariff.

BEN NORTON: So Michael, that is Donald Trump’s proposal. What is your response to that?

MICHAEL HUDSON: Haha, “If you do move to America, we will have your investment, we will simply grab it; we’ll take it away from you, and then you’ll lose it anyway. We’ll do to you Europeans, Asians, Latin Americans, just what we did to China, with TikTok”.

TikTok tried to do something in America, and it was so productive that, Donald Trump, and the Biden administration says, “We want Americans to grab it. We are not going to let other countries make a profit off Americans. We’re going to grab it all. And we’re going to either ban you or, if you continue to operate in America, it will be by selling control of your company at pennies on the dollar to American investors”.

Well, Trump has had the Silicon Valley people flocking to Florida to talk to him, to say, “We want to buy TikTok. You know it’s worth, Trump says TikTok is worth $1 trillion. Let’s offer $50 billion, you know, 5% of what it’s actually worth. And if they don’t agree to lose 95% of what it’s worth, then we’re going to just ban them from doing it”.

That’s an invitation to Germany, sure, Germany, Europe, reinvest in America. You’ll have to leave your labor there. Let your labor, you know, essentially, work in restaurant, serving tourists or something, but, yeah, we have to employ American labor. Of course, we’ll have to first of all send them to school to learn engineering and basic skills to work in the factory.

But you’ll move them here, and then we’ll just raise taxes on you; we’ll take you over.

Obviously, the American mentality since, the McKinley era, of imperialism, from the Philippines to Cuba, has been confiscation. So he has threatened other countries with confiscation if they invest in America.

Venezuela tried to invest in gas stations, and refining companies, and marketing, to be able to sell its oil in America. America confiscated this, because it said, “You elected a socialist. If you don’t elect a neoliberal, we will confiscate whatever you have in America”.

What does that tell Europe? That if Europe, if Germany, Italy, France, elect a nationalist, their property can be nationalized the same way.

America has declared trade war and financial war on the rest of the world. And it’s as if this seems so surprising to them, so unthinkable, that they’re not thinking about, how do we cope with this?

The only way of coping it with it is to call Trump’s bluff and say, “If you want to raise the tariffs, that’s fine with us, to sell at our price. We’re not going to lower the [price] and except less for our exports. If you want to gain more money, and charge American consumers more, and raise your price index, that’s fine with us. Be our guests. And in fact, if you impose a 20% tariff on our exports, that means that we’ve been under-pricing our exports. So we’re going to impose a 20% export charge on our exports, so that our government makes as much money as you’re making off our export trade”. That’s one possible response.

BEN NORTON: Well, that was an excellent discussion. We hit all of the points I wanted to address.

We’re living in a very interesting time. Things are happening very quickly. So it’s always a pleasure having you, Michael.

I hope to have you back on soon to discuss, who knows, all of the other crazy things that will be developing in the upcoming weeks and months.

MICHAEL HUDSON: Well, I look forward to it — and to the transcription, that we can post.

BEN NORTON: Yeah, absolutely. For anyone watching or listening, if you go to GeopoliticalEconomy.com, you can always find transcripts of the interviews that I do with Michael Hudson.

So thanks for joining me today, Michael, and I’ll see you next time

MICHAEL HUDSON: Bye bye.