Yves here. This effort to ‘splain Trump tariffs, that keeping up an empire is costly and other countries should pay for all the benefits they derive from it, was made in all seriousness. It oddly has not gotten much traction despite the high odds that it reflects the beliefs of a large faction of Trump insiders.
By Jomo Kwame Sundaram, former UN Assistant Secretary General for Economic Development. Originally published at Jomo’s website
Donald Trump’s top economic advisor claims the President has weaponised tariffs to ‘persuade’ other nations to pay the US to maintain its supposedly mutually beneficial global empire.
Geopolitical economist Ben Norton was among the first to highlight the significance of Trump’s Council of Economic Advisers chairman Stephen Miran’s briefing at the Hudson Institute.
The Institute is funded by financiers such as media czar Rupert Murdoch, who controls Fox News, The Wall Street Journal, and other conservative media.
Miran made his case just after Trump’s electoral victory in A User’s Guide to Restructuring the Global Trading System. Miran attempts to rationalise Trump’s economic policies, which are widely seen as at odds with conventional wisdom and reason.
Enhancing US Dominance
Miran defends Trump’s tariffs as part of an ambitious economic strategy to strengthen US interests internationally with a “generational change in the international trade and financial systems”.
“Our military and financial dominance cannot be taken for granted, and the Trump administration is determined to preserve them”. Miran claims the US provides two major ‘global public goods’, both “costly to us to provide”.
First, Miran claims US military spending provides the world a ‘security umbrella’ that others should also pay for. Second, the US issues the dollar and Treasury bonds, the main reserve assets for the liquidity of the international monetary and financial system.
Miran seems blissfully unaware of longstanding complaints of US ‘exorbitant privilege’. The dollar’s reserve currency status has provided seigniorage income to the US while Treasury bond sales have long financed US debt at very low cost.
Miran’s Case for Trump
The White House has threatened others with high tariffs unless they make concessions, at their own expense, benefiting the US. Miran’s defence of tariffs is indirect, as part of an ostensible grand strategy.
“The President has been clear that the United States is committed to remaining the reserve [currency] provider”, Miran added. He claims US dollar hegemony is “great” and denies “dollar dominance is a problem”.
While this “has some side effects, which can be problematic”, Miran “would like to … ameliorate the side effects, so that dollar dominance can continue for decades, in perpetuity”.
For Miran, these side effects are supposedly largely adverse while ignoring the benefits to the US. Chronic US trade deficits have been possible and financed by mounting US debt, enabling the dollar to serve as a global reserve currency.
Hence, US trade deficits have been sustained since the 1960s, rather than “unsustainable”, as he alleges. US manufacturing has been “decimated” by its consumers and transnational corporations, not by an extensive foreign conspiracy.
Miran’s Guide acknowledged the ‘Triffin dilemma’. In 1960, Robert Triffin warned that the dollar’s status as global reserve currency posed problems and risks for US monetary policy.
He invokes Triffin to argue that the US must import more than it exports to provide liquidity to the world, which needs dollars for international trade and to hold as reserves.
Miran adopts the Trumpian narrative of only blaming others. However, the US expected to benefit from continuing trade surpluses at Bretton Woods. In 1944, it opposed alternative payments arrangements to deter excessive trade surpluses.
US trade deficits have grown since the 1960s with post-World War II reconstruction of the Global North and uneven ‘late industrialisation’ in the Global South.
The Empire Must Pay
The Trump administration wants to eat its cake and still have it. It intends to strengthen US empire while minimising adverse side effects and costs.
Miran wants foreign nations to “pay their fair share” in five ways. First, “countries should accept tariffs on their exports to the US without retaliation”. Tariffs provide revenue, which has financed its global public goods provision. Second, they should buy “more US-made goods”.
Third, they should “boost defense spending and procurement from the US”. Fourth, they should “invest in and install factories in America”. Fifth, they should “simply … help us finance global public goods”, i.e., foreign aid should go to or via the US.
Miran then emphasises that Trump “will no longer stand for other nations free-riding”, and calls for “improved burden-sharing at the global level”.
“If other nations want to benefit from the US geopolitical and financial umbrella, then they need to … pay their fair share”, i.e., the world must “bear the costs” of maintaining US empire.
Trump Dilemmas 2.0
Trump wants to use tariffs to force countries with trade surpluses with the US to buy more from the US. Ending these deficits would undermine dollar hegemony, which, paradoxically, Trump obsessively wants to preserve.
Miran wants other countries to convert their US Treasury bills into 100-year bonds at very low interest rates, effectively subsidising the US over the long term. He also wants nations running trade surpluses with the US to buy more long-term US Treasury securities.
Trump has threatened 100% tariffs on BRICS members and all countries promoting de-dollarisation or undermining dollar hegemony in the international monetary system.
During his first term, Trump wanted to do the near-impossible by boosting exports while preserving a strong dollar!
Miran acknowledges that the “root of the economic imbalances lies in persistent dollar overvaluation that prevents international trade balancing”. But he also insists that dollar “overvaluation is driven by inelastic demand for reserve assets”.
Trump now hopes to kill both US trade and fiscal deficit birds by cutting imports and raising revenue with higher tariffs. He also wants the world to continue using dollars despite the US budget and trade deficits and policy uncertainties.
Meanwhile, official US debt, financed by selling Treasury bonds, continues to grow. Trump has to deliver his promised tax cuts soon before his earlier measures run out. Trump is falling foul of his bluster and may have to revert to the status quo ante while denying it.
Despite Miran’s best efforts, he cannot provide a coherent rationale for Trump’s rhetoric. But dismissing Trump as ‘mad’ or ‘stupid’ obscures the impossible dilemma due to and obscured by post-war US dominance.
“Topics: Currencies, Economic fundamentals, Garrulous insolence, Globalization, Guest Post, Income disparity, Ridiculously obvious scams”
My failure of imagination never ceases to amaze me. Garrolous Insolence.
Never would have conjured that as a search term.
I strive to learn something new every day. Thanks for the poke and prod!
“Ridiculously obvious scams” would make a great “Jeopardy” category.
“I’ll take Ridiculously obvious scams for $200, Alex.”
“This technology is touted by CEOs to reduce workforces, improve profit margins, and cure your asthma!”
“What is Artificial Intelligence?”
I love the Zappa (Cosmik Debris) reference!
So the tariff fight is all about the Cold War. It is an opportunity to shake down other countries. Over the next three months Trump will agree NOT cut the tariffs that he has threatened, IF countries agree to cut back their trade with China, and even to impose sanctions on trade with it.
I will discuss this on Nima’s Dialogue Works today, and I did on my Geopolitical Hour with Radhika yesterday and even Danny Haiphong.
Is there a Cold War or is all this conflict an excuse to get everyone talking about Trump? Given his ever shifting statements (today that he is negotiating with China) one suspects his real goal is having everyone staring at his face if not actually kissing his a**. Also being able to manipulate the stock market like a yoyo no doubt has its advantages.
Personally a life goal is to pay as little attention to Trump as possible. Maybe “Silent Cal” Coolidge wasn’t so bad.
This all sounds like the people in the White House have taken that line from the film “Killing Them Softly” to heart when Brad Pitt said-
‘I’m living in America, and in America, you’re on your own. America’s not a country. It’s just a business. Now ****ing pay me.’
To the Trump White House, there are no allies but only vassals and their sole purpose is to subside the US. And if they have to de-industrialize and ship their factories to America to avoid punishment, then the resulting unemployment will be their problem. Buying American weaponry will get you in the good books of the US no matter how ineffective it is on the battlefield. And if a country has to eliminate their financial safeguards and protections so that US corporations can go in and loot the place clean, well that is just survival of the fittest. There may be initial success but you just know that there will be hell to pay not that Trump will worry. He probably plans on sitting with Bibi drinking Marguerites at the poolside of Trump Hotel in the New Gaza Resort.
He probably plans on sitting with Bibi drinking Marguerites at the poolside of Trump Hotel in the New Gaza Resort.
A guy can dream, can’t he?
The Riviaza.
I think the real statement is “Trump is open and transparent about wanting the rest of the world to subsidize U.S. Hegemony”.
The US position as global leader in “the unipolar era” allowed it to skim profits for decades already. Now we are just going to be a little more honest about it.
Example- If Burkina Faso would just let us take “10% for the big guy” we might not need to topple the Traore govt.
Important to ask, at every step, just how much of what we’re looking at is continuity and contiguity–with previous administrations and the post-WWII global order as led, Marshall Plan forward, by the United States. To paraphrase something I saw yesterday, the Clintons and Bush/Cheney walked so that Donald Trump. And to ask, in turn, which moves are breaks, the flouting of conventions and rules–WTO and IMF regs, for example–that were mostly there to discipline the poor countries, us, even the professionals who thought they were administering. And, again important, what moves are all but dictated by a global crisis and living-through of the cruel logic that intensifiying neoliberal order and disorder inevitably bear with them? Nature living and dying through the consequences?
An irony is that here in Brexitland people are also susceptible to “Do not buy USA”
I predict collapse in USA imports.
What if the interest is mostly in making the USA a workshop for some kind of neo-feudal ideology?
The Gilead Christian Republic of Theotyrannistan.
The DT2 regime policies are reckless, desperate and idiotic attempts to coerce/extort even more tribute from vassals and rivals, and as many have observed is only going to expedite the decline of the US, both domestically and abroad. The kleptocratic oligarchy looks like they are shifting the asset-stripping into high gear domestically and more economic warfare, siege warfare (Venezuela, Cuba etc.) and outright genocide of Palestine.
Of course, there is always plenty of money and weapons for Israel to exterminate thousands of Palestinian children. (targeted population control). Yet both Ds and Rs are lockstep in support of all this. No matter who one “votes” for (or not) the policy continues.
One “good” thing bout the current regime that the Aussie journalist Caity Johnstone pointed out months ago: the mask is fully off and the ugly face of empire is exposed. The malfeasance and lawlessness of the Empire is more obvious now, The DT and his kakistocrat crew are also cartoon-like buffoons. Peak Kakistocracy? The tragic humor is available by the truckload and it’s free.