InterOuts

The Truth behind Trump’s Tariffs.

Why is the USA putting Tariffs on virtually all major trading nations globally? The simple answer is because the Americans are broke, insolvent and just downright collapsing economically. It is no longer possible to prop up their derelict economy by selling bonds as the yields are too low (making it prohibitively expensive for the USA to finance) and fewer and fewer nations, corporations or buyers will take the risk of buying them given that the USA like the EU and the UK has ‘frozen (read stolen) Russian assets like those of Venezuela and Iran among other nations whose assets were seized under the pretext of ‘maintaining democracy’. The Dollar has been weaponised to such a large extent it is no longer trustworthy as nations globally have understood that they can be held to ransom by the United States if they do not bend to its will and allow it to loot their countries wealth. Basically, the US President Donald Trump has realised that ‘protectionism’ is the only way forward if the USA is to climb out from the economic morass they now inhabit ( what happened to the audit of Fort Knox? Is there any Gold in the US Treasury at all?).

After making big pronouncements regarding the imposition of tariffs on the world’s nations, the US President had to backtrack as it became clear that apart from the vassal states, the big players like Russia and China would not play ball as they were fully aware that the imposition of these tariffs would barely make a dent in their GDP and even less so in their standard of living. Even smaller economies like Ghana retorted by saying they would increase the price of Cocoa beans to offset the tariffs thus increasing the price of chocolate products for American consumers. The squawks from the EU, the UK and others like Mexico and Canada (for all their loud pronouncements of reciprocal tariffs) showed how vulnerable they were to the USA’s blackmail as their economies sell a very high proportion of goods and services to the USA and their own electorate would be far from happy to find themselves out of a job. Added to this, the forced removal of the French colonialists (and to a lesser extent the British, other Europeans and Americans) from Africa’s vast wealth of raw materials and cheap labour by the African Governments either kicking them out or trading instead with Russia, China and other Global South nations from whom they receive higher profits, no lectures and respect as mutual partners, not subservient ones, has severely reduced the income of these western hegemonic colonialist nations leaving them with a greater degree of dependence on the market provided by America.

The world is dividing, into several ‘spheres’ of influence where those who have and those who need are being repositioned. Those who have the raw materials, foodstuffs, oil, gas etc. are no longer bound by the continuous looting, unfair business practices and a financial system loaded against them leaving them wallowing in ever increasing levels of debt as the now have viable alternative markets and financial instruments constantly available to them allowing them to choose for the first time business conditions and contracts that benefit them, not just the buyer. Buyers from the western nations are now competing on a playing field which if not level, is at least not tilted in the western nations favour to the detriment of the sellers who are mainly from the rest of the world. The addition of information concerning the cost to the USA of maintaining their overseas military bases making them use the issue as a bargaining chip in the tariff war ensuring that Japan, South Korea and other Asian nations hosting US Military Bases know there is a cost they must pay to ease the tariffs which otherwise would impact heavily on their economies. The EU is contemplating the removal by the USA of its financial input into Europe’s defence (via NATO) as the Trump Administration openly debates the issue of Europe paying its own way. Shipping using the Red Sea route has been told b America that it must pay for US Navy protection as the route only accounts for 3+ % of the USA’s GDP and they have picked up the tab for decades. The USA needs to trim expenditure and increase income, not an easy task in today’s inconstant economic world. The tariff introduction into the global marketplace has had a disconcerting effect on the financial systems causing volatility and a definite overall feeling of much lowered confidence.

The United States is overstretched financially to the extent that the possibility of solving their impecuniousness has few options over and above war and austerity, neither of which is appealing to an incumbent President whose power base is not as cohesive as we are led to believe. The collapse of the Dollar and the USA’s financial standing would be catastrophic for much of the globe in the short term and have a very negative impact on the medium term and onward. It is not to the benefit of the Global South, Russia, China and others let alone the BRICs, to want the Dollar to fall extremely but rather they are extricating themselves from the USA’s grip without undermining the Dollar intentionally, though western pundits will disagree. None of the holders of the USA’s debts, the ‘sovereign’ nations like China, Japan, Saudi Arabia and others has cashed in the bonds though it is probable that the implied threat is not unknown. The Dollar will eventually lose its pre-eminence as the only internationally recognised and accepted Reserve Currency. The move will be quicker than expected as the USA itself pulls in the reins and starts to remove all the fat, the excess of decades of government graft, padded contracts, and of course, so much more that is quite breathtaking from USAID, immense sums leaving the Federal Reserve – for where, to their immersion in Ukraine, Israel and other nations.

America has to explore every option as the clock is ticking though hopefully not put it into motion as we will all have to endure the fallout and will with luck, muddle through. It must be said that for all the rhetoric and ill will cast by the United States in one form or another, most of the globe does not want it to collapse so a lot more slack than is apparent is given to it though it abuses this privilege time and again, much to the chagrin of those at the receiving end. The implementation of tariffs by the USA is but one of the many avenues the Americans will follow and spring on us as they try to wrestle their way out of the mess left by many previous administrations making it an unenviable task for the current sitting President to have to deal with.