Filed with Politics MOC · Related: Ideology & Foundations · 60.10 Argumentation
- “The American empire that came into existence after the failed protectionism and the isolationism of the 1930s is being broken up after 80 years.”
- “Despite Donald Trump’s imperial impulses, like wanting to annex Greenland or calling for Canada to become the 51st state, he is engaged right now in a kind of wild decolonization project.
- “Donald Trump has a few cherished principles. One of them is that trade deficits are bad, and that countries running trade surpluses with the United States, exporting more to us than we export to them, are kind of ripping us off. This has no standing in economics.”
- “What just happened was that Trump turned the clock of economic history back to roughly 1909, which was the last time the average tariff rate on imports into the United States was this high. To just give you a sense, the United States was a protectionist country throughout the 19th century, into the 20th century and right up until the Great Depression. And then Americans decided that maybe raising tariffs was not the way to go.”
- “We also slapped a huge tax on Americans if one assumes that American consumers will absorb a pretty big part of the increase in import costs. One of the biggest tax hikes of our lifetime has just been imposed.”
- “And I think one thing that’s so confusing is the White House itself doesn’t seem to know what the goal is. You have the Treasury Secretary, Scott Besant, or Besant, I never know how to pronounce it, saying that tariffs, don’t worry guys, they’re a negotiating tactic, a la NAFTA, all of these other things, it’s just a way of bringing people to the table. But then you have White House Advisor, Peter Navarro, you just mentioned, saying the exact opposite, saying no, this is what we mean, this is an ideological move, tariffs are good and there’s no negotiation.”
- Or 4D chess?
- “Though I do think that there is a clown show element here that we should not underplay. I wish I had been a fly on the wall in the final meeting before Trump went out into the Rose Garden to announce and indeed unveil the list of the new tariffs, because anybody who really understands economics must have realized that the doomsday machine was about to be unveiled by the president.”
- “China is the most important player in this game. And China is not coming to the table. China has retaliated at each step to Trump’s new tariffs and used implacable language along the lines of, we will go to war. If you want a trade war, you can have a trade war. So the problem with the cope is that the Chinese show very little sign of coming to the table for a deal with Trump, which means that all kinds of perverse outcomes follow.”
- Difficulty attempting to determine if it was re-routed through another country when really it was from China.
- “we’re trying to apply a 19th or early 20th century policy instrument, the tariff, to an incredibly complex global trading system.”
- Free trade has “fundamentally hollowed out middle America. It has hollowed out the working class.”
- “from the 1990s until around 2016, the median American household saw barely any change in inflation-adjusted disposable income.”
- “You could certainly do things to try to bring the United States economy into equilibrium, like reduce the fiscal deficit, like try to encourage saving and avoid running a colossally large current account deficit. But you kind of need other countries to do stuff too, like you would need the Chinese meaningfully to stimulate their domestic consumption.”
- “it is not clear to me that the American working class or the American middle class, whichever class you want to talk about, would have been materially better off in a counterfactual world where the United States had not done globalization. Because the assumption seems to be that there is some parallel universe in which there was no WTO and no globalization, no trade liberalization, and lo and behold, the living standards of middle Americans are better than they turned out to be. This is highly implausible. Let me tell you why. Every single economy that industrialized from the late 18th century through the 19th century into the 20th century, reached a peak at some point along the way, roughly when per capita GDP reached $40,000, after which manufacturing as a share of employment declined. And the decline is essentially identical for all developed economies, as people move out of working in factories and move in to service sector jobs, which are less physically demanding and require more education. And so that happened everywhere. It wasn’t just in the United States.
- “the idea that you’re going to somehow make the United States a major manufacturing economy again, in which there will be lots of jobs in factories, that is the equivalent of turning times arrow around and having it go backwards. We cannot go back to the 1950s, or for that matter to the 1910s, not socially and not economically. There is not a world in which these policies could lead to the reindustrialization of the United States, because it is way more expensive to do manufacturing in this country than it is to do it practically anywhere else apart from in Europe. We do have a lot of cheap energy, but our permitting sucks, our labor costs are high, our workforce is not particularly suited to the kind of manufacturing jobs that we’re talking about.
- And if things are way more expensive, then the real incomes of working Americans are not going to go up, they are going to go down.
- Would they all have had wonderfully better lives if the United States had put up tariffs in, let us say, 1980? If Ronald Reagan had been Donald Trump, and from 1981 onwards had raised tariffs decisively, Reagan only did a small amount of trade war, and was mostly against the Japanese, and he didn’t really use tariffs, he forced the Japanese into restricting exports. But broadly speaking, Reagan was a trade liberal. If Reagan had been a protectionist, and if the United States had never gone down the global path, are we really to believe that the United States would still have had great industrial jobs? Well, we know the answer to this, because some countries tried this kind of policy. They tried to protect their industries behind tariff barriers in multiple parts of the world after World War II. Not everybody tried the great liberalization. India didn’t. Britain put up high tariff barriers around its industry after World War II. The Brazilians also and most Latin Americans were protectionists. How did that turn out? Well, the answer is, and this is not a great surprise to anybody who studies economics, very inefficient industries that were wholly uncompetitive in global markets, substandard products and generally rather overpowerful trade unions. So, there is a parallel world in which the United States doesn’t do Reagan, doesn’t do Clinton, doesn’t do globalization. But the idea that it would have been better, and we’d all be better off in a protectionist America is fanciful.
- “Economic history is kinder than military and geopolitical history can be. You cannot turn the economic historical clock back. It’s as realistic to imagine America being an industrial superpower again, as to imagine that Britain could rebuild the British Empire by an act of political will. So one has to accept that times change.”
- “Where the American people have been failed, especially the American working class, is that their education has deteriorated in international terms, to the point that the baseline is shockingly low. And so, that’s a much more serious concern to me than whether we can magically restore 1950s America with a bunch of randomly calculated tariffs.”
- Problems that can’t be blamed on China
- Fiscal degeneration where we consistently live beyond our means and accumulate debt
- Regulatory problem due to administrative bureaucracy, permitting
- Dysfunctional system of law, ordinary people getting due process, pay to play
- Education system thats underperforming
- “a sustained multi-decade failure to confront the realities that lie behind these problems.”
- “Donald Trump’s fantasy that we can return to our glorious industrial past via tariffs is not the only fantasy that we’ve indulged in. The Democrats had an equally bizarre fantasy that we could through diversity, equity and inclusion simply abolish unfairness by intervening in order to discriminate against anybody who was doing okay. That was equally insane.”
- Xi Jinping can take more pain in a game of chicken than Trump can on behalf of their own population.
- Taiwan crisis might happen sooner than later
- Alienated all US allies
- “idea that China’s gonna pay, I think is is misconceived because, as we’ve discussed, American consumers will pay. It’s not entirely clear what percentage will be absorbed by Chinese exporters and US consumers. But US consumers do not get a free lunch in a trade war.”
- “one of the reasons that they cheated was that the United States and other trading partners did not insist on enforcing the WTO rules to which the Chinese had committed because everybody was doing too well out of the China shock apart from the workers who lost their jobs in manufacturing. So the key here is that the Chinese did indeed steal intellectual property, engage in rampant subsidizing of their manufacturing, they depressed the wages of their workers in order to promote their exports. All of this is true and we did very little indeed through the routes that were available in the WTO, in the World Trade Organization to stop that happening. The idea that you can use US tariffs on China and other countries to undo this, is, I think, misconceived and to couch it in terms of retribution. What is this? Reparations for the white working class?”
- “I think the notion that this is sort of payback for Chinese misbehavior is doubly misconceived. We winked at and tolerated the misbehavior. It was part of what I called Chimerica, where China and America had a moment of economic symbiosis. We got the benefits of their cheap labor and all their savings that flowed in to finance our current account deficit. It’s too late now to undo those things, and nor is it effective to try to undo them with tariffs.”
- China saw this coming:
- Xi Jinping made peace with China tech companies, Jack Ma
- DeepSeek
- Tech community forgiven
- Large scale stimulus to offset tariffs
- Li Daokui: Chinese economist
- Pay game of chicken, don’t blink, stimulate Chinese economy and only then consider negotiation
- Xi didn’t go to Trump’s inauguration
- Chinese are not interested in negotiation, they recognize their being played in the art of the deal tactics, they’ve all read the book
- “I think China has the upper hand in a game of mutually assured economic or financial destruction because we know from the events of 2020 that the Chinese can impose significant economic pain on their population and maintain complete social control. That is not the case for any elected president or congressman.”
- Decolonization
- “21 years ago, I published a book called Colossus, The Rise and Fall of America’s Empire, arguing that to almost everybody who’s not a US citizen, the United States has long been the world empire, and it was the heir of the British Empire. It inherited global dominance during and after World War II in a series of retreats from empire that the British made, the US generally stepped in. The United States, to this day, has an enormous network of military bases, as well as economic interests all over the world, and the United States Navy and Air Force, and strategic command, the nuclear capability, those have been the foundations of the international order. Americans had a different kind of empire from the Brits. It was an empire that imported rather than exported capital. It was an empire that imported rather than exported people. It was a very different kind of empire. But to the eyes of the outsider, as the legions swept into Mesopotamia and the Hindu Kush after 9-11, there was a familiar pattern playing out. This is, I don’t think, a distinctly left-wing argument.”
- “It’s simply a reality that most of history is the history of empires. And the United States has been the dominant empire in the world, really, I’d say, since the Battle of Midway. Today, Donald Trump has decided, for reasons of his own, with the assistance of advisors who share his vision, to dismantle this in two bold strokes.
- First, to dismantle the financial, international, economic structure of the empire, which has been based on the dollar as the international reserve currency, the 10-year treasury as the universally regarded safe asset, and the American financial system as the global financial system. Trump is dismantling that, beginning with the free trade, the trade liberalization, but remember, took average tariff rates down below 2%. On the eve of the Trump era, the average tariff rate on imports to the United States was less than 2%.
- It’s now above 22%. The first big blow to American empires to smash the international trading order and hurt American allies as much as American adversaries in doing so. The second and more important part is to entirely undermine the international security order by ending the transatlantic alliance, NATO, the North Atlantic Treaty Organization, telling the “Europeans, you’re on your own, you have to do your own defense, we’re not subsidizing you anymore, in fact, we don’t care about Europe, we don’t care about Ukraine. You know what, we don’t even care about the Middle East. After this Iran thing is sorted out, we’re leaving the Middle East too. This is a hemispheric vision in which the United States only cares about the Western Hemisphere.
- We’re back in the, I suppose, glad confident morning of 100 plus years ago when the United States was not a superpower, did not have a global military. And behind a tariff barrier was the world’s workshop, but it was not an empire. That’s the vision of Trump. And I think that that is what is not understood. We are witnessing this rapid dismantling of American empire, or if you prefer to call it hegemony, because it’s more polite, call it that. But it’s being dismantled very rapidly within 100 days by the re-elected President Trump.”
- Benefits of an American Empire
- “The costs are we have to keep sending our soldiers to all these far away places. We shouldn’t have to do that. And oh, it’s very costly that we run trade deficits with Europeans. That’s the kind of cost argument. But this omits the benefits. And the benefits are the things that you only miss when they’re gone.
- The benefit of having the reserve currency is not trivial. It means that, for example, the United States has colossal power through financial channels. It can borrow and has borrowed on a vast scale, can rely on foreign investors to hold treasury bonds, even when fiscal policy is manifestly reckless.
- We don’t really have the ability to use financial sanctions if we lose that reserve currency status. Americans may complain about the loss of manufacturing jobs, but they don’t celebrate the cheapness of the consumer goods that they have been buying made in Asia in increasing quantities since really the 1970s and 80s. And so the benefit of being the empire of consumption, which is that you get to run a large current account deficit, you get to consume the produce of the rest of the world and pay for it with “IOUs called Treasury bonds denominated in dollars. We don’t notice how valuable the benefit is because we’re not asking the counterfactual question, what would it be like if we no longer had that benefit? So I ask listeners, particularly those who think that Donald Trump can do no wrong, to contemplate the world that they’re heading towards, a world in which the United States is no longer a superpower, in which it no longer has primacy in the Indo-Pacific, in which China controls Taiwan, and therefore TSMC, the source of all the most sophisticated semiconductors, which are the key to the AI race, a world in which China wins the AI race, a world in which the United States pays much more for imports than it previously did, or has to manufacture its own iPhones at perhaps three times the cost of an iPhone largely made in Asia. I could go on in this vein.”
- “I deliberately liken Trump to Clement Attlee, the post 1945 prime minister, a Labour prime minister, because Attlee envisioned getting rid of overseas commitments and, of course, protecting British manufacturing jobs and the working class behind tariff barriers. How’d that turn out for England over time? The thing about losing your status as a superpower is, it’s very hard to get it back when it’s gone. And depends who succeeds you.”
- Antagonizing Allies
- JD Vance humiliating European leaders
- Ukraine president
- NATO contingent commitment
- Europeans got the message and consider the transatlantic era over
- Could now see a thaw in EU and China relations
- Chinese, Japanese, South Koreans holding meetings that haven’t happened in a long time
- “I used to say that people were wrong in thinking that Donald Trump was an isolationist. That his impulses were, if anything, imperialist in the William McKinley sense. I want Canada, you know, give me the Panama Canal. How about Greenland? But he could end up being an isolationist inadvertently. You’re an inadvertent isolationist if through your imperial type policies, your chest-beating protectionist William McKinley policies. You lose friends and alienate people. To the extent that you end up isolated, that’s the risk the US runs.”
- Countries might negotiate but now don’t consider U.S. a reliable trading partner
- “big worry I have is that as happened in the 1930s, trade wars are followed by actual wars. That’s the thing that’s more concerning than the price of coffee.”