The trade war in which the Trump administration throws the world weakens globalization as it has been known since the fall of the Berlin Wall. During his first mandate, Donald Trump had increased customs duties on the European Union or China, but these increases were less systematic than today. Now, Trump is based on a doctrine that was lying on paper as early as its election in November 2024 by Stephen Miran, an economist who has since taken the presidency of the economic analysis council attached to the president.
This document of a few tens of pages entitled A User’s Guide to Restructuring the Global Trading System (Hudson Bay Capital) is filled with approximations and contradictions, but we will still try to summarize it. For Miran, and as Trump keeps repeating, the American economy is penalized by trade deficits. He believes that these deficits are linked to the persistent overvaluation of the dollar which affects American competitiveness.
Customs duties will raise the dollar
To correct this competitiveness gap, Miran offers the implementation of important customs duties. Problem, if this policy works, it will raise the dollar while the United States wants a decline. It will then be necessary to convene a large international conference to convince (threatening them?) Third -party countries to let the dollar depreciate (we are not sure how). The author also mentions, to better control the international financial system, to control the capital flows that move exchange rates. Clearly – as much as it is possible to be -, Trump’s economic administration wishes to create a commercial, monetary and financial interventionist monster, based on false ideas like protectionism, and which works thanks to threat and intimidation. This analysis is incorrect in many places.
The most obvious error concerns the causes of American trade deficits, which are not linked to cost differences but to the fact that, since the end of the Bretton Woods agreements in 1971 and the dropping out of the dollar of gold, the American currency has established itself as the international currency. However, a country that exports its currency and sells its obligations and actions worldwide more than any other – which is the case with the largest monetary and financial power in the world – necessarily imports goods and excess services. American trade deficits are therefore not the consequence of the weakness of the country but of its strength, which allows it to buy almost unlimited. The other error is to think that customs duties imposed on American imports may have any positive effect on the United States.
A negative impact on the competitiveness of American companies
Professor Richard Baldwin explains things perfectly. Since the 2000s, globalization has no longer concerned only product exchanges but the value chains of companies. Large American or European companies are organized on a fairly standard global geographical basis: research and development and final assembly in rich countries, design in emerging countries, distribution in strong growing countries. Thus, 40 % of Chinese exports to the United States are industrial intermediate goods used in the final manufacturing process of companies present on American soil. An increase in customs duties in the United States on China weighs on the competitiveness of large American companies without affecting that of Canadian or European women. When Trump taxes foreign imports, he degrades the competitiveness of American groups. When the countries targeted replies, what is the case is the cost of the global industrial value chain that increases.
The more or less well controlled monetary and financial disturbances that the Trump Administration prepares will increase uncertainty on the markets, which will undoubtedly draw interest rates up. The key, higher production costs, greater financial costs, and a consumer, American or not, depleted. Faced with this unfortunate perspective, Europe, Canada, China … must remain rational, calm and predictable and not helping to defeat the global economic order post-1989.
Nicolas Bouzou, economist and essayist, is director of the Astères consulting firm
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