Trump's tariffs are part of a class war on his own base

Donald Trump's tariffs are part of a class war against many of his own supporters. The US president plans to slash income taxes on the rich and corporations and use tariffs to shift the burden of taxation onto the poor and working class. Radhika Desai is joined by economist Michael Hudson to discuss. This is part of the program Geopolitical Economy Hour. You can watch other episodes of the show here:    • Geopolitical Economy Hour   || Geopolitical Economy Report || Please consider supporting us at https://GeopoliticalEconomy.com/Support Subscribe to our newsletter: https://GeopoliticalEconomy.Report

trump is often called transactional he knows that somehow it's all about doing deals and so on but actually this is the

behavior of a mafioso if you follow Trump's logic everything leads into a blind alley hello and welcome to the

44th geopolitical economy hour the show that examines the fastchanging political

and geopolitical economy of our times i'm your host Ratika Desai and to

discuss Trump's tariffs I am joined today by Michael Hudson once again Michael welcome back to Geopolitical

Economy well it's good to be back why don't you start by showing some charts to give a sense of proportion on what's

happening absolutely so as everyone practically everyone knows liberation

day has come and gone and the world has h woken up with a hangover it is

tariffed out after decades to of work to lower tariffs Trump's United States has

now raised them to historically high levels this is the highest tariff in a 100red years higher even than the

notorious Smooth Holly act as you see here uh uh the the Smoo Holly act uh uh

peak is about here at about 20% and Trump's trade war has taken tariffs even

higher as you see in this chart trump has slammed 25% tariffs on auto and auto

parts and a minimum of 10% tariffs on every country even countries with a

trade deficit with the United States even on islands with no inhabitants such

as the Herd and McDonald Islands um even on a US military base as you see

here um and uh and and and a former desolate former whailing station as this

story has it trump has called these tariffs reciprocal but are they really

reciprocal and the third aspect was the most bizarre so the Trump administration

put out an put put out an a complex looking mathematical formula which allegedly calculated the tariff and

non-tariff barriers that each country imposes on the United States but in fact

the formula was very simple it was the trade deficit of the United States with

a particular country divided by its exports which allegedly yielded some

sort of index of protectionism of that country and then which the Trump administration then proceeded to have

very kindly to essentially uh impose only half as much burden on that country

as that country was imposing on the United States this kind of index is about as good as diagnosing how ill you

are by dividing your pulse rate by your blood pressure i mean this is just complete nonsense so the hardest hit hit

countries are in the east and northeast Asian regions so if you look at this chart here uh the United States has

trade deficits the top 15 trade deficit partners are listed here and as you can see eight out of the 15 are actually in

East and Southeast Asia with of course the biggest one being China and Europe

has come a close second so if you see in this uh uh uh uh chart of or map of

countries the darker the shading of the country the the heavier are the tariffs

imposed on it so uh Europe comes a close second and then of course there are

countries that are less affected interestingly Canada and Mexico have so in have been spared any further tariffs

in this round probably because the the hit would have been just too great even

for the US economy and ironically some of the world's poorest countries have

been hit with the highest tariffs cambodia got 49% Bangladesh which has

recently made quite a success of exporting garments was hit with a 37%

rate myanmar where of course as the world knows there has been a devastating earthquake has has a 45% duty imposed on

it and the South African nation of lutu received a 50% tariff the highest of any

country this is just the result of this bizarre formula in which um essentially

the tariff is calculated as a proportion or or or as a as a ratio between the uh

uh uh the the the the trade deficit of the United States with that country divided by the total export so if your

exports are very low if you're buying nothing your if if your exports are are essentially you are exporting to the

United States and buying very little from the United States then essentially you get into this situation the markets

of every sort have swooned at the news so if you look here uh once again you

see that before we get into going over the the markets which is a different thing uh I don't think you should let

Trump trick you into trying to explain uh his silly formula as if there's some

actual logic he's using mathematics just like scientists do to make it appear as

if there's something objective in all this and uh there's nothing objective there's a pretense that there's a

scientific basis but he he he just wanted to uh uh give a kind of patter

talk uh as if this is all based on the trade deficit but then what he explains is that it had nothing to do with the

tariffs at all uh we'll get into what his logic is later uh but I I think this

is all just uh to make it appear as if he's following some logic and there is a

logic and as you just just expressed the fact that the market is in a turmoil

means that nobody can find any logic at all in what he's doing well exactly i

mean if you look at this chart or this story here essentially as the Financial

Times was reporting just a few hours ago we are recording this on Friday the 4th

of April donald Trump's tariffs have h tariffs have ignited a 2.5 trillion

route on Wall Street alone and that's just Wall Street other markets are also

going down the uh SNP tumbled of course by 4.8% on Thursday and went even

further down uh later the tech uh tech heavy NASDAQ plunged 6% on the worst day

since 2020 that is since the corona virus crisis stocks Europe uh 600 fell

1% Japan's uh uh uh topics closed down 3.4% South Korea markets went down

almost 1% and Vietnam's Ho Chi Min index it uh if you please uh it's as it's

called went down 3.9% uh markets in China and Hong Kong

were closed and interestingly the dollar also fell it fell by 1.7% and it is

still falling against a basket of major currencies even though as part of this

bizarre uh h logic that the Trump administration had been putting out they

were claiming that tariffs would strengthen the dollar and indeed one commentator a currency strategist that a

bank major bank was quoted as saying the collapse in the dollar is a loss of

confidence in dollar denominated assets in general and he added it's a vote of

no confidence on the first 100 days of Trump now this is an interesting comment

which refers back to many other shows that Michael and I have done in which we have we have talked about how the value

of the dollar has absolutely nothing to do with trade and everything to do with

markets in dollar denominated financial assets and this we can go back to that some other time so commentators are

basically divided between those who are trying to find some method in this tariff madness and others who are simply

throwing up their hands and saying using words like insane crazy mad one

commentator even said batshit crazy whatever that means and if this were not

enough the Trump administration has made it clear that it is an this all of these moves that were made on the 2nd of April

are simply an opening gambit he's looking forward with of course great relish uh knowing Trump uh to as he put

it in his speech all foreign presidents prime ministers kings queens ambassadors

and everyone who will soon be calling to ask for exemptions from this tariff so

you know to my mind you know Trump is often called transactional you know that somehow it's all about doing deals and

so on but actually this is the behavior of a mafioso who softens up his opponent by pummeling them first giving them a

good beating and then negotiates with them this is exactly what has happened and so what Trump has done is that he

has massively increased the uncertainty uh uh uh in the world economy in the US

economy in particular and the claim therefore that somehow this is going to

reignite a wave of investment and productive expansion in the United States is complete rubbish if you are

simply prolonging the uncertainty people are not going to invest and moreover the

retaliation has started china has just threatened to impose on the 10th of

April so they've given Trump a window of time to to back down but on the 10th of April an equal China was hit with a 34

uh sorry 54% uh uh uh total tariff of which 34% was added in the last round so

China is imposing 34% tariffs on on the United States beginning on the 10th of

April it has also banned exports of various rare earths from the United States and and um and of course other

rich countries are also bracing for the fact that whatever the world cannot sell

to the United States they will now try and find markets for in the rest of the world so essentially it looks as though

Trump has inaugurated a global worldwide trade war so Michael what do you see a

method in this madness what Trump is saying is the problem is not simply that other countries have tariffs on it the

fact is that they're cheating us by manipulating their currency and by

manipulating their currency what he means is that uh they're taking their

export proceeds especially countries like Taiwan and China that export a lot

and they're recycling these uh and by buying US Treasury securities by buying

dollars why are they doing this this is this is how the financial system has

been structured since 1971 when America went off gold if if uh Taiwan uh China

Europe uh Germany does not uh recycle its uh take

recycle the dollars that it earns on its exports and it gets from the huge

military deficit that America has then their currencies are going to go up so what do they do to uh stabilize their

currencies while they're exporting to the United States they send the dollars back to the United States in the form of

buying US uh treasury securities uh and that that is why there uh the growth in

international trade reserves has been uh b consists of US treasury IUS uh and uh

the the result this has been called America's exorbitant privilege once

America went off gold in 1971 America foreign central banks don't have an uh

opportunity to buy gold or uh anything except really treasury uh securities and

so the United States can keep spending militarily abroad it can buy up foreign

industry it can run trade deficits while it de-industrializes and it it's just

running up these debts to foreign countries that can't be repaid that's what I described in superimperialism

that we've been talking about uh uh all these these shows and Trump uh is now

saying that this is exploiting the United States giving America the free ride and financing the US uh uh balance

of payments deficit by buying Treasury securities to finance the budget deficit

is exploitation is if he what he wants to do without realizing it is to destroy the whole

uh source of American financial imperialism he's it he's asking other

countries dd dollararize not only do we want you to stop buying US dollars but

uh the Treasury Secretary has talked about putting a special tax on foreign

purchases of US bonds and stocks to stop people from uh foreign investors from

putting their money in the United States surely Michael I mean we in fact have

argued against this idea that there is such an exorbitant privilege uh because

the fact of the matter is that uh you know in our past programs what we've argued is that this whole narrative that

somehow the uh US uh uh uh that that that currencies are value of mutual

value of currencies are governed by things like trade deficits etc is simply not true the value of the United States

dollar is entirely governed as I was saying earlier when I quoted that currency strategist it's entirely

governed by the extent to which the rest of the world particularly rich people and and and and foreign financial

institutions and so on want to buy dollar denominated assets and as we know

the uh recently I mean over the last uh uh year or more in fact the stock market

and and you know there's been an everything bubble in the United States and the stock markets in particular are

going up at a had been going up at a very crazy rate and all of that was

driven by this expectations around uh uh technology you know artificial

intelligence blah blah and so on the magnificent seven were basically powering the rise of the stock market so

it is that it is not the deficit so so I think what what you are saying merely adds to the kind of mumbo jumbo that's

been that that that's been put about by the Trump administration about why it is

engaging in this tariff behavior right so so so in that sense you know the

valuations of the currencies the the if Trump wants to really deal with the uh

fact that the dollar is overvalued he should simply prick the asset bubbles he

should reeregulate the financial sector so that they do not uh uh uh uh inflate asset bubbles and uh and that would also

essentially put an end to the dollar system which would then be fine the world can move on to some more reliable

better less destructive less harmful way of uh uh managing international payments

all of that would work and and I think that's that would be our answer to the dollar story right

yes but Trump has uh doesn't realize he has a different story from our story that is No no exactly so we we are just

so that's why I'm saying this is our answer to his dollar story and his currency well his illusion is that if

countries didn't stabilize their balance of payments by buying dollars their currency would go up America's currency

would go down and he said that's what we want we want a lower dollar because if we have a lower dollar somehow uh this

will make our industry more competitive now we can export our high high-speed

trains uh at a a lower price against China's high-speed trains but oh we

don't produce any high-speed trains we don't uh we don't we don't have the

range of industrial exports to uh to export that can be uh somehow less

costly that's what's so funny and and exactly and you know there's also some other very absurd things that are going

on so apparently uh there have been huge tariffs that are imposed on countries

that export coffee and chocolate now you're not going to be able to grow coffee and chocolate in the United

States it's not like by putting tariffs on coffee and chocolate you're going to

spur the the the farming of coffee and chocolate in the United States so this

is just absurd then you know the other thing about this whole reindustrialization argument that yes

tariffs have a role to play uh in in industrialization policies and industrial policy but they have to there

are two or three other things that are important about it number one they have to be uh accompanied by a whole host of

other strategies tariffs plus industrial strategy credit strategy you know creating the institutions that will

foster industry and so on none of that is part of this so that's one big hole

in the reindustrialization of the United States argument another big hole in the

reindustrialization argument is that in a proper industrial strategy to re-industrialize the United States there

would be sectoral tariffs so you can say okay we are going to revive auto you know the

car industry so you will only put tariffs on cars not a blanket tariff on everything or let's say you are going to

revive um I don't know chipm then you would put tariffs on you know chip

related imports and so on so again this is a acrosstheboard tariff that makes

absolutely no sense and thirdly of course a point we've made before if the

United States really wants to re-industrialize it has to have a state capital relationship in which the state

tells capital what to do whereas at the moment the state capital relationship is one in which capital tells the state

what to do the Trump administration is entirely in the pockets of its of its big um uh of its big CEOs isn't it

well that's the whole point that industrialization is more than just a system of tariffs as you say it has to

be an overall system and if you look at the McKenley age of protectionism what did they do the United States said uh

well the way in which to make our industry more competitive is uh we want uh heavy public uh utilities internal

improvements they were called we want the government to provide basic needs at a low price so that employers uh can uh

will not have to pay labor uh high enough wages to cover the cost of basic

services that we're now uh doing through public utilities uh local electricity uh

education uh with subsidized health care all the things that today are increasing

the cost of uh labor that companies have to pay the government was picking up then and yet uh Trump and his gang are

privatizing all of this and uh thing uh if you're going to privatize basic needs

and turn former government services into monopolies with monopoly prices that

you're going to have uh high domestic prices regardless of what the tariffs are so he he didn't look at the system

and also even McKinley and the Democrat uh the Republicans had the economy of

high wages they said uh we want to make America in uh labor more competitive by

uh paying uh supporting living standards so well educated well-clod well-fed

American labor can underell popper labor that's not Trump's idea he's against

labor i mean this is this is really interesting you know when Trump says uh

you know that uh you know he he's nostalgic about the early 20th century one of the reasons is

that of course that was a time when the American economy was really booming it was you know uh uh uh uh supported

indeed by tariffs and other uh other such measures the United States economy

was doing very well and it was a time when American labor was comparatively highly paid compared to the rest of the

world whereas today the situation is completely reversed the United States has suffered massive

de-industrialization um and uh US industry is in deep trouble and the and

as we were just saying the Trump administration intends to do nothing about it and here's where I'd like to

put you know I mean if there is a method to this madness I think it is like 90% madness but in so far as it is even 10%

method the method itself is really shoddy and goes against practically everything Trump has said so you know uh

my line is that basically what this all the this show about tariffs is I've argued in many times before that Trump

goes on and on about tariffs because he has got elected as president now twice

by telling Americans a big lie trump was very intelligent he understood uh that

uh you he understood that you could not tell Americans that their economy was doing fine as the Democrats were doing

because Americans were feeling the pain there was no way you could win elections by saying our economy is doing very well

which is what many democrats and democrat democratincclined intellectuals

still say so he he understood that but then if he if he had to directly admit

that the US economy was not doing well that was you know if he had to

admit that he had to admit that by telling a new lie so he said yes I know you're hurting the US economy is not

doing well but he told a big lie about the reason the reason he did not fess up

that the reason why the US economy is not doing well is four and a half decades of neoliberal policy that has

de-industrialized the United States financialized the United States etc but rather that it is

um uh uh China it is trade and it is immigrants who are the cause of your

misery so uh so by having got elected on that he wants to make a big show and dance

about how uh uh uh uh he's going to address this problem by imposing tariffs

so beyond that there is another really interesting thing which is that as soon as this tariff flurry is over the next

big thing we are going to see is the Trump administration in alliance with the Republican Congress people in in

Congress they are already designing a bill with massive tax cuts for the rich

I mean throughout the neoliberal period the US tax system has become more and more regressive so uh uh uh uh this is

and Trump is going to take another Republican administrations have always whether you're talking about Ronald

Reagan or George Bush Jr or uh uh uh Trump every one of them have uh uh

reduce taxes for the rich and part of the justification of this is going to be

that tariffs are the the income from tariffs will compensate will pay for the for for

these taxes so that's why you know uh Trump is nostalgic so let me just share a screen and show you a very interesting

chart that I found trump is very nostalgic about the early 20th century this is just from

Wikipedia and it shows how uh until about the early 20th century when income

taxes which are in red here began to be imposed basically the bulk of US uh uh

government revenues federal government revenues came from tariffs and since then we've had the imposition of income

taxes and payroll taxes which have reduced the share of tariffs next to nothing so that's what he wants to go

back to is this idea is that somehow tariffs are attacks on foreigners we'll

come back to that point but basically he's going to uh uh uh uh he's going to

use the expected tariffs from uh uh uh tariff revenues as a justification to

give an even bigger tax cut to the rich meanwhile the real cost of tariffs in so

far as there is uh they are effective uh uh huh well the in so far as tariffs are

paid which is another question but in so far as tariffs are paid they will be paid by ordinary American people so

ordinary Americans will experience essentially a tax on them through the

increased prices of the commodities they buy the necessary commodities they must buy in order to live and they will pay

for the big tax cut that is going to come for the rich i think this is the real secret of if there is a method to

the madness that is the that is the method well actually not all tariffs are paid by consumers because there there's

two kinds of trade one is the import of uh imports of just consumer goods from

other countries the uh the fact is that a huge proportion of American imports

are by from foreign affiliates of US firms this is the problem with Canada um

Trump has postponed until May 3rd uh the tariffs on auto auto parks and things uh

the United States has uh one month in order to

sp build 5 years of factories to build its own auto parts companies to hire its

own labor to produce the auto parts that's done from Canada one month uh

China could do it maybe but uh uh it how long is it going to take to replace the

Canadian auto parts manufacturers with American auto parts uh you have to have

planning permission you have to uh have sites you have to have supply lines uh

electrical uh power supports you have to have labor uh they've left out the time element

it's as if in one month America can poof all of a sudden we're re-industrialized

so this is Trump's plan one month industrialization well I think the sorry

I just wanted to interject very briefly that the month is also there so that all the affected parties can go you know

either they can shift their purchase you know shift production here if it's

possible and if not they can seek exemptions for there will be a whole slew of exemptions that will be sought

and given well the question is how much will this pay yesterday

uh uh Apple stock was down 9% because They get all of their their iPhones and

other things from China now how can they uh replace what they're producing in

China now uh if they don't have an exception from all this how can they replace it with uh American uh industry

well the only way they could have would have been to have immigrant labor doing this kind of thing because it's

immigrant labor that makes the kind of things that America is buying from China

all of the things that Walmart uh gets all the consumer goods uh from uh that are well has enabled Walmart to sell at

low prices made in China uh with a very low paid labor well the lowest paid

labor you can get here is immigrant labor because often you don't have to pay it and you can cheat it and say

"Well you you want to sue for it haha we'll get you deported." uh the the

the the irrationality of this and if he does

what you suggest is logical if he says "Okay uh we're not going to uh tax

Chinese imports for uh parts that are used by by our

producers like Amazon or our car companies like uh General Motors uh then

it's so obvious that uh tariffs uh uh are explicitly only on labor not for the

class on whose income he's cutting uh as you've described though this is the

class war put back in business so nakedly uh that I think that that really

is the theme of our show uh and that wonderful chart that you showed that that's it in a nutshell almost I wish we

could begin with that uh because that is the whole setting there once was an ideal time when only consumers had to

pay for the government and not uh business we want to go back to that we want to free business uh uh from taxes

and the whole government's paid for by consumers well if that's the case then

uh consumers are going to have to be paid enough by their employers to afford

to live while paying all of these higher costs and if employers have to pay

consumers enough to pay the whole cost of government military costs and everything else then their uh the cost

of production is going to be so far uh above the the rest of the world that it

it it's impossible so every if you follow Trump's logic everything leads

into a blind alley where it's completely impossible to be feasible economically

that's what's so hilarious about this i mean imagine how could you plot this if you were writing a Hollywood plot for a

movie i mean it's almost like a science fiction what's wrong with this picture

absolutely and you know I mean the thing is that what this is going to do is you know over the last uh several decades in

any case the United States weight in the world economy has been declining and

this uh sort of tariff uh uh uh uh uh this tariff mayhem that Trump has

created this tempest of tariffs that Trump is imposing is only going to accelerate that i'd actually like to

show another uh chart which is really quite interesting so this is a a chart of um uh imports of goods and services

from selected countries and um you can see this first uh pie is from 2012 and

this is from 2022 so you can see that the US share of world imports went down

from about 18% to about 15 odd% and uh

uh uh of course in the couple of years since it has probably gone down more um

and and and you can see of course that uh that of others has gone up so this is for imports and if you look at exports

you see here uh the US share of exports has also gone down from 12% to 10% so

essentially the United States role in the world economy has been shrinking and

there is a big reason why you know even if these many of these tariffs will are

modified and they will have to be modified there are going to be so many negotiations and exemptions in fact I

sometimes wonder whether you know given how Musk has been essentially firing

government employees and so on whether the United States has the bureaucratic capacity to conduct these negotiations

with all the various countries that are going to want to negotiate with them but nevertheless uh to me the very fact that

they have created such massive uncertainty you know it's a bit like investment you know the uncertainty that

that Trump has created directly goes against the domestic rationale of re-industrializing America because who

is going to invest in this climate of uncertainty similarly internationally the the kind of uncertainty Trump has

created is only going to divert trade away because you know if you are an exporting company anywhere else in the

world and you know that this guy is going to be in office for it for the next four years and possibly even longer

if you take his threats to seek a third term seriously and even if somebody else

will come to power they are likely going to be just as crazy because as we've argued before Trump is a symptom of the

deep crisis of the United States not the cause not the solution etc so people are

producers and countries are just going to divert and restructure their trade and that process has already begun so

I'm reading in the newspapers for example that China uh Japan and South Korea have been

arranging meetings at high levels in order to increase their cooperation and you know up to now uh South Korea and

Japan has have you know the United States has moved heaven and earth to try to drive a wedge between South Korea and

Japan on the one hand and China on the other but now this will be very very substantially reversed and I would I I

have absolutely no doubt that Europe Canada and many other countries are also

will also be engaging in negotiations with the Chinese in particular and also each other and rest of the world so the

whole of the rest of the world is essentially going to reorient its trade you know essentially carve the United

States out of their trade and economic relationships basically that's a very important point i usually don't like uh

uh the word uncertainty when economists use it because they say an uncertainty

is risk and profits are a payment for risk and it's all based on on risk and

it's not risk at all because it's it's not a it's not that kind of a poker game

there's but the uh the uncertainty that you're talking about is exactly what's happening how if uh suppose some country

looks at the tariff list and says "Well we better recolocate our factory in the

United States." And then Trump says "Well wait a minute we've just made a deal with this factory they've agreed to

sell uh uh some of my uh donors uh an electric utility or these things we made

a deal so now we're rolling the terrorists back uh and America is not agreement capable." I

mean there NAFTA uh led to all of this investment in Canada and the United

States for auto trade that's uncertainty everything's poof america says "Well we can just uh

exactly indicate everything." No who trusts there's no longer a trust in the

United States they can turn on a dime uh and uh change whatever they want on a

transaction basis as if uh this is not going to affect the long term and everything uh can be reversed exactly

and you know sorry I just wanted to Michael very briefly wanted to explain that this is the uh uh uncertainty index

that Bloomberg has created and you can see here that in the first Trump uh uh

administration there was a period of very high uncertainty when uh essentially the Trump started his trade

war with China and before he came to a a deal with China and then throughout the

Biden years it remained very low but the moment Trump won his election it started

shooting up and today it is like you know almost nine times as much as it was

under Biden so you this is what we mean by when we say that this is this is like catastrophic levels of uncertainty

basically well you can see that in the fact that uh everybody was surprised by

the uh stock market change uh but there there are all sorts of other things suppose that there's a weaker dollar uh

that's going to have an effect on American investment as well because if the dollar goes down uh against say the

euro or uh the Asian currencies that's going to make US multinationals in

foreign currencies higher in dollar terms all of a sudden if they continue to make profits in uh Germany as if

anyone can make a profit there or Europe or Asia then uh the their earnings are

going to be higher against the dollar and that gives them an incentive to invest abroad and

suppose that a foreign country is going to say "Let's set up a BMW yet another

BMW or a Mercedes factory in America." If they to sell cars to Americans but if

the dollar goes down then these earnings for foreign countries that they expected

in dollar terms are going to be worth less and less in euro terms now you can

that's almost beyond uncertainty that's pretty certain that if uh this is Trump's policy you're going to lose in

your holding and if the dollar is going down then all of these foreign investments that China Japan Europe make

in US Treasury securities say "Wait a minute we're holding our reserves in uh

US securities that are going to go down in our own currency." So uh all of a

sudden China's holdings of uh US dollar securities are going to be worth much

more much less in Chinese currency and they'll take a loss what do they do to

avoid it they move to gold which is going up and up and up now

it's I think $2,300 an ounce of uh yesterday

it trump is driving the rest of the world to solve the uncertainty problem

out of the dollar into gold and and making it urgent that the BRICS countries create some kind of in trade

among themselves so that they don't have to use dollars but now Trump uh said uh

the other day he's threatening like a 500% tariff on uh goods from any country

that does business uh with Russia that was reported on April 2nd uh he's he he

he says any any country that tries to join with bricks to create a a currency

to avoid or a means of payment a financial system to avoid the dollar

we're going to put extra tariffs on them so again uh uh you could say what are

all the self-contradictions column A and column B you could go uh right down uh

and say it he's driving other countries out of the dollar to avoid uh your

uncertainty which to me is a kind of certainty that they're going to lose money if they put their money in the

United States in other words he's creating a new c let's say he's creating a new certainty you're going to lose if

you invest in the United States that's you're going to lose if you trust the United States uh you're going to lose if

you don't pull your money out of the United States exactly and you know and by the way the price of gold is actually

above $3,000 US per ounce so not 2,300,000

i'm sorry yeah yeah no no that's that's fine but it but it is at a historic high

it is interesting by the way that Russia has been not not been mentioned in and I think that reason could be quite

interesting you know in my experience all the sanctions that have been imposed on Russia of course have have reduced

trade but at the same time there are important carveouts which allow American

and other western companies to continue operating in Russia it's astonishing how many of them still do so he just doesn't

want to touch that i think that's the main reason why Russia is not mentioned in this notorious list that Trump was

holding up that day yeah like uranium uh paladium all sorts of things that that

was on on those are on the list uh obviously uh America uh want certain

things from Russia so it's only we're only going to tax the things that consumers have to pay exactly we're

going to squeeze consumers uh we're going to drive up the consumer price index

yeah exactly another lie that the Trump administration says is that the tariffs are going to lead to a higher

dollar because uh you know uh as United States uh trade deficit is reduced which

we'll have to see but as the US trade deficit is reduced then uh uh uh the dollar will become higher but you know

as we've already said the dollar's value has nothing to do with the trade deficit uh so also you know the uh uh the

reserves that uh people hold in any case the rest of the world is holding less and less in terms of um at least foreign

governments are holding fewer and fewer US uh treasuries and that has led to more and more of the treasuries being

owned by um uh by US entities and and so on and by the private sector so

essentially uh uh uh the uh the amount of treasuries that are today being sold

they are not necessarily being bought by uh uh by foreign governments uh uh in

any case so so so so I I just thought I'd make that clarification well in addition you're talking about uh

the dollar debt let's look at foreign debts right now uh what uh do many Latin

American and uh global south countries do with their export proceeds they pay

the dollar debts that they've run up if they cannot uh make the exports that

they've done before they don't earn the dollars to pay the dollar debts on their

foreign debt the only solution they have is to say the United States has prevented us from paying the dollar

debts so we're we're suspending payment of foreign debts uh the whole system

that was put in place after World War II was uh a degree of financial imperialism

which is what we've been discussing all along uh that other countries have to use their economic surplus to pay the

foreign debts that they've run up to finance the uh dependency relationships that uh the World Bank and the IMF and

American foreign policy have created well now all of a sudden this dependency relationship was supposed to be you uh

export to us uh low prices and uh uh use uh the your earnings to pay the foreign

debts to our bond holders and banks all of a sudden Trump has broken this so other countries have now a reasonable

excuse under the under national law to say these debts have now become odious

debts we are not only suspending payments we're annulling them because

the whole trade system on which the philosophy of paying our foreign debt

services paid is has now been rendered unworkable

well sure and and you know the other thing is I just want to go back to uh uh the the point about inflation you know

these tariffs are bound to be heavily inflationary and of course inflation is going to drive down the value of the

dollar this is uh inevitable uh in in some sense in so far as tariffs are actually paid in so far as Americans

continue to purchase foreign goods and these tariffs are paid going to drive up the prices uh in in in the US and that

is going to put the Federal Reserve in a serious fix because and it looks as though what's now going to happen is uh

this you know even though inflation will be higher the Federal Reserve is going to say going to use the excuse which

will be amply provided uh by developments that is to say there will be a slowing down of the US economy and

so they will use the excuse of the growth slowdown to justify a lack monetary policy see so inflation will

remain high the Federal Reserve will not do anything to correct inflation go ahead so so the inflation is driving

down the dollar without making the American economy more competitive it's wiping out exactly and that will only

further increase the burden of tariffs on uh uh uh so you know in addition to

the burden of tariffs consumers will have the burden of inflation placed on them so ordinary people so you know it's

very ironic that Trump you know the Republican party has you know thanks to Trump become very substantially a

workingclass party you know a very substantial section of the working class have voted for Trump now they will see

that Trump does not care a wit about them that what he cares about are his

CEO uh cronies and they are the ones who will benefit ordinary working people are

going to pay a huge price in on many many different fronts on this and that's why the class war aspect of of these

tariffs are uh is really the most important thing i mean you know we we we are not saying we have said from right

from the get-go that the United States needs re-industrialization and if Trump really

cared about the American working family then he would have made a serious effort at re-industrialization but that is not

what he cares about this is a a a you know if you thought the neol liberal era was bad in creating

inequality and and and and and tilting the balance of power in favor of capital and against labor you ain't seen nothing

yet what Trump is going to do is going to be a lot worse so this gives a new uh

dimension to the concept of internal contradictions i mean it's amazing the

if the Republicans are the party of labor then labor has voted against its

interest in voting that just like the Democrats uh since Obama being the party

of the ethnic minorities uh when Obama has been the most anti- anti- minority

uh the the the expropriation of houses of homeowners that are black and

Hispanic after his bailout it it's as if every category of the deportations

against their self-interest and the deportations don't forget yes yes of course isn't that

it's really ironic and and and so you know to to me I mean this the fact that

the you know the other thing that this tariff situation shows us is that the United States uh essentially the crisis

is so deep that the only solution to the crisis seems to or or the apparent

solution to the crisis was to elect or or let me rephrase that the United States crisis is so deep that one of

that it has led to the election of this complete loose cannon of a president who

has absolutely no agenda but to promote the interests of the 1% and do so

unabashedly shamelessly uh uh uh you know in this in these ways while you

know uh so so so you you you you you get elected on the backs by by raising hopes

of American working people and then you get there and you essentially get there on on the basis of an ideology which

says on the one hand to working people we care about country and we are going to address your problems but on the other hand the solution to their

problems is allegedly to tax rich people even less to uh uh impose more and more

of the tax burden on ordinary people and essentially to allow uh uh CEOs to do

whatever they want remove the last vestigages of regulation that there were maybe that's the significance of this

DEI stuff the DEI the diversity inclusion and equity and so on this

stuff was perhaps the last little veneer of regulation that was left after you

know decades of neoliberalism and now even that has to be thrown out and of course along with all sorts of

environmental regulations and so on so so this is this is where we are at now

well half of America's population is reported by living paycheck to paycheck and if the uh their cost of living goes

up what what's going to happen their default rates on credit card debt automobile debt that are already at

peaks already high yes ep housing mortgage debt is going to go under so

we're seeing a uh a snowballing effect of debt defaults poverty uh gives new

meaning to the idea race to the bottom and you know I I wasn't going to show this slide but I think I will it's it's

a very interesting slide i I I want to say you know that there is a a sense in which uh uh in in one sense at least

what will happen to the rest of the world i mean the United States is going to have a really tough time uh one way

or the other and you know and and the Trump era will simply be a uh a further

chapter in the deep crisis of the United States that is going to make things even worse but if you look at this chart it's

very interesting this I mean I I don't like the labels in this chart but then I didn't make it i'm just showing it some

people at the IMF made this chart so they are showing you know from 1870 to 1914 you have uh you know relatively

high level of trade openness then it goes down in the inter war era the great depression the competitive protectionism

of that era and so on and then it sort of begins to recover uh uh uh uh in

between 45 and 80 and then in the neoliberal era it goes up even more but

since 2008 and probably a little bit before then what you've had is really a

no great growth in the level of trade openness so to speak so this is a period

that people have been calling globalization but there are many interesting things about this chart

remember the first thing is that you know the the the recovery of trade in

the 80 45 to 80 period which was the period of the highest growth that the

world has ever known it was not accompanied by a massive explosion of trade the real secret of the growth of

this period from 45 to 80 was that it was not trade dependent trade recovered

because economies recovered and economies recovered primarily by producing for the domestic

market not uh uh uh for uh not by um uh

uh e through exports so the export-led strategy was uh was

um sponsored or or or encouraged in the neoliberal period so that's really interesting so now what we are looking

at increasingly is a is a situation in which more and more the world is

focusing on expanding domestic markets and that's a good thing because that means you're making the lives of

ordinary people better off so I think the rest of the world will continue on this strategy they will uh e you know

the growth was already becoming more reliant on domestic markets as a

stimulus to growth and I think this can continue and it will it will have a good and beneficial effect on the rest of the

world so again you know the rest of the world will essentially carve the United States out uh and and and allow the

United States except perhaps for Canada and Mexico they will have a much harder task at that but even they are beginning

to talk about that and and the US will sort of continue it spiral of decline until it has better political leadership

i think that's right when the United States officials talk about trade with Russia they keep talking about trade as

dependency uh and tra as if trade uh is a bad thing to import they say import

means dependency don't uh import oil from Russia because look you're you're

dependent on it in case it does something to interrupt the trade with you the only country in the world that's

interrupting trade and weaponizing trade is the United States uh for all of this and uh uh the kind of trade that you're

talking about with uh and I'm talking about uh uh among the bricks is uh

non-dependency trade so what we're seeing is not simply a a winding down of

open trade but a shift in trade away from the dependency system that uh the

Americans put in place in 1945 with the IMF and the World Bank and uh American

uh uh diplomacy all of a sudden the rest of the world says there must be a kind of trade that's win-win instead of

win-lose uh and avoids dependency so we're finding a transformation uh and a

juxiposition in trade systems the US dependencybased international trade and

the global majorities u independent uh self-sufficiency

international mutual gain that's that's an interesting point and you know I've made it in se in in several places um uh

in a slightly different way you know uh which is that um in China uh you know you and I have

criticized globalization from many different perspectives uh but in China the word is often used in a very

positive way because the era of globalization in the '9s and was regard

you know was a was a good time for China and China increased its integration in the world economy and so on but what the

west means but but there are two different meanings of globalization what the west means by globalization is that essentially you remove all restrictions

on trade which typically means the other countries remove all restrictions on trade and allow United States

corporations to go in and invest there and trade there and so on and so forth so essentially to open it up for the

United States what China means by globalization uh is increasing economic

integration of the world economy but on the basis of mutually beneficial trade deals with various countries and I think

that this kind of uh uh globalization will will probably increase rather than

decrease and the United States version uh uh will essentially fall into the

dust bin of history yeah I think that's right well it's going to be Trump has

actually done he's been a catalyst for uh uh reorganizing the economy on uh

free of the United States he's isolated the United States from its interference with the rest of the world economy isn't

that wonderful or or let's just put it this way the United States influence in the world economy was already declining

and the and and and the irony is that anything that Trump and Trump is

scraping the bottom of the barrel of of of of measures through which it can rectify this but in fact everything he

now does I mean these measures are so bad that everything he now does simply ex exacerbates the problem of the US's

loss of influence so this is where the United States is at today i think this

is the most spontaneous discussion of any of our shows yet perfect so I think we will uh end our discussion here

michael if you want to say any last uh remarks okay wonderful so let's end here and uh

we'll come back uh soon i think Michael and I also have plans to go back to discussing the dollar with you because

there are some interesting new developments so we will come back and discuss that another time very soon

until then bye-bye