Trade wars: What is Trump's goal?

US President Donald Trump has fulfilled another promise from his election campaign: he imposed tariffs on goods from almost all countries in the world. Among the countries he imposed tariffs on are even islands where no humans live, only penguins. Russia, Belarus, North Korea, and Cuba were exempted.

The first tariff came into effect on April 5, and the second is scheduled for April 9. For most countries, the tariff rate is 10 percent. Countries like Vietnam, Japan, and South Korea face several tens of percent, while tariffs on Chinese goods are set at a staggering 104 percent.

If you listen to Trump, he says, “For the last 30-50 years, the whole world has economically exploited the US; the US bought their products, but they have never bought anything from America, we will change that.” In other words, the whole world has made the US an economic colony, exploiting it...

Is that really the case? Quite the opposite! Indeed, there is a trade imbalance in goods between the US and many countries. But the reason for this is that the US buys more material, physical goods from the outside world, while it exports more services, ideas, and digital products.

The export of services and digital, cultural products brings significant revenue to the US, but they do not rank alongside simple goods in the US trade balance. That’s why Trump does not account for this. For example, Hollywood sells many films to world countries, or Microsoft's Windows and other products generate billions in revenue. Companies in California's Silicon Valley sell vast digital products to the world and see hundreds of billions in revenue.

In fact, in the last 30-50 years, the US has experienced unprecedented economic growth. In terms of GDP per capita and national GDP, compared to Japan and the European Union, the US has seen more economic growth than others.

According to Trump's trade secretary Howard Latnik, there are five trillion dollars available to develop domestic production in the US, and Trump's goal is to bring back factories that once left the US and strengthen domestic production. However, the main issue is that there is no surplus labor in the US. Moreover, if each worker in the US is not paid at least 4-5 thousand dollars a month, they will not work. In Mexico or China, there are many who work for 1,000-1,500 dollars for the same job. Everyone knows that expensive labor in the US significantly increases the cost of products?!

Trump's statement is like going to the market, buying products, and then telling the seller, “You are taking my money!”

The consequences of the policy Trump has initiated could be very negative. For the US and for others! A hundred years ago, the economic interdependence of world countries was very low. In the 1920s and 30s, only 15 percent of the world's GDP was accounted for by international trade. Everyone consumed what they produced themselves. But in the last century, the economy has continuously sought to lower the cost of products and services. Today, global trade accounts for 60 percent of the world's GDP. A century ago, the balloon, steering wheel, and engine of an American car were all produced in Detroit. That is, when people referred to an “American car,” they meant a car produced entirely within American territory and by American workers. In today's Ford cars, for example, the engine might be made in Korea, other parts in China, the steering wheel in Mexico, and the tires in Europe, with everything assembled in Mexico or Canada. Only the name and design belong to the US.

Economists cannot understand what Trump's goal is. Because economically – America does not win, it loses. Others also lose. According to calculations, due to the increase in tariffs and the imposition of retaliatory tariffs by other countries, each American family will incur an additional expense of 5,000 dollars. This is an additional expense!

As a result of Trump's tariffs, the People's Republic of China, Canada, the European Union, and other countries have announced that they will impose “retaliatory tariffs” on American products and services. Indeed, some countries are looking for ways to negotiate with Trump, such as India, Israel, and others. However, against the backdrop of Trump's tariffs, a sharp decline began in the stock markets, and the capitalization of the largest American companies fell significantly. If Trump's tariffs remain in place, many medium and small businesses in the US will collapse. The reason is simple: they will lose their customers both in the domestic market and abroad.

Democrats say that Trump's goal is not economic. He is thinking about remaining in power indefinitely. After the current tariffs, all companies in America will come to Trump and plead, “Please remove the tariffs from this sector or these countries!” Trump will respond, “Okay, I will do what you ask, but my condition is that you will be loyal to me so that I can remain in power! You will do what I say! You will support my political projects!” say the Democrats.

The world economy is interconnected like a chain. When the pandemic occurred in 2020, we saw how interdependent the world is. Trump's actions could trigger a new recession and crisis in the world economy. Typically, the weakest economies suffer the most during a recession.