Trump's Trade War: the World-System Perspective

 

The New York Times today posted two interesting graphics about Trump' Trade War (here): The country status (above) and the results ranked by 2024 Imports (below).

From the ranks (above) it seems that he is going after the money, targeting our biggest trading partners. The economic sense of this (if there is any) is Import Substitution Industrialization (ISI) for the US, a strategy typically employed by Global South countries. Basically, price imports so high that home-grown industries will develop to fill the gaps. Unfortunately, building factories and developing an ecosystem of suppliers takes times. In the mean time, prices in the home country (US) go up as are result of tariff expenses being added to list prices (remember when tariffs would be listed on automobile sticker prices).

By the time ISI would have any impact, Trump will be out of office.

Why MAGA?

 

Sometimes I think I understand the MAGA Movement, other times I don't. ChatGPT (here) reports that there are a handful of reasons. The best I can say right now is that it is complicated. My favorite explanation, that aligns with historical analysis of the Nazi Movement, is Right-Wing Reactionism. The failure and humiliation of loosing World War I led Germany to Nazism. The failures for the US are not so clear, but let me just explore Economic failures in this post.

Everything seems to have come to a head during the COVID-19 Pandemic which was a strong shock to the US Economy and was handled very poorly by the first Trump I Administration (2017-2021).

Notes

• Beverly Gage How the Red Scare Reshaped American Politics

Magnitude of Trump Shocks

 

It seems that the US (and maybe the World System here) are in for some shocks from the Trump II Administration. Just yesterday, Trump seems to have imposed strong tariffs on every country in the World-System (except Russia) and countries (such as China) have instituted retaliatory tariffs. It's hard to understand why Trump is doing this: tariffs are against economic orthodoxy and against Republican economic free-trade orthodoxy. Maybe he was asleep in ECON 101 or maybe there is no explanation.

Here's another idea: Trump learned to like the botched COVID-19 Pandemic Response at the end of the Trump I Administration (2017-2021) and decided to impose his own Shock Therapy on the US and the World System. For a needy narcissist, it does get everyone talking about him!

The graphic above shows a time plot of Quarterly US GDP residuals from (2005,1) to (2024,1) produced by the USL20 policy model. The largest shock to GDP during this period was the bungled Trump Administration response to the COVID-19 Pandemic.

Can we expect another shock like the COVID-19 Pandemic shock from the Trump II Administration? Time will tell...