President Trump would be funny if he were not so serious when he complains that the USA is the victim of the rest of the world. According to the president, the whole globalized world economy is a clever ploy by other countries to feed off America. “America first” announces his intention to throw the old multilateral system on the scrap heap of history and replace it with deals that work for America. Not just any country can do this. With typical bluntness, Trump makes clear that the “rule-based” world economy is a question of power and nothing else.
Even before he starts looking for evidence of foul play, Trump senses something wrong: How can it be that the US has economic rivals? We are superior, with the hardest working people, the most amazing technology, the most bueatiful money. The economic competition between states should already be decided by America’s claim that it is economic power number one. If the US is by definition a winner, something must have gone wrong. So who is to blame? It can’t be America. It has to be everyone else. If America is no longer great, this can only be because foreigners are competing unfairly.
Is Trump just a nutcase? Why does the world look like this to him? There is a basis for his ideological view: After decades of growth, the world market has created competitors who are not just there to provide America with a market, but who are challenging America’s economic predominance. They are using their economic gains to assert independent ambitions on the global stage and questioning America’s rule in the world. For Trump, this is shocking and unacceptable. He recognizes that the whole world is no longer a means for America, but can’t give up the idea that America is by right number one.
In a way, Trump’s point of view is purely capitalistic: if a partner country is making money, that is money we aren’t making, so it’s a loss. If there are Mercedes Benzes on Park Avenue, that means Germany is selling something here that we aren’t. Why is growth happening somewhere else and not here? Trump does not think that another country’s growth is something that America can take advantage of. For Trump, if another country is growing, that proves they are taking advantage of us. When he looks at NAFTA, he does not weigh how much the US gained vs how much Mexico gained. He just sees that Mexico got some jobs, so there were some positive aspects for Mexico, so this is a negative for America.
Trump is not wrong to point out that the economic competition between states is not a game in which everybody wins – far from it! His view is just completely biased. For Trump, the trade deficit can mean only one thing: If the US is not exporting as much as it could, it is being discriminated against by other countries, even though the trade deficit could just as well be taken as a big plus for the USA because other governments see dollars as attractive and strengthen America’s credit all over the world. Trump is also aware of this, and proud of it. But his view of American interests is so totalitarian that he demands to know: So what if Wall Street and Silicon Valley are global successes, what about steel? Why not produce washing machines in the USA instead of Mexico? It is an absolutism of winning everything.
“America first!”: a contradiction
The view that the USA is above competition is not new with Trump. In setting up the post-WWII economic order, the US decided to allow other nations to make some money off America, but always with the presumption that America will win out with this kind of managed competition. In this system, it was taken for granted that all states could find something for themselves in a growing world economy, but that the US would maintain its superiority and mastery of the whole system because, in a world of free competition with capital, America couldn’t lose.
The contradiction in Trump’s point of view is that the basis for his absolutism is precisely the success of the system that he criticizes and wants to unravel. It was on the basis of the world security system epitomized by NATO and the world economic order with the WTO as its defining institution that the US built up and maintained its superiority, economically and militarily. Trump, who exaggerates everything, says that the pre-history of the presidency before him is a record of failure, but he could only make this judgment on the basis of the success achieved by previous administrations.
What is new about Trump is how America is going to make wealth in the world. Trump doesn’t talk about building up the American economy in the world system as the means for building American power. He just says that America’s power and economy are one and the same. In his executive order imposing tariffs on China, he did not accuse China of cheating in trade – that would require making a case before the WTO – but just said China’s steel exports are hurting America’s national security. In other words, a seemingly economic measure – tariffs – is not just to provide economic benefits to America, but to ensure America’s national security.
In fact, America has always defined its national security differently than other nations. America is insecure if it can’t act anywhere in the world in any way it chooses, meaning that another nation can get something that America does not want it to get. That’s the absolutism of power: there can’t be any obstacles in the world to America at any time. In the context of Trump, this has gotten a new directness. The USA is getting ready to damage other states in world trade in the name of its national security because the economic success of these states is a result of, and evidence of, a lack of American power. America’s power should be able to prevent other countries from competing against the US.
This is where Trump gets radical in relation to the previous international order. His program is to make America so strong that no state in the world will dare to achieve anything in the world without the consent of America. He wants the USA to become so powerful that it doesn’t even have to fight wars because its force is so overwhelming that nobody will dare raise their head. It is the same with his economic goal: a power so strong that it is no longer competing against other powers because it is beyond competition.
His measures – tax cuts and tariffs – are meant to bring business back to the USA at the expense of other nations by reducing business in those nations. The carrot is that taxes and environmental laws will no longer be obstacles to investment in the USA. The stick is that American capitalists will have to take it seriously that building a factory overseas with profits that can’t be brought home is a political risk. This really is an attack on other countries and their policies to attract capital. This negative impact is not only part of the strategy, it is also why Trump wants a vast increase in military spending: to make sure that no one can oppose the power that he wants.
When Trump says the US is going to win the trade war, what does it mean to win? The objective of punitive tariffs is not to destroy the other country – if it were, America has more effective ways of doing this. Nor is Trump saying that nothing from China can come into the USA. The idea is that China has to accept specific demands – stop requiring American firms in China to share technology with Chinese partner firms; crack down on intellectual property theft; stop dumping products below cost; etc. Trump is doing the usual thing with a threat and a demand, just like with a kidnap for ransom: we will harm you until you do what we want. The point is to force others to behave in ways that America decides.
For Trump, considerations about his policies – won’t tariffs hurt other American businesses? won’t this hurt growth? – are beside the point. Trump’s calculation is that the negative effects due to the responses of other states are not something that can harm America in the long run. His critics are not getting his argument that all this rests on America’s superiority as the world power and that it has the means to set the terms, so the whole world has to cope with that – and not the other way around.
Many liberals worry that what is called “protectionism” will hurt the world economy and, by damaging other countries, potentially lead to real armed conflicts. This is not a false worry; every war between major powers was preceded by economic grievances. But liberals only want criticize the normal economic conflicts by saying that they could lead to something worse; they take the normal economic extortion as the status quo and not as a horrible thing.
Economic conservatives who have long preached prudent fiscal policies are horrified by the recklessness of the current administration. This is a real change in the political economy of America: the rules of good budget policy have been thrown out the window. There will no longer be any considerations about the indebtedness of the state, which has always been regarded as an advance to the capitalist class that has to prove itself in further growth and therefore has to be done very carefully with regard to future prospects. Trump and the Congressional GOP just believe that the amount of dollar debts is justified by the purpose these debts serve: unilateral American power.
Trump is convinced that America will win and this will show up as economic success because, if there is any success in the world, it will be America’s – and its going to be huge. This success is to be measured in a growing number of American jobs. For Trump, “jobs” is a code word for “capital accumulation.” He finds support from the mistaken belief that the purpose of the economy is to give people jobs and not what workers are actually doing on the job – serving capital accumulation.
The power of a state does not directly translate into economic growth – that has to be done by the capitalists on the basis of their own competition. So, after one year of Trump, how has international finance and multinational capital responded? On the one hand, purely opportunistically. They take Trump’s declaration of trade war as a condition of business. If the world’s stock markets speculate against imposing tariffs, this is a business calculation, and they also do the opposite. They have one question: does it give us leverage to create more profits; if so, how?
On the other hand, their speculations are not only concerned with the profits to be made from Trump’s policy. They simply take it for granted that the most powerful state sets new conditions, so the best thing for business is to invest in America. This extra-economic feature is more important for economic calculations than anything else.
The big powers holding dollars – the EU, Japan, China – are not threatening to get rid of them. They are not contesting Trump other than by trying to promote their own money as world money, as an alternative to the dollar. This is not a warlike response, but an accommodating response. China is not threatening to dump the dollars that it holds in its treasury because these guarantee China’s own financial credibility and the money that it wants to add to the list of globally desirable currencies. Secondly, dumping dollars would cut the value of the dollar, so China would be ruining itself by using this weapon. So far, the rest of world has not responded with a debt competition to see who can print the most money and have it accepted as money. The trade war is not (yet) a currency war.
In other words, the major states and the business world are confirming Trump: They too believe that economic growth finally rests on superior force. The fact is that America is building up its economy at the expense of the world in order to build up its military to enforce its global hegemony, and this is the best guarantee that the dollar and dollar-denominated bonds can get. The world of states recognizes the logic of this new situation and the markets can’t refute it – because, ultimately, all capitalist wealth rests on the power of the state that creates this wealth.
The contradiction that Trump is in – that he is destroying the basis by which America got wealthy and powerful, the international order – does not seem to be something the world can speculate against at the current time.