Cooking the Books 1 – Trumponomics
‘On the campaign trail, Trump has floated a ten-per-cent tariff on all imported goods, and a sixty-per-cent levy on those from China’ (New Yorker, 15 July ). He also wants to devalue the dollar vis-à-vis other currencies. In an interview with Bloomberg Business he ‘called the strong dollar “a big currency problem” and “a tremendous burden on our companies”’ (Times, 29 July). Tariffs and dollar devaluation, that seems to be what his plan to Make American Capitalism Great Again amounts to.
The capitalist class in any country is not a monolithic bloc when it comes to commercial matters. There are differences between those whose business is exports, those who face competition from imports, those who import raw materials and parts, those who neither export nor require imported materials. What Trump has in mind would affect these groups differently.
A 10 percent tariff on all imports would benefit some US manufacturing companies by protecting them from outside competition. But this would mean an increase (not necessarily proportionate but what the market will bear) in the price of their products. Insofar as these are consumed by workers this would exert an upward pressure on wages, which would affect all capitalist employers even those involved in neither exports nor imports. It would also risk, in fact provoke, retaliation by the other country or trading bloc, which would affect exporters, who in the US mainly produce food for humans and animals.
When in 2018 his administration put a 25 percent tariff on imported steel and 10 percent on aluminium, the EU retaliated with tariffs amounting to nearly $3 billion on US imports. China reacted too. As the New Yorker noted, ‘when Trump imposed tariffs on some Chinese goods in 2018, Beijing retaliated with levies on American imports which hurt American farmers and manufacturers’, adding:
‘If a new Trump Administration introduced universal tariffs, many other countries would face enormous domestic pressure to respond with similar measures. In the worst-case scenario, Trump’s policies could lead to an all-out trade war’.
A world-wide trade war in fact, since Japan, India, Brazil and others would join in as well as China and the EU.
A fall in the value of the dollar compared to other currencies would make US exports cheaper and so be welcomed by exporters. But it would also make imports more expensive and so be unpopular with companies that rely on them, whether to sell or to use to produce something else. Because the dollar is the world’s reserve currency, held by states and companies to settle their international transactions not only with the US but also with each other, a fall in its value would have worldwide repercussions.
It would reduce the value of the reserves held by other states and companies. These are mainly held in the form of US Treasury bills and bonds; in other words, is money lent to the US government and which allows the US to run a trade deficit but also to finance its huge military budget. Making the dollar weaker might benefit US exporters but could make borrowing from abroad more difficult. Some US capitalists disagree with Trump’s approach and the matter (in which workers have no interest) will be settled at the ballot box in November.
Trump may act the boor (and be one) but he is essentially a businessman and wants to use the same sort of tactics — involving bluffs and deals — against US capitalism’s economic rivals that competing capitalist companies apply against each other. States do this anyway but generally more diplomatically. A Trump administration would make it clear for everyone to see that economic rivalry between states is about supporting their companies in the competitive struggle for profits.