America Against All. The US Is Preparing For A New Trade Era
Donald Trump is launching a systemic transformation of the American economy. What should the world prepare for with the renewed United States?
Over the past 20 years, the share of industry in the structure of US GDP has decreased from 20–25% to 10–13%, i.e. almost by half. In recent years, the US industry has been growing by 0.2% (2023), mainly thanks to oil and gas production. Industrial output has been stagnating since the end of the global financial crisis in 2008. America is gradually losing manufacturing industries (semi-finished products) and the production of short-term goods (consumer goods). But the mining industry is growing by 4–5%, which only strengthens the raw material trend of industrial development.
At the same time, the backbone of the American economy is the service sector (more than 80%), which forms the quasi-virtual nature of the American GDP. Thus, the deindustrialization of the United States is out of the question; highly profitable and technology-intensive sectors of the economy remained in the United States, while labor-intensive ones moved abroad: to China, Mexico and other countries of Asia and Latin America (accordingly, the indicators of this industrial production are not included in the US GDP).
A kind of synergy was formed, which in the context of cooperation with China, for example, was called “Chimerica”: the Chinese produce consumer goods, the Americans buy them, and the Chinese invest export earnings in dollars in American government bonds. With these funds, the United States covers the budget deficit and finances social policy, including payments to the unemployed who lost their jobs as a result of the relocation of American production to China.
However, this model could function effectively only under one condition: allied relations between the United States and China. Initially, this partnership format was set up against a common geopolitical enemy, the USSR, then in the format of “new globalism” and “the end of history,” when it seemed that the unipolar world had come forever.
But after 2008 it turned out that history is not over and globalism is experiencing the most dramatic crisis in its history.
The first serious wake-up call came during the COVID-19 pandemic, when almost every industrialized country imposed restrictions on the export of strategic medical supplies.
The problem of global supply chains has now become even more acute, this time in the context of international trade in strategic raw materials and products of the military-industrial complex.
If China is becoming a key geopolitical rival of the United States, at least a competitor, then it is very indiscreet of Americans to outsource their strategic production abroad.
However, the production of both semi-finished and consumer goods is stagnating in America. Only the production of durable goods and mining, that is, the raw material component, is growing. Since 2009, the American industry has grown by less than 1%, i.e., it has not actually changed, being in a kind of “sideways trend.”
Interestingly, even in the context of Russia’s war against Ukraine, during which the United States promised our country lend-lease programs and other types of arms and ammunition supplies, America has not been able to significantly increase its own military-industrial potential. To put this in perspective, during World War II, the US industrial sector grew by more than 300%.
Moreover, there is a rather paradoxical situation: labor productivity in the American industrial sector has been declining since 2013.
At the same time, capital investments in industrial infrastructure during the post-pandemic recovery (since 2021) have been increasing rapidly and have grown by 250% compared to the pre-pandemic period. This is the third cycle of expansion of the US industrial base, but it is the largest one. However, American companies are not yet able to compete with cheap imports from Asian countries, even with such rapid growth in industrial infrastructure. The main reasons are the productivity factor and labor costs. The former depends on the level of technical education and the prestige of working professions, while the latter depends on the cost of living.
Donald Trump plans to restore the US industrial potential through protectionism and the protection of the domestic market from cheap imports, primarily imports of consumer goods from countries such as China, Mexico and Vietnam, investment high-tech goods from the EU, Japan and South Korea, and raw materials, agricultural products and semi-finished goods from Canada.
In terms of tariffs, Trump promises not only to impose tariffs on goods from Mexico and Canada (with which the United States is bound by the North American Free Trade Agreement, which was already revised during Trump’s first term in office), but also a real trade war with the EU and China.
And while duties on goods from Mexico and Canada are still considered at the level of restrictive duties — from 10 to 25% — duties on goods from China, according to Trump’s “threats” (if China does not accept the US demands), may increase to the level of blocking duties, i.e. up to 100%.
Moreover, according to Reuters, Trump may introduce “universal duties” on imports for all countries of the world. These duties will be considered as a kind of an entry fee to the premium American market, a global trade rent that the United States will collect from countries around the world for the right to do business on its territory.
To quote the 47th president: “...you impose general tariffs on everybody who does business in the United States because they come in and steal our wealth, they steal our jobs, they steal our companies, they hurt our companies. So you put tariffs on them to stop them from doing that.”
However, Trump added that the US is not yet ready for such radical actions.
What impact will all this have?
As you can see in the figure, since 2012, imports of goods to the United States have increased from $2.33 trillion to $3.17 trillion (as of 2023), or by $840 billion (36%). At the same time, exports of goods from the United States over the same period increased from $1.54 trillion to $2.02 trillion, or by $480 billion (31%). The negative trade balance increased by $360 billion, from $790 billion to $1,150 billion, or 36%. At the same time, the negative trade balance decreased slightly relative to GDP, although it remains at a fairly high level: 4.86% in 2012 and 4.21% in 2023.
An increase in the average import tariff by 10 percentage points will lead to an increase in US budget revenues by $300 billion (with total US federal budget revenues at around $4.5 trillion). That is, it is approximately 6–7% of the level of federal revenues. But this is, of course, assuming that the increase in import duties does not lead to a significant reduction in US imports, which is not at all obvious.
The key trading partners of the United States are China, Mexico, Vietnam, the EU, Brazil and Canada.
So, Trump will try to renegotiate the terms of the free trade area with Canada and Mexico, using trade wars to strengthen the US economy.
In parallel, with the help of import duties, Trump will try to win a competitive civilizational struggle with China and turn the EU into a source of “perpetual economic and trade rent” in favor of the United States to finance this confrontation with China.
In this regard, Britain in the Atlantic will also be involved in the structure of the US strategy, as will Australia in the Indo-Pacific.
This new geopolitical model can be called the “New Atlantis.”
For the past 50 years, the world economy has been developing within the framework of the generally accepted concept of globalism, which envisaged the progressive development of economic cooperation between countries. The creation of supranational superstructures, such as the WTO, was supposed to protect the process of competitive selection of countries from state protectionism methods that turn natural selection into artificial selection.
The crisis of 2008 showed that the global market is asymmetrical, especially in the context of the ratio of opportunities of the pivotal and peripheral countries, which was manifested in the “discrimination of the Global South.”
Today, we are no longer witnessing the construct of a global world, but rather a new format of global fragmentation, in which all the laws of global selection and cooperation are in force, but within the framework of separate global clusters. From now on, the rules are followed only within such separate entities, blocks of countries.
If your country is outside of such a “taxon,” it may be subject to the most sophisticated tools of non-competitive influence and neocolonialism.
In the format of global fragmentation, the United States can wage openly discriminatory trade wars with China or the EU and even “rewrite” signed trade agreements almost unilaterally. So it is a blessing to be at the core of the new American strategy. Woe to those on the periphery, outside it.
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