THE LOOSE-CANNON APPROACH TO DESTROYING EARLY-21-CENTURY CAPITALISM--AND/OR HUMAN LIFE ON EARTH ON

The 25%-25% unilateral import tariffs imposed on trade with Canada and Mexico, and the 10% tariffs on China show, at the minimum, that Creep1's advisors are 19th century German nationalist "trade protectionist" extreme-right-wing / protonazi anarchists. It may well be, as the editorial board of the Wall Street Journal scoffs, "The Dumbest Trade War in History" but it is, nevertheless, real--at least for now.

Geopolitical decision-makers', advisors' and analysts' phone lines are buzzing all over the world, and quantitative trade policy types are typing away feverishly on their computers, running simulation models on various possible outcomes of the current total crisis of world trade. None of it looks particularly good.

https://media.architecturaldigest.com/photos/613b5bbefc0a4f39862aa7dd/16:9/w_2560%2Cc_limit/GettyImages-450287267.jpg

There is a disturbing sense of unpredictability in the air. But--what is it that we do know?

To start with--and this might well be the most important thing to keep in mind--the US is very considerably less dependent on foreign trade than most of its major geo-economic partners.

https://data.worldbank.org/indicator/NE.TRD.GNFS.ZS?end=2023&locations=US-1W-MX-CA-CN&start=1970&view=chart

Ergo any tariff imposed unilaterally on imports from its own trading partners, or any reciprocal tariffs on exports from the US to those countries, will affect it less, ceteris paribus, than its partners. AT LEAST IN THE SHORT RUN. For the long run, see my closing remarks below.

Of the three trading partners hit by the tariffs, Canada and Mexico--at 25%--will be most heavily affected: ± 80% of the foreign trade of both neighboring countries is dependent on the US. Much less so in the case of China, (1) partly because it is less dependent on foreign trade than Canada or Mexico, (2) partly because the US constitutes only around 15% of China's exports, and (3) partly because the unilateral US tariffs, as currently stated, will amount to 10%, not 25%.

There is also the issue of the immediate, short-term windfall of a 1 trillion USD revenue increase for the federal government. There is no precedent that I know of in which any sitting administration would have guidelines--supposedly discussed and approved by the legislative branch, etc.--to determine what some of the constitutional-legal, socially and environmentally sustainable ways would be to spend such extra government cash. For a governing group supposedly avowedly against government spending, this is . . . let's just say, . . . a somewhat unorthodox move. (Of course that revenue is likely to decrease quickly, once companies and trading partner states adjust their policies to the new tariff-and-countertariff environment.) 

Still in the short run, all this will affect most intensely those companies that are built on cross-border technological, financial and/or market integration between the US on the one hand and Canada, China and/or Mexico on the other. Specific technological and other aspects of their respective niches might determine their reactions and relative success--those are difficult to talk about in this, general fashion. 

And, then--there is the even bigger "bang," Creep1's imminent threat of tariffs "on the European Union". My hunch: Should it happen, it will almost certainly tilt the always-precarious balance of political and economic forces within the EU toward the right, most likely resulting in an astounding, further rise of the extreme right / nazi elements. As if we didn't have enough of that already.

It is sad to watch the near-total inability of the non-extreme-right political forces in the EU--including, by the way, very much the pride of European societies, the so-called left-liberal intelligentsia--to produce a relatively sustainable and more-or-less forward-looking response to the ongoing transformations and the current state of the world. Most are either silent or recycle right-wing / nationalist / racist perspectives, analyses, slogans. We live in extreme-right-leaning times, to say the least. I find that to be a truly significant insight about the "deeper" character of supposedly "liberal"-democratic capitalism in the era after the collapse of state socialist geopolitical alternatives and the wholesale abandonment of the ideas of égalité and fraternité on part of post-Enlightenment intellectuals, once they face the real possibility that their geopolitical-geo-economic establishment may not continue to control the entire world.

For the small states of the world, EU-members or otherwise (see the external trade dependence of the EU as a whole, as well as Austria, the Czech Republic, Hungary and Slovakia in the graph below), this will likely further increase the degree to which their political, economic, cultural and social lives being nigh determined by forces over which they have no chance to have the slightest degree of reasonable control. (The example of Hungary and Slovakia, and increasingly Austria, also show that (1) it can happen to societies well above the world mean per capita GDP and that (2) this structural condition, again, moves the political needle to the right. Always to the right.)

https://data.worldbank.org/indicator/NE.TRD.GNFS.ZS?end=2023&locations=US-1W-HU-SK-AT-EU-CZ&start=1970&view=chart

So, what about the long run? Well, I can think of these consequences:

• World war. How to keep it from destroying Planet Earth, carbon-based life forms, including human--your guess is as good as mine. Even if Earth, etc. are preserved, it is entirely unclear what the outcome of such a calamity would be.
• Short of a world war, the structure of world trade might well eventually be re-aligned to isolate the US and bring its most intense current trading partners together. In the short run, that would be a very complicated process as it would need to involve, among other things, a major overhaul of the geo-strategic patterns of material forms of trade (i.e., long-distance maritime and air transport routes, etc.), in which the current, numerical superiority of the US military is a key factor. Also, many non-US-based industries that are currently integrated into the US economy, not to mention Mexico's agricultural sector that is highly dependent on its exports to the US, will suffer--but it could be done. In some ways, this process could easily be fitted in the Chinese plan of taking over Afro-Eurasian trade, for which the infrastructural and institutional preparations are well underway. This outcome is an explicit scenario behind the ongoing intensification of the BRICS cooperation and a number of other such initiatives. A variety of commodity prices will rise in the USA, from fuel through automobiles to food items, coupled with attendant drops in quality, not to mention the overall quality of life due to various other changes, including a slew of social and environmental measures. Plus there will be the inevitable nationalist backlash in Canada, Mexico and China, lots of entertaining political theater is about to come forth.
• As for the European Union,
• it will either transform itself into a federal-constitutional state or risk disintegration;
• it will either rapidly admit its current applicants (at this point, there are 10 of them, including Ukraine and Türkiye, plus eight smaller and much weaker states) or faces a continued, even more dramatic, downward slide in terms of its share in the world economy;
• should the EU decide to proceed with the currently pending accessions, internal inequalities within the so enlarged EU will become so intense that it will become un-manageable unless the EU as a whole develops a new institutional form, the federal developmental state that aims explicitly to "bring up" the current and would-be new members at least to the level of the current EU-average;
• as for the calls inviting Canada into the EU and/or attracting the UK back to the EU--those are interesting ideas but it is entirely impossible to tell at this point whether the populations of the respective geopolitical units will go for it. Also, given the EU's habitual tempo on such things, by the time they get around to doing something about it, it may well be time to kiss north-Atlantic / west European capitalism as we know it goodbye.
• The UK has a serious question as to where it wishes to stand in the trade war initiated by the current US administration. The UK's response to this realignment will also depend on whether or not it is subject to US trade tariffs. If so, even the current suspense, let alone a trade tariff patterned say, after Canada, will spell major trouble for the UK's current political system, the entire state, military, intelligence and overall geo-strategic establishment.

So, in the long run, this needs to be seen as an absolutely obvious, implicit admission on part of the US geo-strategic thinkers advising the current president that the global hegemony of the United States is waning. In academic circles, this has widely been known, material for an intro-to-geopolitics / -geo-economics courses. (I have taught it as one of the unassailable insights of world-systems analysis--a prediction that has actually worked!--for at least fifteen years, if not more.) The media supposedly informing the public about top decision making has not quite taken any note of it--but that doesn't mean that this is not on the mind of the people who are drafting the structures of our world for the next century. It just means that large parts of the US public (and the media establishment) are neither intellectually nor morally prepared to understand that longue-durée historical changes (1) do happen, (2) they are not part of the sovereignty of the ruling elites in the US, and, yet, that (3) the US is subject to them no less than any other place. Other major geopolitical-geo-economic entities have openly been talking about this transformation of the structure of the world, of course. It has, for instance, been a centerpiece of official Chinese geopolitical reflection for decades.

This points at the limits of the analogy with 19th-century Germany I started this post with. While the essence of the nationalist-protectionist economic policy advocated by economist Friedrich List (1789-1846) was providing space for nascent cutting-edge industry to grow, the current US administration is trying to use similar measures to revive its ailing, rusting industries-on-decline.

Longue-durée history teaches me that is almost impossible to imagine that, even such last-ditch, pretty desperate measures aiming to preserve or increase the global sway of the US over the capitalist world-economy will be successful through peaceful means. In case of an all-out war, of course the entire planet will be gone, either entirely or in terms of serving as a habitat for humanity as we know it. So, actually, the actual decision on part of the US government is whether they wish to risk the end to human life in the interest of a well-nigh impossible struggle to stop the historic, downward slide of their state as a global hegemon.

Short of that, the next step is the formal inauguration of China as the global hegemon. Nobody knows how that can / will be done, and nobody knows what that would actually mean. Should it actually entail a realization on part of the leadership of the Chinese Communist Party that capitalism may not serve the collective interests of the political elites / people overall of China--that is a truly interesting question.

So, there.

THE LOOSE-CANNON APPROACH TO DESTROYING EARLY-21-CENTURY CAPITALISM--AND/OR HUMAN LIFE ON EARTH OFF

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UPDATE 1: February 2, 2025:

Canada and Mexico Hit Back with identical reverse-tariffs. It's a full-scale trade war now in north America. (Of course, as I pointed it out above, the same measures will not be nearly as painful for the US as the US' ones are for Canada and Mexico.)

China vows to retaliate and turn to WTO . In a less self-restrained tone, also China: "Fentanil is America's problem."

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UPDATE 2: February 3, 2025

The New York Times has discovered that there is a world of trade beyond the USA.

Meanwhile, the Government of Mexico has managed to squeeze out a one-month delay for the tariffs. The beatings on Canada and China will go ahead.