Tariffs
Why tariffs? Why now?
The direct effect of tariffs is to raise prices on imports. How much depends on the level of tariffs, the targeted product, the buyer and the seller. Roughly, for small enough tariffs, the seller might absorb the difference in cost, thus truly making the seller pay for it. So when Trump says that a tariff is a tax on foreigners, he is sometimes right but only on some products, from some suppliers and at some low tariff levels. For larger tariffs, the seller would only profitably be able to absorb some of the cost. This leaves the rest of the imbalance caused by the tariff to be paid by the importer and ultimately the consumer. This leads to inflation, the exact amount of which depends on many factors. However, the picture is not complete.
Tariffs have another effect, especially when tariffs are across the board, on every country, and from the US. First, which would be true for any country, the quantity of all imports will be less. This will make the currency of the importer, in this case dollars, flow less to the outside thus restricting its flow. That makes the dollar more expensive, or in other words, makes the dollar appreciate relative to other world currencies. Of course this partially offsets the price paid by consumers and makes it possible to import somewhat more. This dynamic effect also brings down the dollar somewhat from its initial higher levels. All this happens dynamically but, when the dust settles, the price of the dollar will be higher worldwide, US consumers will pay more for imports, inflation will be higher, nominal interest rates will be higher and the availability of the dollar will be less worldwide. I believe that last one, a higher dollar, is the true intention of the powers behind Trump’s actions.
Before I continue to explain the impact of a higher dollar, I will comment briefly on Trump. Trump says and does many seemingly non-sensical things of which Trump himself is ignorant as of their true intentions or even nature. What made Trump think of taking over Panama, Greenland, Canada, Mexico and Gaza? What made him insult several countries including Spain? What is the source of his seemingly random and crazy proclamations? I’ld be surprised if Trump knows where Spain or Greenland are on a map although he *may* be able to identify the location of Canada and Mexico.
Trump is the instrument of others. As a narcissist, he is easy to manipulate by those close to him, but only for a while. To control Trump, a stream of people will be sent his way tickling his vanity and manipulating his course. They wanted him to end the war in Gaza. No problem, arrange a meeting with Jeffrey Sachs and voila. Too much bending in that direction? No problem, bring in the war criminal to whisper sweet nothings in his ear and a new path is forged.
Now let me get back to my reason for saying that a higher priced dollar is the true intention of across-the-board tariffs. A higher priced dollar would put decisive pressure on many countries in the global South who have high external debts in dollars. Un-payable debt is what the IMF and the World Bank have as their true purpose. Such a purpose have been wrongly projected by the US on China as “predatory lending” or “debt trap”. The result of un-payable debt is the endgame of a maneuver the US has repeatedly used and that is well-described in the book “Confessions of an Economic Hitman”. In short, the US causes a debt default in its victims and swoops down for the fire sale kill. The US then controls and deeply exploits that country for decades until sufficient resistance builds up despite draconian and savage measures to quell it. Tariffs is that same game plan but gone nuclear. The US relies on its military to enforce compliance country-by-country. This is also aided by corrupt capitalists and willing native agents in each targeted country who are invited to share in a tiny fraction of the spoils and power. To repeat, across-the-board tariffs are a nuclear option to significantly appreciate the dollar, precipitate wide-spread defaults in many countries and then swoop down for the fire-sale kill.
The US is not a normal country and this analysis only applies to the heir of the Western empire. This also exposes the true nature of the western empire which is now in its US incarnation. The West is a vampire. Colonialism, slavery, massacres, proxy wars, World Wars and genocides, the latest of which is in Gaza, are the symptoms of this sanguine morbidity. The West is addicted to exploitation and its zionist, colonialist, depraved tools are their poster child. This latest maneuver is an effort by the empire to stay in power and to continue its depraved exploitation. The West does have the option to live and let live with prosperity for all. But the culture of the West, for its most part, is not conducive to such thinking. It is supremacist, exploitative and predatory. Cooperation is anathema to the heart of the West. Cooperation is the heart of China which is why the West so vehemently hates China. This latest tariffs maneuver has the possibility of casting a veil of darkness on many, many countries of the Global South thus countering China’s peaceful and respectful contributions to world advancement. Will the evil empire succeed or will the wise leaders in China anticipate and counter?
