Trump's tariffs will make America poorer
And accelerate the Empire's decline
Liberation Day, April 2nd, 2025, is President Trump’s Orwellian label for imposing sweeping tariffs on the rest of the world.
He blames other countries for the $1 trillion dollar US trade deficit and promises that tariffs will restore the trade balance and lead to the US magically re-industrialising:
For decades, our country has been looted, pillaged, raped and plundered by nations near and far, both friend and foe alike. This is one of the most important days, in my opinion, in American history. It's our declaration of economic independence. Jobs and factories will come roaring back into our country. We will supercharge our domestic industrial base. We will pry open foreign markets and break down foreign trade barriers, and ultimately, more production at home will mean stronger competition and lower prices for consumers.
Weaponising trade won’t revive the US economy nor will it succeed in bending the rest of the world to America’s will. Quite the opposite.
Why the US has a $1 trillion current account deficit
The US has a $1tn current account deficit not because other countries are ripping it off but because the US has been spending more than it produces. For decades, the US government has been running on credit to pay for its forever wars (many instigated by Israel and its powerful US lobby), more than 750 military bases in 80 countries (Russia has fewer than 20 and China has 1), bloated military and intelligence establishments, multi billion dollar contracts with the military industrial complex and tax cuts for the wealthiest Americans.
Cutting the Pentagon budget in half would be a good first step, but one that is unlikely to be taken. In 2025, the Pentagon has $1.39 trillion available to spend, nearly 10% of the US federal budget.
And it’s not exactly a model of financial probity, having failed its 7th audit in a row.
The root of the problem is that since the 1970s, the US has been deindustrialising, outsourcing its industry to foreign countries. Today, its idea of industry is Big Tech and AI, but we recently saw how that particular balloon was burst by China’s Deep Seek.
The US has abandoned productive industrial capitalism for nonproductive financial capitalism. Financial capitalism is about increasing capital gains through rising stock prices. It’s not about creating wealth through industrial production. These capital gains are financed by debt leveraging. If profits are made, they aren’t reinvested into the business but are paid out as dividends to shareholders, which increases stock prices in a never-ending rapacious cycle.
We’ve seen this story play out in the UK as well, with natural monopolies like water, energy and transport being privatised, leaving these essential public services heavily indebted and failing.
Real wages and living standards for the majority have fallen and inequality has soared to unprecedented levels. There’s no way America can become an industrial economy when it can’t even sell to its own people because all their wages go on “healthcare", debt servicing and housing.
Tariffs won’t solve the US economy’s deep problems. The only thing that will happen is that Americans will end up paying more for American products like cars and the auto industry will export less. The deficits and trade gap will remain, since Trump intends to cut taxes for his wealthy donors.
And as we’re now seeing, other nations will impose counter-tariffs that will hobble US exports even more. The US won’t re-industrialise and inflation and unemployment will rise. It’s horrible economic policy.
The US has demonstrated a remarkable ability to shoot itself in both feet. Trump is just another in a long line of political leaders who have hastened America’s decline by waging economic and actual warfare against the rest of the world. So it shouldn’t come as any surprise that the global majority in the form of BRICS is moving away from the US dollar and forging alternative trade and payment arrangements.
There’s a lesson here for Scotland, should its political leaders wish to heed it. For Scotland to achieve real economic growth and prosperity, first it needs to break out of the failing UK, and then it must establish a system of governance that puts the People, not kleptocrats, in charge.
"The US has demonstrated a remarkable ability to shoot itself in both feet" wrote Ria. Agreed, but it's not just the USA: it's the UK and all the other nations wedded to neoliberal economics. It's designed to impose feudalism on all their populations so that their super-rich minority can become super-richer. Scotland's only hope is to escape from the UK, set-up out own fiat currency and financial systems, and re-embrace Keynesian economics. Our people are sovereign (as demonstrable in Statute) and it's long past time when we should run our country in their best interests; not follow the neo-lib dogma that is destroying the world economy and the future prospects for the human race.
I'm no economist or have an inside track on what's going on at high politics levels, I just try and join the dots to give me a credible/possible explanation.
Post WW2 and the Bretton Woods arrangement, gold (price controlled by the US) was the standard for trading stability, creating a coalesced Europe and first line of defence against Russia.
Europe with a bombed out industrial base could invest in new industrial infrastructure. The US not being bombed was stuck with an industrial base that was fast becoming old and left behind. They did well, for a time, and also with the emerging new digital age. But the land of the free was free to seek cheap labour and increased profits elswhere.
Nixon dumped Bretton Woods, France and the UK were packing away dollars to convert to undervalued gold. The US had the power to pull the levers and make the trading countries accept the dollar as the world reserve currency, in return for access to the US market and US security. Security reads, nukes, missiles and or bases on your soil giving increased US security.
Having reserve currency status gives control and allows the US to run a huge deficit with impunity.
Several times the oil dollar trading has been challenged, Saddam Husein, Col Gaddafi and latterly Venezuela. Disrupting and costly to deal with, but dealt with. The BRICS group is a much bigger and different game, it is this that Trump and his internal supporters are trying to strengthen against.
Trump's tariffs are to create negotiating levers and bring in some needed dollars without taxing the wealthy and bring some much needed manufacturing, that went overseas back to the US. Cars and computer tech in particular? The US will need to maintain the dollar as the reserve currency, another big ask for the tariff levers.
The ball is not in the US court any more, hence the tariffs. It is going to be an interesting, if precarious watch.
I propose, if there is a future, that the global community set up therapy to help countries to adjust to the new reality, of not having an empire (are you listening England) or no longer having the biggest seat on the world stage.
My tuppence worth.