Donald Trump is escalating his threats to increase tariffs on imports if he wins a second term in the White House, reviving fears of renewed trade wars that hit the global economy during his presidency.
The Republican candidate, seeking to win blue-collar votes in swing states pivotal to November’s presidential election, has doubled down on his protectionist rhetoric, delivering blunt warnings of tariffs to US trading partners including the EU.
On Saturday, Trump went further, promising tariffs of 100 per cent on imports from countries that were moving away from using the dollar — a threat that could engulf many developing economies too.
“I’ll say, ‘you leave the dollar, you’re not doing business with the United States. Because we’re going to put a 100 per cent tariff on your goods,’” he said at a rally in Wisconsin.
“If we lost the dollar as the world currency, I think that would be the equivalent of losing a war,” he told the Economic Club of New York on Thursday.
I’m starting to think differently about this. Everyone previously thought he didn’t understand tariffs, and that’s obviously still true, but I’m thinking he has someone manipulating him into going down this path because there is a major upside to some otherwise overlooked and under sourced industry based in the US. Like Stephen Miller is sitting on some underwater shares of US mining companies or whatever.
He wouldn’t be the first person to employ tariffs in order to encourage domestic development. A big part of the American Revolution revolved around northern industrial towns fighting for protectionist laws to discourage UK dumping their industrial surplus into colonial markets. Pennsylvania iron-mongers were some of the fiercest opponents of the British merchantalist system.
Prior to FDR, the primary method of US tax collection was tariffs on imports. And a big reason the policy ended was due to Europeans immolating all their industrial capital across two World Wars.
Like Stephen Miller is sitting on some underwater shares of US mining companies or whatever.
These goons are rarely so far-sighted. But I wouldn’t be surprised if he’s simply taking money up front from domestic lobbyists in the extraction industry. A big pivot to domestic fracking happened thanks to Bush/Obama/Trump era fossil fuel companies deluging state and national legislatures and governors with contributions to open up more public land for drilling.
Why are you so sure it is domestic? The rhetoric plays to his jingoistic, isolationist base. But he is easily manipulated by foreign powers. China and Russia, and others would welcome a crumbling US. And Putin likely has other leverage on him
Though yes, there are certainly those within the US itself that would herald in its fall if they found it enriched themselves
The who’s who of nefarious countries: “Hey US? Yeah some of us have concerns that maybe your currency can be used as a weapon against us, so we’re gonna do a whole bunch of political showboating to try to make a point. We’re not motivated enough to actually do something, though.”
DJT: “I’ll give you something to be concerned about. Our currency that I’m ostensibly protecting the use of will be totally useless for you!”
It’s like he doesn’t realize that the US dollar is the world reserve because of the stability and reliability of it. We got there using carrots, mostly, and he thinks the stick is a good idea…
It’s like he doesn’t realize that the US dollar is the world reserve because of the stability and reliability of it.
I mean, its the World Reserve Currency because the world runs on Petroleum and the major petroleum producers all trade in dollars. One of the big threats to USD dominance is renewable energy, as you don’t need to pay a Saudi in paper issued by the US Mint in order to power your house or run your car.
Ok, but why do all the major petroleum producers trade in USD? Yes the US buys a lot of oil, petrol, and natural gas, but the trading volume isn’t that atypical of other wealthy, large geographic regions. They use it because it’s stable, ubiquitous, and almost always accepted. If it’s not stable or ubiquitous anymore due to these sorts of sanctions, why would the petrol producers keep using it?
Ok, but why do all the major petroleum producers trade in USD?
Because the US cut a deal with the Saudis during the '71-'73 trade negotiations under Nixon, fixing the price of Saudi light sweet crude to USD. This helped backstop the falling value of the dollar after the official decoupling of USD from gold in 1971.
They use it because it’s stable, ubiquitous, and almost always accepted
The British Pound, the Swiss Franc, the Russian Ruble… even the Japanese Yen could have easily stood in for the US Dollar at the time. These were widely traded and regionally ubiquitous thanks to the international trade of the era. But it was the US with military bases scattered all over North Africa and the Middle East in the wake of WW2. And they were the post-WW2 industrial sector with the highest demand, in no small part thanks to US automotive industrial expansion.
If it’s not stable or ubiquitous anymore due to these sorts of sanctions, why would the petrol producers keep using it?
To access US financial markets, which have eclipsed the rest of the 20th century global banking powers. If you need USD to trade on the NYSE or to buy up US real estate or purchase US Treasuries, might as well trade oil. Also, we (in many ways literally) have a gun to the heads of Mid Eastern leaders. Just ask Saddam.
Pretty true. I have nothing really to add historically.
Having said that, there’s nothing preventing this status quo from changing in the future if enough economies decide the risk of an erratic main trade partner isn’t worth it anymore. The reward of controlling the main global reserve currency comes with the responsibility of not involving it in undue threats.
Having said that, there’s nothing preventing this status quo from changing in the future
There’s substantial existing industrial infrastructure that makes a kilowatt of new petroleum energy easier to produce than a kilowatt of renewable energy. But that’s a result of economic policies. Change the policies and you change the math.
It appears we are, both intentionally and inadvertently, slowly stacking the deck in favor of renewables.
The reward of controlling the main global reserve currency comes with the responsibility of not involving it in undue threats.
One might argue the reverse. The ability to hold the rest of the world hostage enables a nation to compel adoption of their domestic currency as the global reserve.
That’s the carrot, the US military, sanctions and the CIA tend to be the stick.
