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By Rauf Naqishbendi:
A trade war is an economic confrontation between two countries. It can occur when one country retaliates against another, citing unfair trading practices with restrictions, such as tariffs, on imports. Trade wars have been going on for as long as nations have conducted trade with one another. Starting his second term presidency, Donald Trump, the White House, on April 2, announced “Pursuing reciprocity to rebuild the economy and restore national and economic security. Today, President Donald J. Trump declared that foreign trade and economic practices have created a national emergency, and his order imposes responsive tariffs to strengthen the international economic position of the United States and protect American workers.”
“When you look at the trade deficit we have with certain countries, with China it’s a trillion dollars,” Trump told reporters traveling with him on Air Force One earlier this month.
Trump is doing right, but the timing is too late, the damage is already done, and the remedy is no remedy.
Let us dissect how, as President Trump cited, China’s trade deficit with the US is so paramount and a major US concern. The US is to blame for it. The problem with America is that the people’s interest is taking a back seat to corporate interest due to the prevalence of invisible hands in American politics. American crony capitalism, spearheaded by Wall Street, initiated the emboldening of offshoring American industrial production overseas, particularly to China. As a result, hundreds of towns in America were devastated, and millions of American jobs were lost to China.
It all happened as cited by Asia Times in December 1978, when China opened its doors to the world and launched a historic reform program that would transform the country. Since then, Corporate America has commenced offshoring its industrial production, and China has been the destination. Then, in the past two decades, China has made historically unprecedented technological strides forward and, in many arenas, started mass producing industrial materials and consumer goods at an affordable price. They surpass the US in areas such as Solar, Electric Vehicles, and lithium batteries; according to Techspot.com, the Asian nation is still ahead of the US when it comes to research in 37 out of 44 crucial and emerging technologies, including AI, defense, and key quantum tech areas.
For decades before he became president, President Donald Trump rightly stood against offshoring American manufacturing. His belief is well justified, which can cause trade imbalances, causing loss of American jobs, the government’s loss of tax revenue, dependency, and a higher trade deficit. An overall trade deficit occurs when the monetary value of a country’s imports exceeds that of its exports. “We have deficits with almost every country, not every country, but almost, and we’re going to change it,” Trump told reporters earlier this year. He said, “It’s been unfair.”. It isn’t a matter of fairness but rather the American government that unleashed restrictions on offshoring manufacturing; as a result, domestically, America produced few goods and imported in abundance. Tariffs will not solve the trade deficit. Should the US bring back all its manufacturing, it will have a trade deficit. Let us bear in mind that most of the offshore products, if brought back to the US, will have to be sold at a much higher price than what could be imported, which in turn, will be inflationary and cost American consumers more. When America imposes tariffs on other nations, others’ actions will not be muted but rather they will reciprocate, which will make the price of US goods and services higher, and that will benefit China.
According to Thoughtco, “In 1975, U.S. exports exceeded imports by $12,400 million, but that would be the last trade surplus the United States would see in the 20th century. By 1987, the American trade deficit had swelled to $153,300 million. Imagine that since 1987, the US’s trade deficit has been spiking, and that continued, rest assured, the authorities, including five presidents, were all aware of the danger of this new economic phenomenon, and yet none took proper action to deal with it, knowing the impending economic disaster. Bringing back manufacturing to the US is a long process and will take years. By the time “Made in America” begins, we will have elected a new president. Even when all the jobs are brought back to the US, the supply chain, for instance, some 150 of Apple’s top 187 suppliers in 2024 had factories in China, according to an analysis by Nikkei Asia; that is true with many other US products.
Regardless of the US trade deficit, Americans have enjoyed a good standard of living relative to most other nations. How did this happen? The answer is embedded in the US government going beyond its means, financing its spending through borrowing and printing money for four decades. That can’t be sustained as the US national debt exceeds $36 trillion. In 2024, according to Investopedia.com, the government made a record $1.2 trillion payment of interest. The national debt continues to be uncontrollably growing high, which will haunt the US economy and bring ruin to the American financial system. The US national debt has been blooming since the time of President Ronald Reagan. Yet, all presidents succeeding Reagan, instead of responsibly balancing the budget, ended up piling more of the same.
The time for America to put its house in order is past. Should anyone think that tariffs will be a remedy, they should think again. The Europeans are facing the same dilemma, and that means the end of the Western World’s economic dominance as we know it. Trump’s mantra, “Make America Great Again,” is good for boosting morale, and how that works needs to be seen; it will not be pretty.
