2018-03-08

Trade Retaliation is a Feature, Not a Bug

ZH: China Threatens Tariff Response That "Could Seriously Hurt The International Trade Order"
In a response to today's announcement, China's Commerce Industry urged the US to withdraw the planned-for tariffs while threatening to take "strong measures" that could "seriously hurt the international trade order."
How fragile is globalism 2.0? We are about to find out.

Ultimately the U.S. trade deficit is the result of issuing reserve currency. Washington will not willingly give that up. The American public no longer wants to bear the cost of issuing reserve currency. That creates a permanent problem with no solution. Wall Street pushed its dominance at the Treasury Department to the max in 2008. Despite mass unemployment (labor force participation down), the government pushed for mass immigration and amnesty for illegal aliens. Opioid addiction and overdoses are spiking, suicide is on the rise and life expectancy is falling. People can only accept so much failure from their leaders.

What too many critics of Trump don't understand is that he's doing something for people who have been given the short end of the stick for 20 to 40 years. You can't beat him by opposing him because he has their support. Their view is he's the only one doing something positive. Opposing tariffs isn't a winning position because even if free traders win, they lose politically. The voters will look for a tougher politician than Trump or they'll pick someone with a more radical agenda. All it will do is hit the reset button, buying another few years in which voter anger will build and then explode even larger (see Italy 2018), just as the post-2008 economic strategy is kicking the can and creating conditions for bigger crises. And something worse is almost guaranteed because GDP is near its post-2008 upper limit and the stock market is near all-time highs.

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