Poor old Donald Trump thinks the United States still dominates the global economy, but the ‘stable genius’ has lost touch with reality and is a couple of decades out of date, writes Michael Pascoe.
The US is important, the traditional consumer of last resort, but relatively speaking, it is no longer the colossus it once was. Other than in the fantasies of Emperor No Clothes, the US can no longer use economic heft to command the world.
You can quibble about what set of statistics you want to use and nominal versus purchasing power parity measures, but the reality eluding the Trump gang is in this World Economics graph.
Source: www.worldeconomics.com
It’s a mistake to concentrate too much on the “Chinah” part of Trump’s war on global trade. China, being America’s prime target, distracts from the totality of the mismatch Trump has chosen. (And it’s a bigger mistake to think China is most affected by the war, I’ll come to that.)
Long before Peter Navarro became Trump’s tariff capo bastone, he was a rabid Sinophobe, best known for his 2006 book, The Coming China Wars, and his 2011 tome, Death by China, subsequently turned into a quasi-documentary. A taste of the book is that it quotes a fictitious Harvard economics student, Ron Vara, (an anagram, geddit): “The Manufacturing Dragon is voracious. The Colonial Dragon is relentless. The American Eagle is asleep at the wheel.”
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As for the “documentary”, Wikileaks offers the New York Times review observation that the “alarming and alarmist” film “undercuts its argument with an abundance of inflammatory language and cheesy graphics” and “is also unabashedly one-sided and short on solutions” but “its message, despite the hyperbole, certainly warrants examination and discussion”.
The LA Times found the “important political argument…was drowned out by xenophobic hysteria and exaggerations so rampant it becomes impossible to tell light from heat”.
In other words, it was exactly Trump’s kind of show, receiving a glowing endorsement, and 75-year-old Navarro is very much Trump’s kind of capo with a track record of promoting hydroxychloroquine as a COVID treatment, spreading conspiracy theories of election fraud and becoming the first former White House official to be jailed on contempt of Congress charges. Such is the quality of the man calling Trump’s tariff shots.
“Death by China”
Whatever Death by China’s merits or otherwise, America has missed its chance to put China back in its box and keep it there, if it ever had such a chance once China decided to open up. The International Monetary Fund scores China’s share of the global economy at 19.3% on purchasing power parity (PPP) basis and the US at 15.6%.
World Economics research reckons the US share is 12.7% with China at 19.6 GDP and projected to rise to 22.1% in 2030.
(At current prices, the IMF counts America’s GDP as worth US$30.34 trillion and China’s as US$19.53 trillion, but PPP is generally considered a better basis for comparison.)
In any case, China is only part of the Asia story. World Economics’ 2030 projection will no doubt be changed by the Navarro/Trump tariffarama. I’d bet it will make the US share smaller than the forecast 13%, and Asia’s 58% will be larger.
Source: www.worldeconomics.com
America’s desire to bifurcate the world, putting China behind a tariff curtain and forcing other nations to choose “US or them” fails when the US is no longer the undisputed global economic superpower, let alone when it behaves like the proverbial pigeon playing chess – knocking over the pieces and shitting on the board.
Trump boasts of foreign leaders “kissing his arse” to get a tariff discount. What he ignores is the contempt he is held in and the destruction of any faith in America’s reliability. Insults and loss of face don’t go down well anywhere, but least of all in Asia.
The South China Morning Post compiled a list of how dependent six major Asian economies are on the US market, dividing their GDP by their exports to the US. As the paper teased, China’s place on the list “could be surprising”.
Liberation Day stunt
On top of stopping USAID efforts to clean up Agent Orange and unexploded American munitions and landmines, Trump’s “Liberation Day” stunt included a 46% tariff hike on Vietnam, whose exports to the US are equal to 23% of its GDP.
The US is Vietnam’s biggest customer, accounting for nearly 30% of exports, followed by China at around 20%. Whatever goodwill the US might have been cultivating with Vietnam is gone.
Thailand was promised a 36% tariff. Its exports to the US equal 9.3% of its GDP. Malaysia’s US exports equal 8.9% of GDP. Have a 24% tariff. South Korea exports worth 6.2% of GDP, take a 25% “reciprocal tariff” threat.
Japan, a 24% tariff for 3.4% of GDP.
China’s exports to the US are now being threatened with, well, pick a number, any number, 145% last time I looked,
but those exports are the equivalent of “only” 2.7% of China’s GDP.
To lose it all would obviously hurt, though the Trump clowns have already realised that, d’oh, China makes stuff America needs. As American-resident Australian economist Justin Wolfers tweeted:
Professor Wolfers seems to have forgotten very few Americans speak irony.
China is prepared
China has been preparing for this trade war, its export markets diversified, America’s intentions well telegraphed. China has the advantage of high savings and an under-utilised domestic consumer market ready for priming if required.
At the same time, the US sinks further trillions into debt after decades of living beyond its means, something the bond market last week signalled may not be sustainable after all if fools run the place.
And China has the benefit of Donald Trump making it look more reliable and pragmatic and certainly less insulting than the US. Trump is providing China with an incredible opportunity to straighten up, fly right and win while the US loses.
Which is why Australia would be particularly stupid to fall in with Trump’s bifurcation plans, as Crikey’s Bernard Keane reasonably believes ($) the weak ALP/LNP leadership will.
How dumb would you have to be to pick this particular moment of historic turmoil to act all Trumpy and seize the Darwin port lease? The answer is as dumb as the ALP and LNP leadership.
Unreservedly sticking with AUKUS and what we pretend is the US alliance, signalling that we’re all the way with the USA even when the USA has gone crazy and worse, just means we’re picking the losing side instead of prioritising our own interests.
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Michael Pascoe is an independent journalist and commentator with five decades of experience here and abroad in print, broadcast and online journalism. His book, The Summertime of Our Dreams, is published by Ultimo Press.