Trump's Tariffs And The Illusion Of De-Globalization

Latest stories Pakistan may hit Afghanistan for Jaffar Express terror attack

New research on crypto shows an insider group influences its value

What Ukrainians say about readiness for ceasefire and concessions

This resulted in globalization, which was what made it possible to manufacture goods in China at lower costs, thus keeping US wages and inflation in check and increasing the profits of US companies. As long as this remained the case, free trade with China served the interests of US companies and was therefore justifiable .

However, in recent years, China has shifted its economic strategy toward producing and exporting high-tech, value-added products (as South Korea and Taiwan have also done). Chinese-produced mobile phones, electric cars and artificial intelligence (AI) have subsequently conquered the US market.

The longer this shift goes on, the more useful and legitimate tariffs and protectionism become as a way to shield the economic interests of US businesses.

How far will the US go?

Protectionist rhetoric and trade wars were already trumpeted by the first Trump administration.

However, the KOF globalisation index – which measures the global connectivity, integration and interdependence of countries – showed the same value in 2021 as it did in 2017 .

While the growth experienced since 1970 ground to a halt, the index's indicators disprove any claim that globalization receded during Trump's first term in office.

This second term may well be different because, according to some experts, the president has learned to bypass political counterweights, to surround himself with like-minded people, and to free himself from partisan ties in order to implement his own agenda.

Others, however, question the very existence of his own agenda beyond the interests of big business, because it is precisely this alignment of interests that allows him to:

• Impose tariffs on developed countries , and on products competing for the same markets.
• Make political use of tariffs to threaten other countries and secure access to vital resources for the technology race (mainly due to the US' position of being the world's largest buyer and military power).
• Launch a new arms race that will boost the profits of US industry.
• Use a nationalist and anti-globalization narrative to justify the growing precariousness of the US working class. He aims to unite US citizens behind the flag, dilute their class consciousness, and offer up new scapegoats in the form of immigrants.

In reality, Trump's agenda is unlikely to be compatible with any meaningful de-globalization process. Reversing globalization would be contrary to the interests of US capital, which needs to expand – into both new territories and sectors – to ensure its own survival.

In light of all this, why would US multinationals want to stop making huge profits in other countries? What could lead them to give up producing in territories with lower production costs, cheaper labor and a guaranteed supply of raw materials?

The dollar's 'exorbitant privilege'

According to IMF data , in the third quarter of 2024 the US dollar still accounted for more than 57% of total international reserves , and more than 80% of international trade financing.

When a country's domestic currency acts as a reserve asset or is the currency in which most international payments are made, the financing of persistent current account deficits does not carry major risks of either devaluation or currency crisis. Every year since 1982, with the sole exception of 1991, the US current account balance has been negative.

These conditions for financing its debt – which Valéry Giscard d'Estaing , Charles de Gaulle's Minister of Economy, defined in 1964 as an“exorbitant privilege” – improve even in times of crisis. The dollar's status as a safe haven asset (much like gold) means that international demand for it actually increases in times of uncertainty .

So why would the US be in favour of shifting its trade balance, thereby renouncing the privilege of issuing the international reserve currency?